There may come a time when you need to make the difficult decision to close your limited company. Yes, it can be straightforward, but there are several variables to consider.

In this article, we provide a complete overview of how to close your company successfully, when simply closing your limited company isn’t the most tax-efficient option, and when to consider using an MVL (Members’ Voluntary Liquidation) provider.

So, let’s start with the most important question…

Before closing your company, have you considered all your options?

There are a few things you could change to keep trading. So it’s worth keeping these in mind before starting the closure process.

Change trading status and switch from a limited company to an umbrella company.

Umbrella companies are considered one of the easiest ways for temporary workers to get paid. Depending on your IR35 status, your limited company may no longer be the most tax-efficient way to work for now.

Using an Umbrella company means your tax and NI are deducted at source on your behalf, but it’s still important to choose a compliant provider.

Making the company dormant.

There is no time limit for keeping a company dormant as long as you keep your annual confirmation statements and accounts up to date with Companies House each year. Accountancy fees are also significantly less as you are not actively trading. You may also need to deal with any outstanding VAT or PAYE obligations.

You can also keep your limited company dormant whilst contracting through an umbrella company. This gives you the best option to return to your company, hopefully, in the future.

Our Easy Switch package gives contractors the flexibility to switch between limited and umbrella to suit your latest contract, at no extra fee.

Click the link below to learn more about our Easy Switch accountancy and payroll package.

Are you switching to permanent work – if so, is this short-term?

If so, you might want to leave your limited company dormant so you can easily and quickly return to it when your permanent position ends.

Once your company is closed, you can register a new one, but tax rules apply if you close a company and then start a similar business within two years. So bear that in mind.

Be certain, it can be costly if you reconsider later.

If you’re not 100% sure, make the company dormant; that way, you’ll avoid unnecessary costs down the road.

So, you’re ready to close your company. What is the best way to do so?

The two most common choices are to close your company yourself or hire a liquidation practitioner for an MVL.

An MVL is often worth considering if your company has more than £25,000 in retained profits.

Although there’s no minimum amount required to use an MVL, the £25,000 threshold matters because a company that is simply struck off is taxed differently.

Through an MVL, shareholders can usually receive their remaining funds as capital rather than dividend income. If they qualify for Business Asset Disposal Relief (BADR), the Capital Gains Tax rate is 18% from 6 April 2026.

Conditions apply to claiming the relief, particularly if you intend to carry on similar work after closing your company.

Read more in our guide to Business Asset Disposal Relief.

If the company distributes more than £25,000 to shareholders when closing through a standard strike-off, the distributions will normally be treated as dividend income rather than capital gains. Dividend tax rates for 2026/27 are 10.75%, 35.75% and 39.35%, depending on the shareholder’s tax band.

For more details on how an MVL works and the associated costs, read our MVL FAQs.

Standard Limited Company Closure

You can do this yourself, and it will strike your company off Companies House. This can be particularly tax efficient if the total funds distributed to shareholders are £25,000 or less.

Also known as dissolution, you’ll need to complete a DS01 form (signed by a majority of directors) and send it to Companies House. You should also advise any shareholders, creditors, and employees within a week of submitting that form.

It is worth noting here that, to apply for closure, your company cannot have any of the following:

  • Traded or changed its name in the previous 3 months.
  • Been threatened with liquidation or be subject to insolvency proceedings.
  • Entered into certain arrangements with creditors.
  • Has outstanding debts or taxes that have not been dealt with.

If you cannot meet the above criteria, you may need to voluntarily liquidate instead, or resolve the outstanding issues before applying.

Assuming there are no objections, your company will usually be dissolved around 2-3 months after the strike-off notice is published and ‘struck off’ the Companies House register, meaning it no longer exists.

The cost is £13 to submit online, or £18 via paper form. You must send the final statutory accounts and, where required, a company tax return to HMRC, and settle any outstanding tax affairs.

Make sure any business assets, such as cash in the bank account, are shared among shareholders before the company is struck off; otherwise, anything left will go to the Crown.

Even after you close your company, you must keep business documents for 7 years, including bank statements, invoices, and receipts.

Members’ Voluntary Liquidation (MVL)

An MVL is a liquidation process available to solvent companies, allowing the shareholder (s) to appoint a liquidator to formally close the company and can be the most tax-efficient method. Instead of paying income tax, shareholders can obtain the value of the company as a capital gain.

A licensed insolvency practitioner is appointed to realise the company’s assets, pay any outstanding creditors, and then distribute any remaining sums to shareholders. With an MVL, your company must have paid (or be able to pay) all creditors and liabilities within 12 months of liquidation.

An MVL is a formal winding-up process for a solvent company, not an insolvent company, and would not normally affect your personal credit rating.

If you want to go down this route, most directors must sign a declaration of solvency, and shareholders must pass a resolution for voluntary winding up, normally requiring at least 75% of the votes cast.

The resolution must be advertised in The Gazette within 14 days, and Companies House must also be notified.

Once an authorised insolvency practitioner is appointed, they will take charge of the limited company. This is undeniably more laborious than Standard Closure but may well be worth it for the potential tax savings.

If you’re planning to close your limited company and start contracting again through another company, be careful. HMRC has anti-avoidance rules designed to prevent directors from repeatedly closing companies to benefit from capital gains tax treatment. These rules can apply if you carry on the same or a similar trade within two years of receiving a liquidation distribution, where certain other conditions are met.

And finally, if I close my company, do all my outstanding ‘debts’ get written off?

This is a common misconception. A business must be solvent before it can be struck off and should have repaid or otherwise dealt with the money it owes.

Ultimately, if you close your company, Companies House will provide public notice of the closure, and if there is tax and outstanding debt, these will need to be cleared prior to closing.

Creditors can object to a strike-off, and dissolution does not automatically extinguish liabilities or prevent an application to restore the company.

As with all important company decisions, speak to the experts. Lean on your accountant for what they believe is the best financial route for you; even at this stage, their professional advice could make a big difference.

For all insolvency queries, we recommend industry-leading experts at Liquidation Centre. Their team aims to release 90% of your assets within 7 days, depending on the circumstances of the liquidation, and provide a dedicated account manager from start to finish. Find out more about Liquidation Centre here or contact your accountant, who can provide a personal introduction to the team to begin your MVL process: Liquidation Centre.

Speak to one of our accountants on 0207 096 2659 or email christian@integroaccounting.com – alternatively you can complete the Integro Accounting request a call back form.