How to Close a Limited Company — The Strike-Off Process Explained
If you want to close your limited company and it has no significant debts, a voluntary strike-off is usually the simplest and most cost-effective route. Here is how the process works from start to finish.
What Is a Voluntary Strike-Off?
A voluntary strike-off is a formal application to Companies House to have your company removed from the register and dissolved. It is available to solvent companies that have ceased trading. Once dissolved, the company ceases to exist as a legal entity.
The application is made using form DS01. Companies House publishes a notice in the Gazette and, if no objections are received, the company is typically dissolved within 2–3 months.
The Seven Steps to Striking Off Your Company
Step 1 — Cease trading. Stop all business activity. Once you have decided to close, no further trading should take place. Continuing to trade after applying for strike-off is not permitted.
Step 2 — Settle all liabilities. Pay all outstanding creditors — suppliers, HMRC, any remaining payroll obligations, and any other debts. The company must have no external creditors when it is dissolved.
Step 3 — Pay final costs from the company account. Accountancy fees, filing fees, and any other final expenses should be paid from the company bank account before it is closed. We can invoice our fees in advance so these can be settled before the account is closed.
Step 4 — Transfer remaining funds to yourself as shareholder. Once all liabilities and costs are settled, the remaining cash balance can be transferred to your personal account as a final distribution to the shareholder. This is recorded correctly in the final accounts. It is important this is done before the bank account is closed — if any small payments arise afterwards, these can be paid from your personal account.
Step 5 — Close the company bank account. Once the final distribution has been made and there are no further expected transactions, the business bank account can be closed.
Step 6 — Prepare and file final accounts. After the bank account is closed, we shorten the company's accounting period and prepare the final accounts. These confirm that the company has no remaining assets or external creditors — a requirement before the strike-off application is submitted.
Step 7 — Submit the DS01 strike-off application. Once all filings are complete, we submit the DS01 to Companies House. They publish a notice in the Gazette and, assuming no objections, the company is dissolved around 2–3 months later.
What About the Confirmation Statement?
If the strike-off application is submitted before the Confirmation Statement deadline, the filing is generally not required. In practice we aim to submit the DS01 before that deadline to avoid the additional filing obligation. If the application has not yet progressed by the deadline date, Companies House may still require it — so timing matters.
What Happens to the Money in the Bank?
The remaining balance after all liabilities and costs are paid belongs to you as the shareholder. It is transferred to your personal account as a final distribution and recorded in the final accounts accordingly.
Tax Treatment of the Final Distribution — The £25,000 Rule
How the final distribution is taxed depends on the total value of the assets being distributed on dissolution.
Where the total value of assets distributed on a strike-off is £25,000 or less, HMRC treats the distribution as a capital distribution rather than income. This means it is subject to Capital Gains Tax (CGT) rather than income tax or dividend tax — which is generally more favourable, particularly if your CGT annual exempt amount covers part or all of the gain, or if Business Asset Disposal Relief (BADR) applies at 10%.
Where the total assets distributed exceed £25,000, the entire distribution is treated as a dividend for income tax purposes — not just the excess above £25,000, but the whole amount. This can push the effective tax rate significantly higher, especially if it tips you into the higher or additional rate dividend bands.
| Total distribution on dissolution | Tax treatment |
|---|---|
| £25,000 or less | Capital distribution — CGT rates apply |
| More than £25,000 | Treated as a dividend — income tax rates apply |
If your reserves are above £25,000, it is worth discussing with your accountant whether a Members' Voluntary Liquidation (MVL) would be more efficient. An MVL always produces a capital distribution regardless of the amount, and with meaningful reserves the tax saving typically outweighs the liquidator's fees.
Frequently Asked Questions
Q: How long does the full strike-off process take from start to finish? A: From the point of ceasing trading, the process typically takes 4–6 months in total — allowing time to settle liabilities, prepare final accounts, and then wait for the 2–3 month Companies House dissolution period after the DS01 is submitted.
Q: Can I just stop using the company and ignore it? A: No. A dormant or unused company still has legal filing obligations — including annual accounts and a Confirmation Statement. Ignoring them results in late filing penalties and eventually Companies House striking the company off involuntarily, which can create complications. A voluntary strike-off is the clean and controlled route.
Q: My reserves are just over £25,000 — should I do a strike-off or an MVL? A: At that level it is borderline. The tax saving from capital treatment via an MVL needs to be weighed against the liquidator's fees, which typically start at several thousand pounds. We can model both options for your specific situation so you can make an informed decision before proceeding.
Q: What if a creditor objects to the strike-off after the Gazette notice? A: If a creditor or other interested party objects, Companies House will suspend the dissolution process. The objection must be resolved — typically by settling the debt — before the strike-off can proceed. This is why settling all liabilities before submitting the DS01 is essential.
Thinking of closing your company? Contact Liberate Accountants for a free consultation and a no-obligation quotation, or learn more about our other services.
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