How to Close a Limited Company

Learn how to close a limited company in the UK, including strike off, liquidation and final tax responsibilities

Closing a limited company is a significant decision. Whether your business has come to a natural end, you want to retire, or you simply wish to move in a different direction, it is important to follow the correct steps to shut the company down legally. Failing to do so can result in fines, penalties or confusion with HMRC and Companies House.

This guide explains the different ways to close a limited company, how to decide which method applies to your situation, and what you need to do before and after the closure.

Two main ways to close a limited company

The method you use to close your company depends on whether the company is solvent or insolvent.

  1. Voluntary strike off (solvent company)

  2. Insolvency process (insolvent company)

Let’s explore each route in more detail.

1. Voluntary strike off (company is solvent)

If your company is no longer trading, has no debts, and has not been involved in any legal proceedings in the last three months, you can apply to have it struck off the Companies House register.

Eligibility rules for strike off:

  • No trading in the last three months

  • No name changes in the last three months

  • No disposal of assets during the last three months (except to pay debts)

  • No ongoing legal action against the company

Steps to strike off a limited company:

  1. Settle all debts and liabilities
    Ensure the company has no outstanding taxes, loans, invoices or employee wages. Distribute any remaining assets, cash or profits to shareholders.

  2. Inform HMRC
    Tell HMRC you are closing the company and request to close down your Corporation Tax account, VAT registration (if applicable) and PAYE scheme.

  3. Prepare final accounts and tax return
    File your final statutory accounts and a Company Tax Return. Pay any tax due. This ensures HMRC does not chase the company after closure.

  4. Close company bank accounts
    Once liabilities are cleared and assets distributed, close the business bank accounts.

  5. Submit DS01 form to Companies House
    Download and complete the DS01 form or file it online. You must pay a one-off fee of £44. The form must be signed by the majority of directors.

  6. Notify interested parties
    Within 7 days of submitting the DS01 form, you must inform all creditors, shareholders, employees, and any other relevant parties.

  7. Wait for confirmation
    If there are no objections, Companies House will publish a notice in The Gazette and strike off the company two months later. You will receive official confirmation once the company is dissolved.

Important:
Do not apply for strike off until all business activity has ceased and the company has no debts. If someone objects to the closure (for example, a creditor), the process will be delayed or cancelled.

2. Closing an insolvent company

If your company cannot pay its bills, debts or liabilities, you must follow a formal insolvency process. This is usually managed by a licensed insolvency practitioner.

The most common route is:

Creditors’ Voluntary Liquidation (CVL):

  • You choose to close the company voluntarily due to insolvency

  • A licensed insolvency practitioner is appointed to sell company assets

  • Proceeds are used to repay creditors in a set order

  • Directors must cooperate fully and provide financial records

This is different from compulsory liquidation, which is forced by the court, often due to unpaid debts like tax arrears.

Key responsibilities if insolvent:

  • Stop trading immediately to avoid wrongful trading accusations

  • Maintain proper financial records

  • Get professional advice from an insolvency practitioner or accountant

  • Avoid taking money out of the company unless legally permitted

Tax and final reporting considerations

Whether solvent or insolvent, you should take care of the following before closing:

  • File all outstanding VAT returns and deregister for VAT

  • File PAYE returns and close the payroll scheme

  • Submit the final Self Assessment return (if required as a director)

  • Pay any Corporation Tax due on final profits

  • Retain business records for six years after closure, as required by HMRC

What happens to remaining funds?

If the company has retained profits and you close it via strike off, funds up to £25,000 may be distributed as a capital distribution, potentially qualifying for Business Asset Disposal Relief (previously Entrepreneurs’ Relief).

If funds exceed £25,000 or if you want to benefit from tax relief on larger distributions, you may need to close the company via a Members’ Voluntary Liquidation (MVL), which requires a licensed insolvency practitioner and additional costs.

Real-world example

Asha runs a graphic design company and has decided to return to employment. The company has £12,000 in retained profits, no debts, and has not traded in the last three months. She informs HMRC, files her final accounts and pays Corporation Tax. She then submits a DS01 form to Companies House and distributes the remaining funds to herself. Two months later, the company is officially struck off.

Final thoughts

Closing a limited company properly is essential to avoid future liabilities and protect your reputation. If your business is solvent, a voluntary strike off is straightforward and affordable. If your business is insolvent, it is important to act quickly and seek professional advice.

Take time to inform all parties, complete your final filings and ensure that tax matters are settled. Once done correctly, you can move forward with peace of mind, knowing your company has been closed legally and cleanly.