Some owners reach the point of stepping back and find there's no obvious buyer, sometimes because the business depends so much on them. Others have already sold the business and are left with a company that does nothing. If the company can pay what it owes, closing it is mostly paperwork, but the order you do things in matters more than it first appears.
This guide covers closing a solvent limited company in England and Wales. If the company can't pay its debts, its creditors' interests come first, so speak to an insolvency practitioner.
The ways to close a solvent company
A company that can pay its bills can be struck off the register or put into a members' voluntary liquidation. If you're not ready to decide, it can also be left dormant.
| Route | How it works | Often suits |
|---|---|---|
| Striking off | You apply to Companies House on form DS01. No liquidator is needed. | Companies where the total paid out to shareholders will be £25,000 or less |
| Members' voluntary liquidation | The directors declare the company solvent and the shareholders appoint a licensed insolvency practitioner to wind it up | Companies with more money or assets to pay out |
| Leaving it dormant | The company stops trading but stays on the register | Owners who might use the company again, or aren't ready to decide |
GOV.UK describes striking off as usually the cheapest way to close a company. A dormant company still has to send annual accounts and a confirmation statement to Companies House every year, so it isn't free to keep.
Striking off a company
The conditions
You can't apply if, in the last three months, the company has traded or changed its name. It also can't have sold stock it held for trading in that period. Paying off debts from when it traded doesn't count as trading, and nor does what's needed to wind up its affairs.
You also can't apply while the company is going through an insolvency procedure, including a voluntary arrangement with its creditors. If the company doesn't meet these conditions, you'll need to liquidate it instead.
Applying
The application is made on form DS01, signed by the directors or a majority of them. It costs £13 to apply online or £18 on paper, and you can't pay with a cheque from the company you're closing.
Within seven days of applying, you must send a copy to everyone who was a shareholder, director, employee or creditor of the company on that day, apart from the directors who signed. That includes the managers or trustees of any staff pension fund. Not doing so is a criminal offence.
What happens next
Companies House checks the form and publishes a notice in The Gazette, which gives anyone two months to object. If nobody does, the company is struck off and a second notice is published. From then on the company is dissolved and no longer exists.
Dissolving the company doesn't end any liability its directors or shareholders already had. A court can restore a company that was struck off, usually within six years of its dissolution, if a creditor or someone else with a claim applies.
Get everything out of the company first
When a company is dissolved, anything it still owns passes to the Crown. That includes money in its bank account, its equipment, any lease it holds and refunds that arrive later, such as a repayment from HMRC. Getting any of it back means restoring the company, so deal with every asset before you apply.
- Collect what customers owe, and pay suppliers and other creditors.
- Sell or transfer equipment, vehicles and anything else of value, including domain names.
- Send HMRC final accounts and a Company Tax Return marked as the final trading accounts, and pay any Corporation Tax. You don't need to file final accounts with Companies House.
- If the company made a loss in its final year, ask your accountant about terminal loss relief, which can set it against profits of earlier years.
- Cancel the VAT registration within 30 days of stopping trading.
- Close the payroll with a final submission to HMRC, and give each employee a P45.
- Pay out what's left to the shareholders, then close the bank account.
- Keep the records. GOV.UK says to keep documents such as bank statements and invoices for seven years after the company is struck off.
The money left in the company and the £25,000 rule
Money a company pays its shareholders is normally a distribution, taxed like a dividend. There's a special rule for a company that's about to be struck off. Payments to shareholders in anticipation of the strike-off are treated as capital instead, so Capital Gains Tax applies, as long as two conditions are met.
- The company has collected, or intends to collect, what it's owed, and has paid, or intends to pay, its debts.
- The total paid out to shareholders in this way is no more than £25,000.
The limit applies to the total, and it works as a cliff edge. If the payments add up to more than £25,000, none of them gets capital treatment, and the whole amount is taxed as income. The capital treatment is also withdrawn if, two years after a payment, the company hasn't been dissolved or hasn't settled its debts. GOV.UK's strike-off guide still refers to Entrepreneurs' Relief, which is the old name for Business Asset Disposal Relief.
For 2026 to 2027, gains taxed as capital are charged at 18% within your basic rate band and 24% above it, after a £3,000 allowance. Business Asset Disposal Relief can tax qualifying gains at 18%, up to a lifetime limit of £1,000,000 that falls to £500,000 for disposals made from 6 April 2027, with special provisions for contracts made before that date and not yet completed. Dividends are taxed at 10.75%, 35.75% or 39.35% above a £500 allowance, depending on your Income Tax band.
A made-up example
A company has £20,000 left after paying its debts. Paid to its owner in anticipation of a strike-off, it can be treated as capital. If the company had £30,000 left, the whole £30,000 would be taxed as income, unless it went through a members' voluntary liquidation instead.
These figures were checked after the Budget on 28 October 2026. It cut the Business Asset Disposal Relief lifetime limit to £500,000 for disposals from 6 April 2027. It didn't change the rates of Capital Gains Tax or dividend tax, and the Budget documents don't mention the £25,000 limit. Check with your accountant before the company pays anything out.
Members' voluntary liquidation, in brief
For larger sums, a members' voluntary liquidation is the usual route. The directors make a formal declaration that the company will pay its debts within 12 months. The shareholders then vote to wind it up and appoint a licensed insolvency practitioner as liquidator.
Payments to shareholders in a liquidation are normally treated as capital however large they are, and Business Asset Disposal Relief can apply. It costs more than striking off, because you're paying the liquidator, and there's an anti-avoidance rule if you carry on a similar trade within two years. The Budget on 28 October 2026 announced that the rules on how payments from companies to their shareholders are taxed, including the anti-avoidance rules, will be modernised from April 2028, with the detail in draft legislation in 2027. Our guide to members' voluntary liquidation explains the steps and the tax in full.
Your staff
If the company employs people, closing it means making them redundant, and the usual rules apply. Consult the people affected before you dismiss anyone. If you're making 20 or more employees redundant at one establishment within 90 days, collective consultation rules apply. You must notify the Redundancy Payments Service on form HR1 at least 30 days before the first dismissal, or 45 days where it's 100 or more, and consult for at least that long.
Give each employee at least the statutory notice, or pay in lieu where their contract allows it.
| Length of service | Minimum notice |
|---|---|
| One month to two years | One week |
| Two years to 12 years | One week for every year employed |
| 12 years or more | 12 weeks |
Employees with two years' service or more are normally entitled to statutory redundancy pay, worked out from their weekly pay and their years of service at each age. For redundancies on or after 6 April 2026, weekly pay is capped at £751 for this, and the most anyone can receive is £22,530. Their contracts may entitle them to more. Pay their final wages, then close the payroll.
If someone takes on the business, or part of it, rather than you closing it down, TUPE may move the staff to the new owner instead. Our guide to TUPE when you sell a business explains when.
Contracts, the lease and personal guarantees
Work through the company's contracts before you apply. End them in line with their notice terms where you can, and agree terms to finish early where you can't. A lease needs particular care, because one the company still holds when it's dissolved passes to the Crown with everything else. Use a break clause if there is one, or agree a surrender with the landlord.
Check any personal guarantees you've given, for example on the lease, a loan, an overdraft or a supplier account. Directors are personally responsible for company debts they've guaranteed. Agree a release with the lender or landlord before you close the company.
When selling is worth more than closing
Closing a company returns its net assets, meaning the cash and whatever the assets fetch, after the debts are paid. Nobody pays you for the profit the business makes. If it makes a steady profit that doesn't depend entirely on you, a buyer may pay for that profit as well, which can be worth much more than what's in the bank. A buyer who takes on the staff and the lease also saves you redundancy costs and a negotiation with the landlord.
A sale is worth exploring first if these apply.
- Profit has been steady or rising for the last few years.
- Someone other than you could run the day to day, or could learn to.
- Customers buy from the business rather than from you personally.
- There's something a competitor would value, such as a contract or a trained team.
Our guide to how to value a business explains how buyers arrive at a price, and our valuation tool gives you a rough range in a few minutes.