Closing a small company: voluntary strike-off or members' voluntary liquidation?

In short: If cash taken out before strike-off exceeds £25,000, the whole distribution is taxed as income (GOV.UK: strike-off tax). A members' voluntary liquidation can instead give capital treatment. Taxley files the final Company Tax Return for £39.95 with micro-entity accounts, and files the accounts at Companies House once the return is paid and the accounts are finished.

Take the 30-second check to see whether Taxley fits your company, or see the price for your company.

Key facts (checked on 21 October 2026)

What is the difference between strike-off and a members' voluntary liquidation?

Voluntary strike-off is a directors' application to dissolve a solvent company that has already stopped trading. A members' voluntary liquidation is a solvent winding-up run by an authorised insolvency practitioner, after the directors declare the debts can be paid. Cash paid to the shareholders is taxed differently once it exceeds £25,000.

Both routes are for a company that can pay what it owes. A majority of the directors authorise the strike-off application. If nobody objects, the company is struck off after the two months in the Gazette notice (GOV.UK: apply to strike off). A members' voluntary liquidation begins with a declaration that the debts, plus interest at the official rate, can be paid within 12 months. Shareholders meet within five weeks, appoint an authorised insolvency practitioner, advertise the resolution within 14 days and send the declaration to Companies House within 15 days (GOV.UK: members' voluntary liquidation). Scotland uses form 4.25, and Scotland and Northern Ireland follow a different process (GOV.UK: liquidate your company). The final CT600 guide covers that return.

When can the directors apply to strike the company off?

Directors may apply online, or use paper form DS01 if they cannot apply online, if the company has not traded, sold stock or changed its name in the previous three months and no barred proceeding is open. The fee is £13 online or £18 on paper. If nobody objects, strike-off follows the two-month Gazette period.

Section 1004 of the Companies Act 2006 bars the application if, in the previous three months, the company changed its name, traded, sold stock or did anything else, apart from steps needed to apply, to conclude its affairs or to meet a statutory duty. Paying an existing liability is not itself trading (Companies Act 2006, section 1004). Section 1005 bars it during administration, a winding-up, an outstanding petition, a receivership or an open arrangement with creditors (Companies Act 2006, section 1005). A copy goes within seven days to the people affected (GOV.UK: close down your company). The registrar waits two months, and the striking-off notice dissolves the company (Companies Act 2006, section 1003). Final accounts and a Company Tax Return go to HMRC, and those accounts do not have to be filed at Companies House. The overdue-accounts guide covers a compulsory strike-off for overdue accounts. Profit still to be taxed is 19% at £50,000 or less and 25% over £250,000, with marginal relief between. Short periods and associated companies reduce those limits (GOV.UK: Corporation Tax rates).

How is money taken out before a strike-off taxed?

Before strike-off, a share-capital distribution is not income if the total is £25,000 or less and the company intends to collect amounts due and pay its debts. Above that limit, the exemption fails, so the whole sum is taxed as a distribution, not only the excess. An ordinary dividend is always income.

Section 1030A of the Corporation Tax Act 2010 takes a share-capital distribution out of income where strike-off has started or is intended, the debts are being dealt with, and the total does not exceed £25,000 (Corporation Tax Act 2010, section 1030A). Above that figure the exemption fails, so the whole sum is a distribution taxed as income at dividend rates, not merely the excess (HMRC: charge on UK distributions). The dividend guide covers an ordinary dividend, which is income at any amount. At £25,000 or under, the payment is a capital distribution and a disposal of the shares, unless the sum is small beside their value (Taxation of Chargeable Gains Act 1992, section 122). Paying out what the shares are worth is not that small case. Section 1030B withdraws the exemption if two years pass without dissolution, or the debts are not dealt with so far as reasonably practicable (Corporation Tax Act 2010, section 1030B).

How is money taken out in a members' voluntary liquidation taxed?

In a winding-up, a payment in respect of share capital is not an income distribution, so the shareholder pays Capital Gains Tax rather than dividend tax. Business Asset Disposal Relief is 18% on a qualifying gain from a disposal on or after 6 April 2026, after the annual exempt amount. An anti-avoidance rule can tax the payment as income instead.

Section 1030 of the Corporation Tax Act 2010 says a share-capital distribution in a winding-up is not income (Corporation Tax Act 2010, section 1030). From 6 April 2026, Business Asset Disposal Relief is 18% after the annual exempt amount where the whole gain qualifies (GOV.UK: Business Asset Disposal Relief). For other shares, the two-year tests are office or employment, 5% of the shares and votes, 5% of the winding-up assets or the sale proceeds, and a trading company. A sale within three years can still qualify after trading stops. The annual exempt amount for 2026/27 is £3,000 (GOV.UK: Capital Gains Tax rates and allowances). Section 396B taxes the payment as income where the shareholder had at least 5%, the company is or recently was a close company, a similar trade is carried on within two years, and a main purpose was reducing income tax (Income Tax (Trading and Other Income) Act 2005, section 396B). Take advice before appointing a liquidator.

What tax does a higher-rate director pay on £60,000 in 2026/27?

On the assumptions below, a higher-rate director in England, Wales or Northern Ireland who takes £60,000 of retained cash in 2026/27 pays £25,271.25 more income tax if the company is struck off. The same cash in a members' voluntary liquidation gives Capital Gains Tax of £10,242 if the relief applies. The liquidator's fee is not included.

These figures are for 6 April 2026 to 5 April 2027 and illustrate the rules. One shareholder takes the whole £60,000 as the only liquidation distribution and already has £60,000 of employment income, with no other dividends, gains, Gift Aid or pension contributions and no foreign income and gains regime or Overseas Workday Relief claim. The £60,000 is cash left after Corporation Tax, and the final period has no further profit. The shares were issued for £100. The director pays the application fee personally, and no liquidator's fee is deducted because GOV.UK states no fixed figure. The person lives in England, Wales or Northern Ireland, so higher-rate employment income is taxed at 40% (GOV.UK: Income Tax rates). The illustration uses only that one set of facts. It is not a real company's tax. Scottish employment-income rates differ.

On a strike-off the £60,000 exceeds £25,000, so the whole distribution is income taxed at dividend rates and total income is £120,000 (HMRC: charge on UK distributions). Adjusted net income includes the distribution, and the steps do not deduct the £500 dividend allowance (GOV.UK: adjusted net income). The personal allowance therefore falls by £1 for every £2 of the £20,000 over £100,000, from £12,570 to £2,570. The extra £10,000 of salary brought into tax is charged at 40%, which is £4,000. Taxable income is £117,430, inside the higher-rate band of income after allowances, £37,701 to £125,140, so the distribution is not at the additional rate (GOV.UK: Income Tax rates and allowances). Of the distribution, £59,500 is taxed at the 2026/27 higher rate of 35.75% (GOV.UK: tax on dividends).

On a liquidation the £60,000 is outside those adjusted-net-income steps, which list dividends and do not list a capital gain, so the personal allowance stays at £12,570 and the extra £4,000 does not arise. The gain is £60,000 minus the £100 subscribed, which is £59,900. The 2026/27 annual exempt amount of £3,000 leaves £56,900 (GOV.UK: Capital Gains Tax rates and allowances). Where the two-year conditions are met, the £1 million lifetime limit is unused and section 396B does not apply, so tax at 18% is £10,242 (GOV.UK: Business Asset Disposal Relief). That relief column assumes the conditions are met. The same gain with no relief, at 24%, is £13,656. Cash after the relief is £49,758, and it is £46,344 with no relief.

The strike-off column comes to £25,271.25, leaving £34,728.75 of the £60,000. The gap against a liquidation that qualifies for the relief is £15,029.25, before any liquidator's fee and the strike-off application fee. Without the relief the tax is £13,656, still lower than £25,271.25 on these assumptions, again before those fees. A large fee, a section 396B income charge, or different other income can reverse the order. Take advice before choosing a route. The worked figures use the 2026/27 rates for this illustration only. They are not a tax calculation for a real company. A qualified adviser applies the company's own facts. Payment and filing dates are in the Corporation Tax deadlines guide.

When does each way of closing tend to suit?

Strike-off tends to suit a solvent company with £25,000 or less to pay out, no pressure from creditors, and directors who can wait out the Gazette period. A members' voluntary liquidation tends to suit a larger cash balance where capital treatment matters more than the liquidator's fee. A company that cannot pay its debts needs another process.

Strike-off involves fewer outside appointments where the strike-off conditions are already met and no more than £25,000 is coming out, or where the shareholders accept dividend rates on a larger sum (GOV.UK: strike off your company). Anything left passes to the Crown. A members' voluntary liquidation is the route to consider for a larger balance where the 18% rate may apply. The cost is the practitioner's fee, for which GOV.UK states no fixed figure, and section 396B can still tax the sum as income. A company that cannot pay its debts uses a creditors' voluntary liquidation or a compulsory liquidation (GOV.UK: liquidate your company).

What can Taxley file when a company is closing?

Taxley can prepare and file the final Company Tax Return of a limited company that is not in liquidation or administration, together with the accounts. It does not send form DS01 and it does not act as liquidator. Once a members' voluntary liquidation has started, that company is outside what Taxley supports. The micro-entity fee is £39.95.

Taxley (taxley.co.uk), UK online software that prepares and files the Company Tax Return (CT600) with HMRC and the annual accounts with Companies House. It can prepare that final return where the company is not in liquidation or administration. Filing the accounts at Companies House is live, and Taxley files them once the return is paid and the accounts are finished, using the company's authentication code. The fee is £39.95 with micro-entity accounts and £129 with small-company accounts. A partnership, an LLP, Self Assessment, VAT and payroll are outside Taxley. The directors make the strike-off application. Taxley does not make that application and does not act as liquidator. A loss can be carried back 12 months. A three-year terminal loss is not a claim Taxley files. Taxley does not give tax advice and does not pay the Corporation Tax. Take advice on the route. Take the 30-second check to see whether Taxley fits your company.

Frequently asked questions

Does an ordinary dividend get the £25,000 capital treatment?

No. An ordinary dividend is taxed as dividend income at any size. The £25,000 test is for a distribution in respect of share capital made because the company is to be struck off, and only where the total does not exceed that amount and the debts will be paid.

What if the company is still on the register two years later?

If a distribution used the £25,000 exemption and the company has not been dissolved two years later, or it has not collected what it is owed or paid its debts, the exemption is treated as never having applied. The sum is then taxed as income under section 1030B of the Corporation Tax Act 2010.

Do assets left in the company go to the shareholders?

No. On a strike-off, assets still in the company pass to the Crown, including later refunds. Deal with them before applying. A paper application costs £18, and its cheque cannot come from the company's account; an online application costs £13.

Do the final accounts have to go to Companies House?

The final statutory accounts and the Company Tax Return go to HMRC. The return should say they are the final trading accounts and that the company will soon be struck off. Those final accounts do not have to be filed at Companies House. Overdue accounts can still lead to a separate compulsory strike-off.

Does Taxley make the strike-off application or act as liquidator?

No. Taxley prepares and files a limited company's Company Tax Return, and files the accounts at Companies House once the return is paid and the accounts are finished. It does not make the online or paper strike-off application and does not act as an insolvency practitioner. A company already in liquidation or administration is not supported.

Who pays Capital Gains Tax on a liquidation distribution?

The shareholder pays it through Self Assessment, where the payment is a capital distribution rather than income. Business Asset Disposal Relief, where the conditions are met, is claimed on that return or on the helpsheet. The company does not pay Capital Gains Tax on cash it pays to its own shareholders.