How to close a limited company
You can close a limited company in the UK in a number of different ways. Options for closing a limited company include: strike off via a DS01 form, solvent liquidation via a Members' Voluntary Liquidation (MVL), and insolvent liquidation via a Creditors' Voluntary Liquidation (CVL). The most appropriate closure option for your company will largely depend on if the company is solvent or insolvent at the time of closure.
Closing a limited company: At a glance
The right way to close your company depends on its financial position. Below is a side-by-side comparison of the four main closure routes available to UK limited company directors, covering costs, timescales, and when each method is most appropriate.
| | Strike Off (Dissolution) | Members' Voluntary Liquidation (MVL) | Creditors' Voluntary Liquidation (CVL) | Making the company dormant |
| Best suited for | Solvent company with minimal assets (under £25,000) that have stopped trading and have no outstanding debts | Solvent companies with assets over £25,000 where shareholders want to extract value | Insolvent companies that cannot pay their debts and need to close in an orderly manner | Companies that have stopped trading but may want to resume in the future |
| Typical cost | £13 online / £18 by post (Companies House fee only) | Varies depending on complexity and value of assets. Expect to pay around £4,000 | Varies depending on complexity and the number and value of creditors. Expect to pay around £4,000 - £6,000 for simple cases | Minimal - ongoing filing fees only |
| Typical timescale | Approximately 3 months | 3-12 months depending on complexity and HMRC clearance | 6-12 months but complex cases can take longer | Immediate - no formal process required |
| Insolvency practitioner needed? | No - directors apply directly | Yes - licensed insolvency practitioner appointed as liquidator | Yes - licensed insolvency practitioner appointed as liquidator | No |
| What happens to debts? | Must be settled before applying for strike off. Creditors can object if debts remain | Must be repaid in full within 12 months. Directors must sign a declaration of solvency attesting to this | Assets sold to repay creditors as far as possible. Remaining unsecured debts written off | Debts remain and creditors can still pursue payment |
| Company removed from register? | Yes | Yes | Yes | No |
Key takeaways
- How you close a limited company depends on whether it’s solvent or insolvent
- Solvent companies can be closed via voluntary dissolution (strike off) or Members’ Voluntary Liquidation (MVL)
- Insolvent companies must use a formal insolvency process, typically a Creditors’ Voluntary Liquidation (CVL)
- Dissolving an insolvent company via strike off risks HMRC objection, the company being restored to the Companies House register, and potential director disqualification
- There is a closure option for every company, regardless of its financial position
How do I close an insolvent limited company with debts via a Creditors' Voluntary Liquidation (CVL)?
Closing a company with debts via a Creditors' Voluntary Liquidation (CVL) allows a limited company director to wind up their company voluntarily, while also ensuring outstanding creditors are treated fairly and in accordance with the Insolvency Act 1986.
Closing a limited company through a CVL can only be done under the guidance of a licensed insolvency practitioner. Once appointed, the company will cease trading, and the appointed insolvency practitioner will take over control of the company’s affairs from that point onwards.
An insolvency practitioner's role when closing a company includes identifying and realising the value assets, dealing with creditors of the business, and ensuring the company is closed down in the correct way at Companies House. Creditors will be repaid as far as possible using the liquidated assets of the company, with any debt remaining outstanding after this point being written off unless it has been secured with a personal guarantee.
In the event of a personal guarantee being in place, the guarantee will crystalise upon the company being closed, and the responsibility for repaying the remaining balance of the borrowing will pass to the individual who provided the guarantee.
How do I close a limited company by strike off?
Voluntary strike off (also known as dissolution) is the simplest and cheapest way to close a solvent limited company. You apply to Companies House using form DS01, and provided no objections are received, the company is removed from the register around three months later.
To be eligible, your company must not have traded, changed its name, or disposed of any property in the previous three months, and there must be no ongoing legal proceedings.
Before applying, you need to settle all outstanding debts, file your final accounts and tax returns with HMRC, close the company’s payroll scheme, deregister for VAT if applicable, distribute any remaining assets to shareholders, and close the company’s bank accounts. Within seven days of submitting the DS01, you must send a copy to all stakeholders including shareholders, creditors, and employees.
It is important to note that strike off is only suitable for solvent companies. If your company has debts it cannot repay, creditors (including HMRC) can object to the application, and a dissolved company can be restored to the register for up to six years. There is also a tax consideration: if the company has assets or retained profits above £25,000, distributions via strike off are treated as income, and a Members’ Voluntary Liquidation (MVL) may be a more tax-efficient alternative. For a detailed comparison of strike off and liquidation, see our guide to company strike off vs company liquidation.
“Time and time again we see directors trying to dissolve a company that should have been liquidated. If the company has debts it can’t pay, dissolution is not the right route and HMRC will almost certainly object to the strike off if they’re owed money. Getting advice at the outset saves time, money, and stress.”
— Jonathan Munnery, Partner, UK Liquidators
How do I close a solvent company with a Members’ Voluntary Liquidation (MVL)?
A Members’ Voluntary Liquidation (MVL) is a formal process used to close a solvent limited company, and is typically the most appropriate route when the company has assets or retained profits worth more than £25,000.
The key advantage of an MVL over a simple strike off is that distributions to shareholders are taxed as capital gains rather than income, and many shareholders will also qualify for Business Asset Disposal Relief (BADR), which reduces the Capital Gains Tax rate to 18%.
The MVL process requires the directors to sign a Declaration of Solvency confirming that all debts can be repaid within 12 months, followed by a shareholder resolution to place the company into liquidation. A licensed insolvency practitioner is then appointed as liquidator to realise the company’s assets, settle any liabilities, and distribute the remaining funds to shareholders before the company is removed from the register.
The process typically takes between three and twelve months to complete depending on complexity and HMRC clearance. However, in many instances a distribution can be made to shareholders long before the formal liquidation process completes. For a full guide to the process and eligibility, visit our dedicated MVL page.
Can I make my company dormant instead of closing it?
If your company has stopped trading but you are not ready to close it permanently, making it dormant is an alternative worth considering.
A dormant company remains on the Companies House register but is not actively trading, which can be useful if you want to protect the company name or keep open the option of resuming business in the future.
There is no formal process to make a company dormant and no time limit on how long it can stay inactive, however, you do still have ongoing obligations as a director: you must continue to file annual accounts (simplified dormant accounts are accepted) and submit a confirmation statement to Companies House each year. You should also notify HMRC of the change in status, as you may be able to stop filing corporation tax returns while the company remains inactive.
It is important to understand that dormancy is not the same as closure as the company continues to exist as a legal entity, and any outstanding debts or obligations remain in place. If the company is insolvent, making it dormant does not resolve the debt situation and creditors can still take action. When you are ready to close the company permanently, you can do so via voluntary strike off (if solvent) or liquidation.
How much does it cost to close a limited company?
The cost of closing a limited company depends on which route you take.
Voluntary strike off is the cheapest option at just £13 online (or £18 by post) for the Companies House filing fee, with no professional fees involved. A Members’ Voluntary Liquidation (MVL) requires the appointment of a licensed insolvency practitioner, with fees typically up to £4,000 + VAT plus statutory disbursements. While more expensive than a strike off, the tax savings from having distributions treated as capital gains — particularly with Business Asset Disposal Relief — will often more than offset the cost for companies with assets over £25,000.
A Creditors’ Voluntary Liquidation (CVL) is typically the most expensive closure method, with fees generally ranging from £4,000 to £6,000 + VAT depending on the size and complexity of the case. Directors who have been employed by the company may be able to claim director redundancy pay to help cover these costs.
Making a company dormant has minimal ongoing costs — just the annual filing fees for accounts and your confirmation statement at Companies House. For a side-by-side breakdown of costs, timescales, and suitability across all four options, see the comparison table above.
What happens to debt when you close a limited company?
When a company is liquidated, outstanding creditors will be repaid using the proceeds from selling company assets. In the case of an insolvent company, however, there will not be enough money raised in order to fully pay each creditor what they are owed. In many instances, there is in fact a significant shortfall, meaning a substantial amount of company debt remains after the business has been closed following liquidation.
Any debt which remains after a company has been closed via liquidation will be written off in the vast majority of cases. This is because a limited company is classed as a separate legal entity to that of its directors, meaning the debts of a limited company belong to the company itself and not its directors or shareholders. As the company has been closed via liquidation under the guidance of a licensed insolvency practitioner, you can be sure the closure of the company has been done in full accordance with the Insolvency Act 1986.
The same cannot be said when a company is closed via the DS01 strike off option. Although this closure method should only be used by solvent companies, sometimes an insolvent company will apply for strike off and occasionally this will go through unchallenged.
In this instance, however, an outstanding creditor of the dissolved company can apply to the courts to have the company reinstated to the Companies House register in order for them to continue chasing for the debt which remains unpaid. You can only be sure unaffordable debts of a company are written off and legally cleared by closing the company via liquidation.
Can I be held personally liable for company debt when I close it?
As the company is responsible for its own debts, directors will not find themselves personally responsible for repaying these should the company have to close before all debts are repaid. This is due to something known as limited liability.
However, there are certain circumstances when the director of an insolvent company can be held personally liable for the debts of their limited company:
- Personal Guarantees - If a director or shareholder has provided a personal guarantee to underpin company borrowing, they will assume legal responsibility for repaying this debt should the company become insolvent and has to close.
- Fraudulent trading - If a company director is found guilty of fraudulent trading, they may be asked to pay a compensation order to creditors in order to cover the financial losses they have incurred as a result of the fraudulent activity
How to close a limited company that has never traded?
If you are the director of a limited company that has never traded, there are a number of closure options open to you.
The first option to close a company that has never traded is to apply for voluntary strike off using the DS01 dissolution process. This can be a great closure option for a never traded company as there are no assets or debts to deal with. The strike off process is relatively quick and can be completed for just £33 when you apply for strike off online.
An alternative to closure is to apply to make the company dormant. This could be a great option if you want to keep open the possibility of trading through the company in the future. You can make a limited company dormant for an indefinite length of time safe in the knowledge that your company name is reserved for you when you want to begin trading.
Where can I get advice on closing my company?
Company closure is a complex area, particularly if your limited company has debts it cannot repay, which is why seeking early advice from a licensed insolvency practitioner is vital.
Continuing to trade while knowingly insolvent is a breach of your duties as a company director, however, closing your company in the wrong way, particularly one which is detrimental to your creditors, will also see you falling foul of your legal responsibilities as the director of an insolvent company.
An insolvency practitioner will be able to talk you through the options you have for closing your company and bringing its affairs to a close in the best way possible.
