How do I shut down a startup properly (strike-off vs liquidation)?
By SuLe · Updated 27 June 2026
If your company is solvent with little left to distribute, a voluntary strike-off (form DS01) is the cheapest, simplest route; if there is more than about £25,000 to hand back, a members' voluntary liquidation keeps capital tax treatment. If the company is insolvent, neither applies — you need creditor-focused advice fast.
Key facts
- Voluntary strike-off (form DS01) is only for a solvent company that hasn't traded in three months and has no insolvency proceedings.
- Distributions before strike-off get capital treatment only up to £25,000 in total (CTA 2010 s.1030A); above that the whole sum is taxed as income.
- A members' voluntary liquidation (MVL) suits solvent companies with more than ~£25,000 to distribute and needs a licensed insolvency practitioner.
- MVL distributions are capital, potentially qualifying for Business Asset Disposal Relief.
- Assets still owned at strike-off pass to the Crown as bona vacantia — distribute everything first.
Which route is right for my company?
Start with two questions: is the company solvent, and how much is left to give back to shareholders? Those answers pick the route.
Solvent with little to distribute — a voluntary strike-off. Solvent with a larger surplus — a members' voluntary liquidation, to protect the tax treatment. Insolvent — a formal insolvency process, with creditors' interests taking priority.
Getting this wrong is expensive: the difference between capital and income tax treatment on your final distribution can be large, and using strike-off while insolvent is not permitted. [More: What are directors' duties when a startup is running out of money?]
How does a voluntary strike-off work?
You apply to Companies House on form DS01 with a small filing fee. The company must not have traded or changed its name in the last three months, must not be insolvent, and must have no live insolvency proceedings.
You must notify creditors and members, and importantly distribute or transfer any remaining assets first — anything still owned when the company is struck off passes to the Crown as bona vacantia (ownerless property). Cash, IP and equipment can all be lost this way.
The company is then removed from the register. It is the simplest, cheapest wind-down, but only for genuinely dormant, solvent companies with tidy affairs. Confirm the current DS01 fee on gov.uk before filing.
Why does the £25,000 distribution cap matter?
Tax. When you distribute cash to shareholders before a strike-off, capital gains treatment applies only up to £25,000 in total (CTA 2010 s.1030A). Go a pound over and the whole amount — not just the excess — is taxed as income dividends.
Income treatment is usually harsher than capital, and it removes any chance of Business Asset Disposal Relief on the distribution. For founders with a meaningful surplus, that swing is the whole reason to choose a different route.
The fix is a members' voluntary liquidation, which keeps the distribution as capital regardless of size. The £25,000 line is precisely where strike-off stops being the cheaper option.
| Voluntary strike-off (DS01) | Members' voluntary liquidation | |
|---|---|---|
| Company must be | Solvent, not trading 3 months | Solvent |
| Insolvency practitioner needed | No | Yes — licensed |
| Distribution tax treatment | Capital up to £25,000, then income | Capital (no £25,000 cap) |
| BADR possible | On the capital portion | Yes, if you qualify |
| Cost | Low | Higher — IP fees |
| Best for | Small surplus, dormant company | Larger surplus to distribute |
What is a members' voluntary liquidation?
An MVL is a formal wind-up for a solvent company with more than roughly £25,000 to distribute. It requires a licensed insolvency practitioner to act as liquidator and a statutory declaration of solvency from the directors — a formal statement that the company can pay its debts.
The liquidator realises assets, settles any liabilities, and distributes the surplus to shareholders as capital. That capital treatment is the point: it can qualify for Business Asset Disposal Relief, unlike an income dividend.
It costs more than a strike-off because of the practitioner's fees, but for a healthy company returning real money to founders, the tax saving usually more than covers it.
What if the company is insolvent?
Then strike-off and MVL are both off the table. Once insolvency is probable, directors' duties shift to prioritise creditors, and continuing to trade past the point of no return can expose directors personally through wrongful trading.
The likely route is a creditors' voluntary liquidation, run by an insolvency practitioner in creditors' interests. The single most important step is to take advice early and minute your decisions.
Do not prefer connected creditors, take deposits you cannot fulfil, or trade on hoping for a miracle — each can rebound on you personally. [More: What are directors' duties when a startup is running out of money?]
Worked example
Ben is winding up a solvent design-tools company. After settling everything, £18,000 in cash remains and there is no other asset. Because that is under the £25,000 cap, he distributes it, gets capital treatment, and closes the company with a voluntary strike-off on form DS01 — cheap and quick.
Contrast a second scenario: had £60,000 remained, distributing it before a strike-off would tax the entire £60,000 as income dividends, not just the amount over £25,000. To keep capital treatment — and a shot at Business Asset Disposal Relief — Ben would instead appoint a liquidator and run a members' voluntary liquidation, accepting the extra cost for the far better tax outcome.
Where founders go wrong
Leaving cash in the company at strike-off
— any asset still owned passes to the Crown as bona vacantia and is simply lost.Ignoring the £25,000 cap
— distribute more than that before a strike-off and the whole sum is taxed as income, not capital.Using strike-off while insolvent
— it is not permitted; you need a creditor-focused process and early advice.Trading on when insolvency is probable
— directors' duties shift to creditors, and wrongful trading can make you personally liable.
Related questions
When can I use a voluntary strike-off?
Only if the company hasn't traded in the last three months, isn't insolvent, and has no live insolvency proceedings. You file form DS01, notify creditors and members, and the company is removed from the register. Any remaining assets pass to the Crown, so distribute them first.
What is the £25,000 distribution cap?
Before a strike-off, distributions to shareholders get capital gains treatment only up to £25,000 in total (CTA 2010 s.1030A). Above that, the whole amount is taxed as income dividends. The fix for larger sums is a members' voluntary liquidation.
What is a members' voluntary liquidation (MVL)?
An MVL is the formal wind-up route for a solvent company with more than about £25,000 to distribute. It needs a licensed insolvency practitioner and a statutory declaration of solvency, and distributions are treated as capital — potentially qualifying for Business Asset Disposal Relief.
What if the company is insolvent?
Then you cannot use strike-off, and directors' duties shift to protect creditors. You will likely need a creditors' voluntary liquidation and early advice from an insolvency practitioner. Continuing to trade past the point of no return exposes directors personally. [More: What are directors' duties when a startup is running out of money?]
What happens to leftover assets on strike-off?
Anything still owned by the company when it is struck off passes to the Crown as bona vacantia — ownerless property. Cash in the bank, IP or equipment can all be lost this way, so distribute or transfer assets before you file.
Choosing between a strike-off and a liquidation is really a tax and solvency decision, and the £25,000 line plus your creditor position can turn a simple close into a costly mistake. A SuLe solicitor can confirm the right route and keep directors on the safe side of their duties. Book a free consultation with a startup solicitor before you file anything.
Keep reading: What are directors' duties when a startup is running out of money? · What legal prep does a startup need before an exit? · What are directors' duties under the Companies Act 2006? · What happens to SEIS/EIS investors in an exit? · Share sale vs asset sale — what's the difference for founders? · What is a founder secondary and when can I sell some of my shares?
Primary sources: GOV.UK — Strike off your company from the Companies Register · GOV.UK — Liquidate your limited company
