Knowing how to close down a limited company properly is a formal process, not simply stopping trading. The company carries on existing, along with its filing obligations, until it is removed from the register at Companies House. Which route you take depends on one question above all others, which is whether the company can pay its debts. This guide covers the four routes, what they cost, how long they take, and the tax that comes with each.
In short, a solvent company with little left in it can usually close through a voluntary strike off (DS01, £13 online), a solvent company with more than £25,000 to distribute is usually better suited to a Members’ Voluntary Liquidation, and an insolvent company needs a Creditors’ Voluntary Liquidation rather than a strike off. The sections below cover each route in full.
What Does It Mean to Close Down a Limited Company?
Closing a company means having it removed from the Companies House register, which is called dissolution. Once dissolved the company no longer exists. It cannot trade, hold assets or be sued, and anything still sitting inside it passes to the Crown.
Why directors choose to close a company
The usual reasons are retirement with nobody to take over, a company that has served its purpose such as a contractor going permanent or a finished project, a sale of the trade and assets, a business that is no longer viable, or a group being tidied up. Closing is the right call when there is no realistic plan to trade again and no reason to keep paying to file. If you might want the company back later, leaving it dormant is often the better option.
Who can apply to close a limited company
For a voluntary strike off the application comes from the directors, and a majority must sign it. For a liquidation the shareholders or the creditors start the process and a licensed insolvency practitioner does the work. If the company is insolvent, the directors cannot simply strike it off.
What to Check and Do Before You Close Your Limited Company
- Confirm the company is solvent, meaning it can pay all its debts within 12 months
- Settle every creditor, including HMRC
- Deal with employees properly, including notice, redundancy and final payroll submissions
- Get the cash and assets out before dissolution, because anything left goes to the Crown
- Prepare final accounts and a final Corporation Tax return
- Deregister for VAT and close the PAYE scheme
- Close the bank account only after the final distribution has been made
Which Is the Right Way to Close a Limited Company?
Voluntary Strike Off
The simplest and cheapest route, for solvent companies with little left in them. You file form DS01 with Companies House. The company must not have traded, sold stock or changed its name in the previous three months, and must not be in an insolvency process or an arrangement with creditors. Distributions totalling up to £25,000 can be treated as capital rather than dividend income, which usually means a lower tax bill. Go over that figure and the whole amount is taxed as income, not just the excess.
Members’ Voluntary Liquidation (MVL)
For solvent companies with more than £25,000 to distribute. A licensed insolvency practitioner is appointed, the directors swear a declaration of solvency, and the reserves come out as capital. That means Capital Gains Tax at 18% or 24%, and Business Asset Disposal Relief, where the shareholding qualifies, is charged at 18% on up to £1 million of lifetime gains. From 6 April 2026, this is the same as the standard lower CGT rate, so BADR now only reduces the bill for higher and additional rate taxpayers, cutting their rate from 24% to 18%. It was 14% for 2025/26 and 10% before that, so the relief is worth less than it used to be
Take advice on the anti-avoidance rules if you plan to carry on in a similar trade within two years, because they can easily turn the whole distribution back into income.
Creditors’ Voluntary Liquidation (CVL)
For insolvent companies, where the directors accept the company cannot pay its debts and choose to wind it up. An insolvency practitioner sells the assets and pays creditors in order of priority. Acting early matters here, because carrying on trading while insolvent can lead to personal liability.
Compulsory Liquidation
The route nobody chooses. A creditor petitions the court, often HMRC, and the court orders the company wound up. The directors lose control and their conduct is investigated. If you can see this coming, take advice before the petition lands rather than after.
| Route | Company position | Who runs it | Rough cost | Rough time |
| Voluntary strike off | Solvent, little or nothing left to distribute | The directors | £13 filing fee (online) plus professional fees | 3 to 4 months |
| Members’ Voluntary Liquidation | Solvent, more than £25,000 to distribute | Licensed insolvency practitioner | Usually a few thousand pounds | 3 to 12 months |
| Creditors’ Voluntary Liquidation | Insolvent, chosen by the directors | Licensed insolvency practitioner | Several thousand pounds | 6 to 12 months |
| Compulsory liquidation | Insolvent, forced by a creditor | The court and Official Receiver | Met from company assets | 12 months or more |
How to Close Down a Limited Company Step by Step
The steps below follow the voluntary strike off route, which is the one most solvent owner managed companies use.
- Stop trading, and do not sell stock or change the company name in the three months before you apply.
- Deal with employees, including notice, redundancy pay and final payroll submissions.
- Settle all debts, including Corporation Tax, VAT and PAYE.
- Prepare final accounts and file a final Corporation Tax return with HMRC.
- Distribute the remaining cash and assets to shareholders.
- Deregister for VAT and close the PAYE scheme.
- File form DS01 with Companies House and pay the fee.
- Tell all interested parties within seven days, including shareholders, creditors and employees.
- Wait for the notice in the Gazette. If nobody objects, the company is struck off around two months later.
Official guidance on eligibility and the DS01 process is available on GOV.UK.
What Happens to Money, Assets and Debts When Closing a Limited Company?
Everything has to be dealt with before dissolution. Cash left in the bank, property, vehicles, intellectual property and even a refund due from HMRC all pass to the Crown as bona vacantia. Getting them back means restoring the company, which is slow and expensive.
Debts do not disappear either. A creditor can object to a strike off, and can apply to restore the company for up to six years afterwards to chase what it is owed. Personal guarantees survive dissolution completely, as does an overdrawn director’s loan account.
How Much Does It Cost to Close Down a Limited Company?
A voluntary strike off is cheap. The Companies House fee is £13 online or £18 by post , in force since the fee changes on 1 February 2026 (down from £33 and £44 respectively). Most of your cost is the work behind it, meaning the final accounts, the final tax return and the deregistrations. An MVL costs more because it needs a licensed insolvency practitioner, usually a few thousand pounds, and that is normally money well spent once reserves sit well above £25,000 because of the tax it saves. A CVL costs more again, and is met from what the company has left.
How Long Does It Take to Close a Limited Company?
A strike off usually takes three to four months from filing, because Companies House publishes a notice and waits at least two months before dissolving the company. An objection stops the clock. An MVL typically runs three to twelve months, since the practitioner has to advertise for creditors and get clearance from HMRC before the final distribution. Insolvent liquidations take longer, often a year or more.
Common Mistakes When Closing a Limited Company
- Leaving money or assets in the company and losing them to the crown
- Trying to strike off an insolvent company, which creditors will object to
- Distributing more than £25,000 on a strike off and paying income tax on all of it
- Forgetting vat deregistration or the final corporation tax return
- Closing the bank account before the final distribution has gone out
- Ignoring personal guarantees and overdrawn director loan accounts
- Leaving it too late when the company is already in trouble
Closing a Business vs Closing a Limited Company
If you trade as a sole trader or in a partnership there is no separate legal entity to dissolve. You tell HMRC you have ceased, file a final Self Assessment return and deregister for VAT. A limited company is different, because it exists in its own right and has to be formally removed from the register. Stopping trading is not the same as closing the company, and a dormant company still has to file accounts and a confirmation statement every year.
How Julian Hobbs & Co Can Assist with Closing Your Limited Company
We handle the whole closure, from working out which route fits to the final filings. That means checking solvency, calculating the tax on the final distribution, comparing a strike off with an MVL where the numbers sit near £25,000, preparing the final accounts and return, handling the deregistrations and filing the DS01. Where a company is insolvent we will tell you straight away and put you in front of an insolvency practitioner rather than let the position drift.
We work with owner managed limited companies across Hertfordshire and beyond. If you are thinking about closing your company, book a call with Julian Hobbs & Co and we will talk you through the options.
Conclusion
Closing a limited company properly is mostly about sequence. Deal with employees, creditors and HMRC, get the assets out, choose the right route for the amount you are distributing, then file. Get the order wrong and it costs you money or time, often both. The question worth answering first is whether the company is solvent, because everything else follows from it.
FAQs: Frequently Asked Questions
Can I close my limited company myself?
Yes, if it is solvent and qualifies for a voluntary strike off. You can file form DS01 yourself. Most directors still use an accountant for the final accounts, tax return and deregistrations.
Can I dissolve a company with debts?
Not properly. Creditors can object and HMRC usually does. An insolvent company should go through a Creditors’ Voluntary Liquidation instead.
Can HMRC stop my company being dissolved?
Yes. HMRC objects regularly where returns or tax are outstanding, and an objection suspends the strike off until the position is sorted out.
Can I close a company that has never traded?
Yes, and it is usually straightforward. You still need to bring any outstanding accounts and confirmation statements up to date first.
What happens to company assets after dissolution?
Anything left passes to the Crown as bona vacantia. Get the cash and assets out before you apply, not after.
Can I reopen a dissolved company?
Sometimes. Administrative restoration is possible within six years in certain cases, otherwise it takes a court order. Both are slow and expensive.
How much does company closure cost?
The Companies House fee for a strike off is £13 online or £18 by post, since 1 February 2026, plus professional fees. An MVL usually runs to a few thousand pounds.
How long does dissolution take?
Around three to four months for a strike off, and typically three to twelve months for an MVL.
Do I need an accountant?
Not legally, but the tax on the final distribution is where the money is won or lost, and the £25,000 line catches people out.
Do I still need to file final accounts?
You must file final accounts and a final Corporation Tax return with HMRC. Companies House accounts are not needed once a strike off completes, but anything already overdue should be dealt with.
