When it comes to closing a UK limited company, there are two main options: voluntary strike-off (dissolution) and liquidation. Choosing the wrong one can lead to legal problems, tax penalties, or personal liability for directors. Here is how to decide which route is right for you.
What is voluntary strike-off?
Voluntary strike-off is a straightforward administrative process where you apply to Companies House to have the company removed from the register. It is sometimes called dissolution.
Best for: Solvent companies that have stopped trading, have no outstanding debts, and want a quick, low-cost closure.
Cost: £33 filing fee (as of 2026), plus your own time.
Timeframe: Typically 3–4 months from application to removal.
What is liquidation?
Liquidation is a formal legal process for winding up a company's affairs, collecting assets, paying creditors, and distributing any surplus to shareholders. A licensed insolvency practitioner (IP) must be appointed.
There are three types:
Members' Voluntary Liquidation (MVL): For solvent companies with assets to distribute. Tax-efficient for extracting value from a profitable company.
Creditors' Voluntary Liquidation (CVL): For insolvent companies that cannot pay their debts.
Compulsory Liquidation: Ordered by a court, usually following a creditor's petition.
Key differences at a glance
| Strike-off | MVL | CVL | |
|---|---|---|---|
| Company solvent? | Yes | Yes | No |
| Assets to distribute? | No/minimal | Yes | Irrelevant |
| Cost | £33 | £1,500–£5,000+ | £5,000–£15,000+ |
| Timeframe | 3–4 months | 3–12 months | 6–24 months |
| IP required? | No | Yes | Yes |
| Tax on distributions | CGT (shareholder) | CGT + BADR may apply | Complex |
When must you liquidate?
You must use liquidation (not strike-off) if:
Your company is insolvent — it cannot pay its debts as they fall due, or its liabilities exceed its assets.
You have significant assets to distribute — for distributions over £25,000, an MVL is usually more tax-efficient than strike-off.
There are ongoing legal proceedings against the company.
A creditor has threatened to wind up the company — you may need CVL to retain control of the process.
When should you use strike-off?
Strike-off is appropriate if:
The company has stopped trading
All debts and HMRC liabilities are settled
Remaining assets (if any) are under £25,000 after costs
There are no outstanding legal disputes
The company has not traded or changed its name in the last 3 months
The Members' Voluntary Liquidation (MVL) route
If your company has accumulated cash or assets worth more than £25,000, an MVL is often the most tax-efficient way to close. You can claim Business Asset Disposal Relief (BADR, formerly Entrepreneurs' Relief) on qualifying distributions, paying CGT at 10% rather than income tax rates.
However, you will need to appoint a licensed insolvency practitioner. Fees vary but typically start at around £1,500–£3,000 for straightforward cases.
Summary: which route should you choose?
No debts, no significant assets, done trading? → Voluntary strike-off
Profitable company with cash to extract, all debts settled? → MVL
Company cannot pay its debts? → CVL (seek professional advice urgently)
If you are unsure, use our eligibility checker to get a personalised recommendation.