How you close your company depends on two questions. Can it pay all its debts? And how much money will be left for you once it has? Get those answers first, because they decide the route, the cost and how much tax you pay on the way out.
Most owner-managed agencies that close are solvent and have modest reserves. For them, a voluntary strike-off costs £18 and takes around three months. If there’s more than £25,000 to take out, a formal liquidation can save a lot of tax, even after the liquidator’s fee.
This guide walks you through the choices, the loose ends to tie up first, and the tax traps that catch people out. It reflects the rules as at October 2026.
Choose your route
There are four ways to stop or close a company. The right one depends on whether it can pay its debts and what you want to happen next.
|
Route |
When it suits | Who runs it | Rough cost |
Rough timescale |
|---|---|---|---|---|
|
Make it dormant |
You’ve stopped trading but might use the company again, or want to keep the name | You, with your accountant | Annual dormant accounts and confirmation statement |
Ongoing |
|
Voluntary strike-off (form DS01) |
Solvent, all debts paid, up to £25,000 left to take out | You, with your accountant | £18 Companies House fee, plus final accounts |
About three months |
|
Members’ voluntary liquidation [MVL] |
Solvent, with more than £25,000 left to take out | A licensed insolvency practitioner | Typically a few thousand pounds |
Several months to a year |
|
Creditors’ voluntary or compulsory liquidation |
The company can’t pay its debts | A licensed insolvency practitioner | Varies |
Varies |
Strike-off: the cheapest route for most
You can only use strike-off if the company hasn’t traded or sold stock in the last three months, hasn’t changed its name in that time, and isn’t facing liquidation or in a deal with creditors.
Once a majority of directors sign and file the form, Companies House publishes a notice in The Gazette. You must send a copy of the application to shareholders, creditors, employees and HMRC within seven days. If no one objects, the company is dissolved two months after the notice.
If the company is insolvent
Stop and take advice from a licensed insolvency practitioner straight away. Once a liquidator is appointed, they take over the company’s affairs, including its tax returns, and directors lose the power to act. Carrying on trading while insolvent can make directors personally liable.
Before you close: tie up the loose ends
Anything the company still owns when it’s dissolved passes to the Crown. That includes money in the bank and any HMRC refund that arrives afterwards. So clear everything first.
- Pick your cessation date. This is the last day of trading. It sets the end date of your final accounts and tax return.
- Look after your team. Pay final wages, any redundancy, accrued holiday pay and pension contributions, then close the payroll scheme with HMRC.
- Clear your director’s loan account. If you owe the company money, repay it, set it against a dividend (only if there are enough profits), or take it as salary. Writing it off counts as income to you, and an unpaid balance is something a liquidator will chase.
- Deal with assets. Sell, give away or write off equipment, vehicles and other assets. If you take an asset yourself, it’s treated as sold to you at market value.
- Collect what you’re owed. Chase customers and write off debts that won’t be paid. VAT bad debt relief may be available.
- Pay what you owe. Settle suppliers, loans, finance agreements and refund any customer deposits for work you won’t deliver.
- Settle up with HMRC. File final VAT and PAYE returns, cancel your VAT registration, and make sure any refund has been paid into the bank.
- Close the bank account last. Only once every payment in and out has cleared.
Getting your money out tax-efficiently
How the final cash reaches you decides whether it’s taxed as income or as a capital gain. The gap can be large.
|
How it’s taxed |
2026/27 rates |
|---|---|
|
As dividends (income) |
0% on the first £500, then 10.75%, 35.75% or 39.35% depending on your other income |
|
As a capital gain |
£3,000 tax-free, then 18% or 24% |
|
As a capital gain with Business Asset Disposal Relief [BADR] |
18% on qualifying gains, up to a £1 million lifetime limit |
The £25,000 rule
If you use strike-off, you can take up to £25,000 in total out as capital. Go over £25,000 and the whole amount, not just the excess, is taxed as a dividend. That’s why liquidation often pays for itself once there’s more than about £25,000 to distribute: a liquidator’s payments are treated as capital whatever the size.
Business Asset Disposal Relief
BADR can cut the rate on a liquidation payout to 18%. You’ll normally need to have owned at least 5% of the company and been a director or employee for the two years before it stops trading. Now that the basic capital gains rate is also 18%, BADR mainly helps higher-rate taxpayers, saving six percentage points against the 24% rate.
Planning to start something similar?
If you or a connected person carry on a similar trade within two years of the distribution, HMRC can treat your payout as income instead of capital. Talk to us before winding up if you’re thinking of starting again in the same line of work.
Your final accounts and tax return
The company still needs a last set of accounts and a final Corporation Tax return. Its last tax period ends on the day it stops trading. In a liquidation, it ends the day before the winding-up resolution, and the liquidator takes over from there.
The final accounts look a little different from usual:
- They’re prepared on a closing-down basis. Assets are valued at what they’d actually sell for, not what they’re worth to a business that carries on.
- The period is often short. It runs from your last year end to the day trading stopped.
- They show how the company wound down. That includes closure costs, any assets you took, director’s loan balances and final dividends.
A few tax points can work in your favour, so make sure they’re claimed:
- Equipment sold or scrapped creates a final tax adjustment, which can be a deduction if assets sold for less than their tax value.
- Losses in the final 12 months can be carried back against profits from the previous three years, which can trigger a tax refund.
- Research and development [R&D] claims must be made before the final return is filed; they can’t be processed after the company is gone.
Any refund must reach the company’s bank account before the company is dissolved. If it arrives afterwards, it goes to the Crown, not to you. Any accounts already due before strike-off must still be filed on time to avoid late-filing penalties.
Common mistakes to avoid
- Closing the bank account too early. A refund or late payment then has nowhere to go and ends up with the Crown.
- Taking out just over £25,000 through strike-off. The whole amount becomes a dividend. A liquidation might have saved you thousands.
- Leaving an overdrawn director’s loan. It doesn’t disappear, and writing it off creates a tax bill for you.
- Filing for strike-off too soon. If you traded in the last three months, the application isn’t valid.
- Forgetting to tell people. Shareholders, creditors, employees and HMRC must get a copy within seven days, and any of them can object.
- Missing a claim. Losses, R&D and capital allowance claims are lost once the company is dissolved.
How MAP can help
Closing a company well is mostly about order and timing. We’ll help you choose the right route, plan how to get your money out, prepare the final accounts and tax return, and make sure every refund lands before the company is dissolved. Where liquidation makes sense, we work with trusted insolvency practitioners.
Thinking about closing your agency’s company? Get in touch at wearemap.co.uk and we’ll talk you through your options.
This article is general guidance based on the rules as at October 2026. It isn’t tailored advice; please speak to us before making a decision.
Sources
- Closing a limited company, GOV.UK
- Strike off your limited company from the Companies Register, GOV.UK
- Business Asset Disposal Relief, GOV.UK
- Business asset disposal relief in 2026/27, Pearson May
