What is the £25,000 strike-off limit?

Under s.1030A CTA 2010, distributions up to £25,000 of reserves prior to a voluntary strike-off can be treated as capital (CGT, with BADR potentially available). Above £25,000, distributions are taxed as income dividends — usually a much higher tax cost than going through an MVL.

How long does an MVL take?

Usually 6–12 months from start to dissolution, but most of the cash distribution is paid within weeks of the IP being appointed. Final dissolution requires HMRC clearance and at least 6 months on the Companies House register.

What is the TAAR and how do I avoid it?

The Targeted Anti-Avoidance Rule treats MVL distributions as income (not capital) if you continue a similar trade within 2 years and tax avoidance was a main reason. Avoid by genuinely retiring or moving into a different field, and document commercial reasons before liquidation.

Do I need to file a final CT600 before closing?

Yes — file a Corporation Tax return up to the cessation date and pay any tax owed. Also deregister for VAT (VAT7), close the PAYE scheme, file final accounts and the outstanding Confirmation Statement before submitting DS01 or appointing a liquidator.

Guides

Closing or Selling a UK Limited Company

There are several routes to extract value from a company you no longer need: striking off (DS01), Members' Voluntary Liquidation (MVL), share sale or asset sale. Each has different tax consequences — BADR can reduce CGT to 14% in 2025/26.

2 min read·Updated 30 April 2026

Quick answers

How do I close a UK limited company?

If reserves are £25,000 or less and the company is solvent and inactive, file form DS01 with Companies House (£33). For higher reserves, use a Members' Voluntary Liquidation (MVL) via a licensed insolvency practitioner — distributions are then capital, eligible for BADR at 14% in 2025/26.

What is the difference between a share sale and an asset sale?

In a share sale, shareholders sell their shares to the buyer and pay CGT on the gain (BADR may apply). In an asset sale, the company sells the trade and assets, pays Corporation Tax on the gain, then shareholders extract the net proceeds — usually triggering a second tax charge.

How does BADR apply when closing a company?

BADR taxes qualifying gains at 14% in 2025/26 (rising to 18% in 2026/27) up to a £1m lifetime limit. To qualify on a company closure, you generally need to have been an officer/employee owning 5%+ of the ordinary shares for 2 years, and the company must be a trading company (not investment).

Routes to close or exit

Route	Use when
Voluntary strike-off (DS01)	Solvent company, distributable reserves ≤ £25,000
Members' Voluntary Liquidation (MVL)	Solvent company with reserves > £25,000
Creditors' Voluntary Liquidation (CVL)	Insolvent company being closed
Share sale	Selling the company as a going concern
Asset sale	Selling the trade and assets, keeping the shell

Strike-off (DS01)

File form DS01 with Companies House (£33 fee)
Eligible if you haven't traded or changed name in the last 3 months and aren't subject to insolvency proceedings
Distributions up to £25,000 of reserves can be treated as capital under ESC C16-equivalent rules (s.1030A CTA 2010), accessing CGT and BADR
Reserves above £25,000 distributed before strike-off are treated as income dividends, taxed at dividend rates

Members' Voluntary Liquidation (MVL)

Used when reserves exceed £25,000 and you want capital treatment
Requires a licensed insolvency practitioner (typical cost £1,500–£5,000+)
Distributions to shareholders are capital — eligible for BADR at 14% (2025/26), rising to 18% in 2026/27
Beware the Targeted Anti-Avoidance Rule (TAAR): if you start a similar business within 2 years, HMRC can re-characterise the distribution as income

MVL vs strike-off — break-even

For reserves much above £25,000, MVL almost always saves tax despite the IP fees, because:

Capital gains rate (BADR 14%) << dividend rate (33.75% higher rate)
The annual exempt amount (£3,000) and BADR lifetime allowance (£1m) further reduce the bill

Share sale

Shareholders sell their shares to the buyer
Capital gain = proceeds – base cost
BADR may apply if conditions are met (5%+ holding, officer/employee, 2+ years)
Buyer takes on all historical liabilities, so warranties and indemnities matter

Asset sale

Company sells the trade and assets; proceeds stay in the company
Each asset class is treated separately: goodwill, plant, stock, etc.
Company pays Corporation Tax on chargeable gains and balancing charges
Shareholders then need a second step (MVL or dividend) to extract net proceeds — leading to potential double tax
Often suits the buyer; rarely the seller's first choice

Filing housekeeping before closing

Before strike-off or MVL, settle:

Final Corporation Tax return (CT600) and pay any tax due
VAT deregistration (form VAT7) — final return covers the period to deregistration
PAYE scheme closure with HMRC
Final accounts to Companies House
Outstanding Confirmation Statement

Deadlines and timing

Strike-off takes ~3 months from DS01 acceptance
MVL takes 6–12 months, often with an interim distribution within weeks
Plan around 6 April to use a fresh CGT annual exempt amount

TAAR — the 2-year trap

After an MVL, if within 2 years you continue or start a similar trade as a sole trader, partnership or new company and one of the main reasons was tax avoidance, HMRC can tax the MVL distribution as income. Document genuine commercial reasons before triggering an MVL.

General guidance, not tax advice. Speak to a qualified accountant for advice tailored to your situation. Figures relate to the 2025/26 UK tax year. Source: HMRC, gov.uk.