If your contracting company is solvent and you want to close your limited company, you have two routes: voluntary strike-off using Companies House form DS01, or a members' voluntary liquidation (MVL). Strike-off is usually the cheapest way to close. An MVL costs more, but once there is a meaningful sum left in the company it can leave you with more in your pocket, because the money can be paid out as a capital distribution and may qualify for Business Asset Disposal Relief. The deciding factors are how much cash is left, whether you meet the relief conditions, and whether you expect to be contracting again.
This article covers both routes, the costs and timing, the tax point that drives the decision, what changes if the company is insolvent, and the housekeeping that applies whichever closure method you choose.
Is the company solvent or insolvent? Check before you choose
The first question for any company closure is whether the company solvent or insolvent. GOV.UK puts it simply: the way you close the company depends on whether it can pay its bills or not. If it can, you can apply to have the company struck off the Companies Register or start a members' voluntary liquidation. If the company is insolvent, a different set of rules applies, covered further down.
For an MVL, solvent has a specific meaning. The company must be able to settle its debts, including statutory interest, within the next 12 months. That calculation should include contingent liabilities, such as impending legal action. The directors sign a statutory declaration of solvency to say so, and there are strict penalties for a false declaration.
For most contractors the position is straightforward: some cash in the bank, a final corporation tax bill, perhaps VAT, and a director's loan account to tidy up. You also need the agreement of your directors and shareholders. If you are the only director and the only shareholder of your Ltd company, that is a short conversation, but the decision to close should still be recorded properly.
How to close a solvent company: the two routes side by side
When you want to close a limited company that can pay its way, this is the comparison to start from.
| Voluntary strike-off (DS01) | Members' voluntary liquidation | |
|---|---|---|
| Who runs it | You, as director | A licensed insolvency practitioner as liquidator |
| Fee | £10 (£8 online) to Companies House | Liquidator's fees, often several thousand pounds |
| Typical timing | About two to three months from application, after three months of not trading | Depends on how long the liquidator takes to deal with assets, creditors and HMRC |
| Treatment of money paid out | Above about £25,000 of distributable assets, cannot be treated as capital gains | Treated as capital rather than income; Business Asset Disposal Relief may apply |
| Declaration needed | DS01 application | Statutory declaration of solvency |
| Best suited to | Little or no cash left | Larger sums to extract |
The £25,000 figure is the working rule advisers use for where the choice tips. Treat it as a guide to which route deserves a closer look, not as a precise calculation, and have your accountant run the numbers on your own balance sheet.
Strike off the company with form DS01
To strike off the company is to ask Companies House to remove it from the register of companies. You can do it yourself from start to finish, which is why it is cheap. The fee is £10, or £8 if you pay online.
The conditions for a company to be struck off
Companies House will only agree to a company to be struck off if it meets some basic conditions. In practice that means:
- the company has not traded for the previous three months;
- it has not changed its name in that period;
- it has no pending agreements with creditors; and
- its dues to creditors have been cleared.
The three-month wait matters for contractors. If your last invoice was paid last week, you cannot file the DS01 yet. Use the time to finish the housekeeping below.
What to do before you apply
A sensible order of work looks like this:
- Set a closing date for the company.
- Pay all supplier invoices. Collect outstanding customer invoices or write them off.
- Have your accountant prepare the final company accounts and calculate the final corporation tax.
- File the company tax return and tell HMRC the company has stopped trading.
- Close PAYE and VAT registrations if you have them, and make sure all VAT refunds have been processed.
- Pay any wages still owed, then empty and close the company bank account.
- Cancel or transfer any domain names.
The point of the exercise is that nothing is left in the company when it disappears. Any company assets still there at dissolution are treated as bona vacantia, which means they pass to the Crown. Getting them back means applying to court to restore the company, which costs more time and money than doing the job properly first.
After you file
Within seven days of applying, you must inform HMRC and everyone else connected with the company. That includes shareholders, any directors who did not sign the DS01, employees, creditors, banks, landlords, pension scheme managers or trustees, and the DWP. Companies House writes to the registered address to check the application is genuine, and a notice goes in the London Gazette so creditors can object. If nobody objects, you will see the company struck off the register. The whole process runs roughly two to three months from the date of application.
The catch
Strike-off is not a way to avoid debt. If the company has outstanding debts, creditors can ask for it to be restored to the register and put into a creditors' voluntary liquidation. Directors who ignore their obligations under the Companies Act 2006 can also commit an offence, for example by failing to notify the relevant people before dissolution.
The other cost is tax. Where a company has more than £25,000 of distributable assets, those cannot be treated as capital gains on strike-off. That is usually what pushes a contractor with a healthy cash balance towards an MVL.
Members' voluntary liquidation: the liquidation process
An MVL is the formal liquidation of a solvent company. A licensed insolvency practitioner becomes liquidator, collects what the company owns, pays what it owes and distributes the rest to shareholders. Only a licensed insolvency practitioner can take the appointment, so check that whoever you speak to holds that licence rather than passing your enquiry on to someone else.
How it runs
The liquidation process is set by law, and a liquidator will manage it for you:
- The directors swear a statutory declaration of solvency.
- The shareholder group passes a winding-up resolution. At least 75% in value of those attending and voting must vote in favour. A sole-shareholder contractor satisfies this alone.
- The shareholders appoint the liquidator and the company goes into liquidation. The declaration of solvency is filed at Companies House within 15 days of the resolution, and notice of the appointment goes to the Registrar and to creditors.
- Creditors are given a period to make claims, and the liquidator agrees and pays them.
- The liquidator confirms there are no outstanding tax matters with HMRC.
- Money is distributed to shareholders, often in stages: an interim payment once creditors are dealt with, then a final payment.
- The liquidation closes and the company is dissolved.
The usual closing work still applies. Final accounts must be completed up to the date of cessation, final PAYE and VAT returns filed, and the final corporation tax liability calculated by your accountant.
Costs and timing
Liquidator costs depend on what the liquidator has to do and are agreed with them in advance. For anything beyond the simplest company, expect several thousand pounds. The timetable depends on how long it takes to collect assets, deal with creditors and settle matters with HMRC. It is measured in months, not weeks.
What you get for that fee is a clean break. Because the company is solvent, there is no later claim against the directors by a liquidator and no risk of director disqualification arising from the liquidation.
One warning: if the liquidator finds the company is not in fact solvent, for example because a creditor was missed or a contingent claim crystallises, the MVL has to convert into a CVL. Your declaration of solvency is the reason to be careful about liabilities before you sign it.
Business Asset Disposal Relief: what it does and who qualifies
The reason contractors with real money left in the company look at an MVL is the tax. Money paid out in an MVL is treated as a capital distribution rather than income, and Business Asset Disposal Relief can lower the Capital Gains Tax rate on qualifying gains.
The rate is no longer the 10% you will see in older guides. GOV.UK sets out the current position:
| Date of disposal | Rate on qualifying gains |
|---|---|
| On or before 5 April 2025 | 10% |
| 6 April 2025 to 5 April 2026 | 14% |
| From 6 April 2026 | 18% |
A closing distribution made now falls in the 18% band. The relief still matters because it applies to the whole qualifying gain at that rate. For shares, GOV.UK requires that, for at least two years up to the date of disposal:
- you are an employee or office holder of the company (or one in the same group); and
- the company's main activities are trading rather than non-trading activities such as investment.
If the shares are not from an Enterprise Management Incentive scheme, the company must also be your personal company for those two years. That means you hold at least 5% of the shares and 5% of the voting rights, and are entitled to at least 5% of either the profits available for distribution and the assets on a winding up, or the proceeds if the company is sold. A contractor who owns all the shares of their own company will normally meet the percentage test.
Timing matters if the company has stopped trading. GOV.UK says that if a company stops being a trading company, you can still qualify if you dispose of the shares within three years. Do not leave a shell company sitting for years and assume the relief will still be there.
A worked example
Suppose your company has paid all its bills and holds cash that gives you a qualifying gain of £60,000 on your shares after allowing for what you originally paid for them, and you meet the conditions above. On a disposal from 6 April 2026, the relief rate of 18% gives Capital Gains Tax of £10,800 on that gain.
That figure ignores the liquidator's fees, any other reliefs or allowances you have, and your wider position that year. The comparison you need is between that figure plus the MVL fees and what the same sum would cost you under the alternative treatment on strike-off. Your accountant can produce both numbers from the final accounts.
If you plan to contract again
This is the part contractors most often underestimate. A law firm's guidance warns that shareholders who take the MVL route cannot set up a company doing the same or similar business for two years. If they do, HMRC will look at what they received from the old company and seek the tax that would have been payable.
The detail of when a distribution is recharacterised as income depends on the individual's circumstances, so take advice before closing if there is any realistic chance you will return to similar work, for example with the same clients. If you are not sure, that is a reason to talk to your accountant before you pass a winding-up resolution, not after.
If you might want the company back, there is a third option: leave it dormant.
Dormant company: the alternative to closing, and its drawbacks
You do not have to close down your company when it stops trading. GOV.UK says you can let it become dormant for tax purposes as long as it is not carrying on business activity, trading or receiving income. There is no time limit.
A dormant company keeps the name and lets you restart if circumstances change. To restart, you tell HMRC the company has begun trading again within three months.
The disadvantages are mostly about admin. The company stays on the register, so you must keep sending annual accounts and a confirmation statement to Companies House, and you must tell HMRC the company is dormant for Corporation Tax. HMRC and Companies House also use different definitions of dormant: for HMRC the company cannot trade or receive investment income, while Companies House looks at whether there are significant accounting transactions. A company can be dormant for one and not the other, so check both before you assume you have nothing to file. A dormant company is a sensible holding position, but it is not a substitute for closing if you are certain you are finished.
What if the company is insolvent? Insolvency and creditor duties
If the answer to "company solvent or insolvent" is the second, neither route above is the right starting point. GOV.UK explains that when a company is insolvent, the interests of the people it owes money to, its creditors, legally come before those of the directors or shareholders. The options include administration, a creditors' voluntary liquidation (CVL), or, in some cases, applying to be struck off. You can get professional advice from a solicitor or insolvency practitioner if you are not sure which is suitable.
There are two tests for whether a company is insolvent: the cash flow test (it cannot pay its debts as they fall due) and the balance sheet test (its debts outweigh its assets). Once you believe the company is insolvent or heading that way, the practical rules change:
- Do not agree further credit.
- Be careful about paying one creditor ahead of another. That can be treated as a preference payment, and you could be personally liable to repay it in a later liquidation.
- Do not sell or transfer company assets out of the business.
- Do not carry on trading while knowing the company is insolvent, which risks personal liability.
A CVL needs at least 75% of shareholders by value to agree. The liquidator is independent and must act in the interests of all creditors, not the directors. Unsecured debt left over is written off, except where a director has signed a personal guarantee, in which case that responsibility stays with the director. Directors of an insolvent company can face proceedings personally, going back several years, for example if money was moved out without benefit to the company, and disqualification for up to 15 years for misconduct.
If you are owed nothing and owe nothing, none of this applies. If you are unsure whether the company has any outstanding debts, find out before you sign a declaration of solvency or file a DS01.
Can a director just walk away from a company?
No. GOV.UK says the company still needs to pay corporation tax and file a tax return, even if there is no director. A company left on the register without anyone looking after it keeps accruing obligations. A company that is not closed properly can pile up penalties for late returns and non-payment, creditors can apply to restore a company after dissolution, and directors can be held personally liable for debts that were not settled beforehand. Closing your business properly is cheaper than clearing up after it.
Tidying up after closure
Whichever route you take, finish the paperwork. Keep your records. A company can be restored to the register for six years after dissolution, so keep company records for at least six years. Minutes of board meetings and resolutions should be kept for at least 10 years.
If you are using an accountant to prepare the final accounts and tax return, make sure they have everything before you close the bank account, because it is much harder to chase information afterwards.
Which route fits you?
- Little or no cash left, no plans to return to contracting, all bills paid: strike-off is usually the sensible choice. It costs £10 or £8 and you can run it yourself.
- More than roughly £25,000 to extract, and you meet the Business Asset Disposal Relief tests: get a quote for an MVL and compare the net result with strike-off. The liquidator's fee may be outweighed by the tax treatment.
- Unsure whether you will contract again: consider leaving the company dormant, or take advice about the two-year warning before you liquidate.
- Owed money you cannot pay: neither route applies. Speak to a licensed insolvency practitioner.
Deplexify prepares accounts and tax for UK contractors, which includes the final accounts and corporation tax calculation you need for any of these decisions. If you are thinking of moving your books before closing the company, see how to change accountant. And for a refresher on how the company was set up, there is a guide to setting up a limited company as a contractor.
Frequently Asked Questions
How much does it cost to close a limited company in the UK?
Strike-off costs £10, or £8 if you apply online through Companies House, plus your accountant's time for the final accounts and tax return. An MVL involves a licensed insolvency practitioner, and their fees can run to several thousand pounds depending on what has to be done. An insolvent closure has its own costs, which the liquidator will discuss with you in advance.
How long does it take to close a limited company?
You cannot apply for strike-off until the company has stopped trading for three months. After you apply, expect roughly two to three months. An MVL is measured in months and depends on how quickly the liquidator can deal with assets, creditors and HMRC.
How do I close down my small business if it is a limited company?
Work out whether the company is solvent, pay creditors, finish the final accounts and tax return, inform HMRC, close PAYE and VAT, then choose between strike-off and an MVL. The steps are set out above.
What happens if there is money or property left when the company is struck off?
Anything left becomes bona vacantia and passes to the Crown. Getting it back means applying to court to restore the company, which takes time and money.
Can I close the company and start another one straight away?
It depends on your circumstances. Where shareholders take the capital route in an MVL, setting up a company doing the same or similar business within two years invites HMRC to look at the return from the old company. Take advice before you close if there is any chance of this.
Sources
- Closing a limited company - GOV.UK — gov.uk, read 2026-10-18
- Business Asset Disposal Relief: Eligibility - GOV.UK — gov.uk, read 2026-10-18
- Options for contractors approaching the end of the road - FCSA — fcsa.org.uk, read 2026-10-18
- How do I close a solvent company? - Company Closure — companyclosure.org.uk, read 2026-10-18
- How to wind up and close your limited company | Wilson Field® - Licensed Insolvency Practitioners — wilsonfield.co.uk, read 2026-10-18
- How much does it cost to close a limited company? | Harper James — harperjames.co.uk, read 2026-10-18
- How do I Close My Limited Company? - Freedom in Numbers — freedominnumbers.co.uk, read 2026-10-18
- Close / Strike off UK company | Closing a Dormant or Unwanted Company — targetaccounting.co.uk, read 2026-10-18
- How to close a limited company - BM Insights - Blake Morgan — blakemorgan.co.uk, read 2026-10-18