How to Close a Limited Company: Your Options Compared

There are three main ways to close a limited company: voluntary strike-off for a solvent company with little left in it, a members' voluntary liquidation for a solvent company with significant reserves, and a creditors' voluntary liquidation for a company that cannot pay its debts. Leaving it dormant is a fourth option if you may need it again.

Choosing the right route affects how much tax you pay on the money you take out, how much the process costs, and whether you are protected from future problems. This guide compares the options in plain English and sets out the steps for the most common route, voluntary strike-off.

Key takeaways

• Strike-off suits solvent companies with no debts and modest reserves.
• Liquidation through a licensed insolvency practitioner is needed in other cases.
• Settle debts, file final returns and distribute funds before the company is dissolved.
• Pre-strike-off distributions of £25,000 or less can be treated as capital, subject to conditions.
• Anything left in the company when it is dissolved generally passes to the Crown.

What "closing a company" means

Closing a limited company means having it removed from the register at Companies House so that it no longer exists as a legal person. Before that happens, its affairs must be wound up: debts paid, tax settled, contracts ended and remaining assets distributed. GOV.UK's overview of the options is on closing a limited company, and the strike-off process is on GOV.UK's strike-off page.

The options compared

A dormant company still has to file accounts and a confirmation statement every year; see our guides to dormant company accounts and the confirmation statement.

How the money you take out is taxed

This is often the deciding factor. Money distributed to shareholders before a strike-off can be treated as a capital distribution, taxed under capital gains tax rules, if the total is £25,000 or less and conditions are met. If it is more, the whole amount is generally treated as a dividend. In a members' voluntary liquidation, distributions are normally capital regardless of size, which can be more tax-efficient for larger sums, though the liquidator's fees need to be weighed against that. Anti-avoidance rules may treat distributions as income if you carry on a similar trade within a set period afterwards, so check your plans with an adviser before acting.

Loose ends to tie up before you apply

Closing a company is mostly about finishing things properly. Tell customers and suppliers the date trading ends, and cancel contracts, subscriptions and insurance that will no longer be needed. If the company has employees, final pay, holiday pay and pension contributions all need settling, and the payroll scheme must be closed with a final submission. A VAT-registered company must deregister and file a final VAT return.

Check the company's online accounts with HMRC and Companies House for anything outstanding, including late filings, and make sure the registered office address will still receive post during the strike-off period. Any creditor, including HMRC, can object to a strike-off if money is still owed, which delays the process. Finally, keep the company's books and records: they must generally be kept for several years after dissolution, and HMRC can still ask questions about earlier periods.

Step by step: voluntary strike-off

1. Stop trading and wait until the three-month conditions are met.
2. Collect money owed to the company and pay all its debts.
3. Deal with the director's loan account, so nothing is owed either way.
4. Close payroll and deregister for VAT if relevant.
5. Prepare final accounts and a Company Tax Return, and pay any corporation tax.
6. Distribute remaining funds to shareholders, with the correct paperwork.
7. Apply to strike off using form DS01 and pay the fee; check the current amount on GOV.UK.
8. Send a copy of the application to shareholders, creditors, employees and others required, within seven days.
9. Close the company bank account before dissolution, keeping records for the required period.

Worked example (illustrative example)

"Northgate Consulting Ltd", an invented illustrative example, is a one-director consultancy. The director is taking a permanent employed role and wants to close the company. It stopped trading at the end of June 2026, has no debts, and after the final corporation tax is paid it will hold £18,000.

The accountant prepares final accounts and a Company Tax Return, the tax is paid, and the payroll scheme is closed. Because the remaining £18,000 is under £25,000 and the director is not planning a similar business, the distribution is made in anticipation of strike-off and treated as capital. After the three-month period, the director applies to strike off and notifies the required parties. The bank account is closed once the funds have been paid out. The company and figures are invented; your own position depends on your circumstances.

Common mistakes

• Applying while still trading or within the three-month window.
• Leaving money in the bank, which is generally lost to the Crown on dissolution.
• Forgetting HMRC: final returns and deregistrations still need to be done.
• Ignoring an overdrawn director's loan, which must be dealt with first.
• Using strike-off to avoid creditors, which creditors can object to and which can have serious consequences.

Close your company properly

Our company accounts service starts from £350 per year and our corporation tax service from £250 per year, covering the final accounts and tax return needed before closing. Where a liquidation is more suitable, we can explain why and what to ask a licensed insolvency practitioner. Read our guide to the director's loan account before you start.

Thinking about closing your company? Talk to us first or see our pricing.