Disincorporation Relief Calculator, 2026/27

How this is calculated

When a limited company transfers its business to its shareholders to continue as sole traders or a partnership, the transfer is normally treated as a disposal at market value for tax purposes, even though no cash may actually change hands between the company and the new unincorporated business.

This creates a chargeable gain on goodwill and any other chargeable assets such as property, based on the difference between market value and the assets' tax base cost. This calculator adds those gains to the company's other taxable profit for its final accounting period and applies standard corporation tax bands to show the total liability, and separately isolates how much of that liability is attributable to the gains alone.

The formal Disincorporation Relief scheme, which allowed gains on goodwill and land up to a set value to be deferred where a business transferred to the shareholders who ran it, closed to new claims after 31 March 2018 and has not been reintroduced, so this exposure generally cannot be avoided through that specific relief today.

Why disincorporation is rarely simple

Beyond the corporation tax charge on the company itself, extracting the company's remaining value to shareholders after disincorporation typically triggers a further personal tax charge, either as a dividend or, if the company is formally wound up, potentially at capital gains tax rates with Business Asset Disposal Relief if conditions are met.

Because of this double layer of tax, and the loss of limited liability protection going forward, disincorporation is usually only pursued where the ongoing tax and administrative savings of trading unincorporated clearly outweigh the one-off cost, or where circumstances such as retirement make winding down the company sensible regardless.

Alternatives worth considering

Some businesses achieve a similar practical outcome by simply running down the company gradually, drawing profits as dividends over time rather than transferring the trade itself, which avoids crystallising a large one-off gain on goodwill.

Others explore a members' voluntary liquidation once trading has ceased, which can allow remaining reserves to be extracted at capital gains tax rates rather than as income, subject to the usual anti-avoidance rules around phoenixism where a similar business is continued afterwards.

Is Disincorporation Relief still available?

No, the formal statutory relief closed to new claims after 31 March 2018. Transfers of a business from a company back to its shareholders are now generally taxed on the full chargeable gain without that specific deferral.

Why would a director consider disincorporating today?

Reasons include reducing ongoing filing and administrative costs, simplifying a business that no longer needs limited liability protection, or preparing to wind down entirely, even though there is a one-off tax cost to weigh against those savings.

Does goodwill always create a taxable gain on disincorporation?

Usually yes, if the goodwill has value and a tax base cost lower than that value, which is common where goodwill was built up through trading rather than purchased. The gain is based on market value at the point of transfer.

What happens to the money left in the company after disincorporation?

It generally needs to be extracted as dividends, taxed at dividend rates, or through a formal liquidation, which can allow capital gains tax treatment instead, subject to eligibility and anti-avoidance rules around similar trades continuing.