Closing down & dormancy
Strike off suits reserves under roughly £25,000 with capital treatment; larger reserves usually favour an MVL run by a licensed insolvency practitioner.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityBelow around £25,000 of reserves, informal strike off keeps capital tax treatment and avoids liquidator fees. Above that, a members' voluntary liquidation usually saves more in tax than it costs in insolvency practitioner fees, because the whole distribution keeps capital treatment rather than being taxed as a dividend.
Where the £25,000 line matters
When an MVL earns its fee
Below around £25,000 of reserves, informal strike off keeps capital tax treatment and avoids liquidator fees. Above that, a members' voluntary liquidation usually saves more in tax than it costs in insolvency practitioner fees, because the whole distribution keeps capital treatment rather than being taxed as a dividend.
HMRC's extra-statutory concession allows capital treatment on informal strike off distributions only up to £25,000 in total. Go even slightly over that figure and the whole distribution, not just the excess, is taxed as dividend income at rates up to 39.35%.
This makes strike off unattractive as soon as reserves approach that threshold, since the tax difference on the full amount can be far larger than the cost of an MVL.
An MVL requires a licensed insolvency practitioner, whose fee depends on the complexity of the company's affairs, its assets and the time needed to conclude the liquidation; there is no fixed industry rate, so get quotes based on your specific position. In exchange, the whole distribution qualifies for capital treatment, and Business Asset Disposal Relief may reduce the rate further to 14% for disposals in 2025/26, rising to 18% from 6 April 2026, subject to the lifetime limit and qualifying conditions.
For most companies with reserves comfortably above £30,000 to £40,000, the tax saving from capital treatment outweighs the insolvency practitioner's fee, which is why an MVL becomes the standard route once reserves reach that level.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK position and current Companies House and HMRC guidance. Check GOV.UK, or ask us, before relying on them for your own company.
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Frequently asked
No, insolvency practitioners quote based on the company's assets and complexity, so compare quotes rather than expecting a standard price.
Distributions must keep the total capital treatment within £25,000 across the whole process, so partial planning still needs care.
No, you must separately meet the qualifying conditions, including share ownership and employment tests, for the two years before the distribution.
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No. This page explains general UK rules and common accounting treatment. Your facts, contracts and wider tax position must be reviewed before you rely on a conclusion.
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