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Should I close my UK company or make it dormant when leaving the UK?

Answered by Jordan Onraet-Wells, Founder & Chartered Tax Adviser (CTA). Published 9 August 2026. Last reviewed 9 August 2026.

The short answer

For most people leaving for good, closing beats dormancy. A strike off keeps the final payout taxed as capital where total distributions are £25,000 or less, and a Members Voluntary Liquidation achieves the same at any size, often at the 18% Business Asset Disposal Relief rate. Dormancy only wins if you genuinely expect to trade through the company again within a few years: it defers the tax rather than saving it, and BADR generally needs the shares disposed of within three years of trading stopping.

  • A strike off (form DS01, £13 online) keeps distributions taxed as capital only if they total £25,000 or less; a pound over and the whole amount is a dividend at up to 39.35%.
  • An MVL lets a liquidator distribute reserves of any size as capital, with Business Asset Disposal Relief at 18% for disposals on or after 6 April 2026, within a £1 million lifetime limit.
  • A dormant company still files annual accounts and a £50 confirmation statement every year, and even bank interest on retained cash ends dormancy for Corporation Tax.
  • Distributions taken while temporarily non-resident (five years or fewer away) can be taxed when you return, and the anti-phoenixing TAAR can re-tax a capital payout if you start a similar business within two years.
  • Once trading stops you generally have three years to dispose of the shares and keep the 18% BADR rate.

The two closure routes and the £25,000 cliff edge

A voluntary strike off costs £13 online and suits modest pots: distributions made in anticipation of the dissolution are taxed as capital only if the company has settled its debts and the total does not exceed £25,000, under section 1030A of the Corporation Tax Act 2010. Go over and the entire amount, not just the excess, is taxed as a dividend at 2026/27 rates of up to 39.35%, and capital treatment is also lost if the company is not dissolved within two years of the distribution. Larger balances point to a Members Voluntary Liquidation: a liquidator distributes reserves of any size as capital, and Business Asset Disposal Relief taxes qualifying gains at 18% within the £1 million lifetime limit. Fees run to a few thousand pounds, but on a six-figure reserve the gap between capital treatment and dividend rates dwarfs them. The mechanics are in our guide to closing a UK company when leaving the UK.

What dormancy really costs

Dormancy is free to enter but not free to hold. The company still files annual accounts and a £50 confirmation statement every year, directors must complete Companies House identity verification, and a missed filing can see the registrar strike the company off with anything left inside passing to the Crown. For Corporation Tax, dormant means not trading with no other income at all: property letting, advertising, payroll or even bank interest on retained cash ends the dormancy. And the half-measure is the real trap: keep the odd invoice flowing from your new home and running the company from abroad can raise company residence and permanent establishment questions in your new country. Dormancy genuinely earns its keep only when a restart is a plan rather than a maybe.

Timing the decision around your departure

Two anti-avoidance rules can override an otherwise sensible plan. Distributions from your own close company received while temporarily non-resident, five years or fewer away, can be taxed in the year you return, as covered in our temporary non-residence guide, and the TAAR can re-tax a capital distribution as a dividend if you carry on the same or a similar trade within two years, in the UK or abroad. For many leavers the cleanest sequence is to close and distribute while still UK resident, lock in the 18% rate, and depart with a known tax cost. Horizon maps the dates and runs the numbers on a fixed fee agreed upfront; book a free clarity call before you sign a DS01 or instruct a liquidator.

Go deeper

Sources and further reading

This is general information for the 2026/27 UK tax year, not personal tax advice; speak to a Chartered Tax Adviser about your own position.

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