Closing Your Company: MVL vs Strike Off
April 6, 2025 • 7 min read
All good things come to an end. Maybe you are accepting a permanent role (Inside IR35) or retiring to Spain.
You have £100,000 sitting in your business bank account. How do you get it out?
You have two main routes: Strike Off or Members Voluntary Liquidation (MVL).
Route 1: Strike Off (DS01)
- Best for: Reserves under £25,000.
- Cost: £10 (payable to Companies House).
Also known as dissolution. You simply apply to strike the company off the register.
- Tax Rule: If reserves are under £25,000, the whole amount is treated as Capital Gains (Capital distribution).
- Benefit: You use your Capital Gains Allowance (£3,000) and pay 10% (BADR) or 10%/20% CGT on the rest.
The Trap:
If you have £25,001 or more, the entire amount is treated as an Income Dividend.
- £25,001 dividend -> Taxed at up to 39.35%.
- Disaster.
Route 2: Members Voluntary Liquidation (MVL)
- Best for: Reserves over £25,000.
- Cost: £2,000 - £4,000 (Liquidator fees).
An MVL is a formal legal process run by a licensed Insolvency Practitioner (IP).
- Benefit: The IP distributes the funds to you as Capital, regardless of the amount (e.g., £200,000).
- Tax: You apply Business Asset Disposal Relief (BADR - formerly Entrepreneur's Relief).
- The Rate: 10% (on the first £1m lifetime limit).
The Math: £100k Extraction
| Method | Tax Rate | Tax Bill | Net Cash |
| :--- | :--- | :--- | :--- |
| Dividend | 33.75% (Higher) | ~£33,000 | £67,000 |
| MVL (BADR) | 10% | £10,000 + £3k Fee | £87,000 |
Using an MVL saves you £20,000.
Anti-Avoidance: TAAR (The "Phoenixing" Rule)
You cannot close a company via MVL (paying 10% tax) and then open a new company doing the same trade within 2 years.
- This is known as Phoenixing.
- If caught, HMRC reclassifies the MVL distribution as Dividends (Income Tax).
- Safe: If you are retiring, moving sector, or taking a permanent PAYE job.
Summary
- Under £25k: Strike Off (DIY).
- >£25k: MVL (Hire a liquidator).
- Phoenixing: Don't start a new Ltd for 2 years.
Disclaimer: Liquidation is a legal process. You must pay all creditors first.