Limited Company Closure and MVL (2026/27)
Closing a solvent company in 2026/27: members' voluntary liquidation with BADR at 18%, the £25,000 strike-off limit, the TAAR phoenix rule and worked figures.
2026/27 closure key figures
BADR rate
18%
On qualifying gains from 6 April 2026
BADR lifetime limit
£1,000,000
Of qualifying gains, across all disposals
Strike-off capital limit
£25,000
Total distributed, CTA 2010 s.1030A(5)
BADR rate by date of disposal
| Disposal date | BADR rate |
|---|---|
| On or before 5 April 2025 | 10% |
| 6 April 2025 to 5 April 2026 | 14% |
| From 6 April 2026 | 18% |
Per GOV.UK. BADR gains use up any unused basic rate band first, so other gains in the same year are more likely to be taxed at the higher CGT rate. For comparison, 2026/27 dividend rates are 10.75%, 35.75% and 39.35% above the £500 dividend allowance.
Worked comparison: MVL with BADR against one dividend
Assumptions: your only other income in the year is a salary of £12,570; the shares cost £100; the whole amount is paid out in one tax year; no earlier BADR use and no other gains. Liquidator's fees are a company cost that reduces the distribution and are not included. The dividend column is dividend tax only: once total income passes £100,000 the Personal Allowance tapers, which also adds Income Tax on the salary. Figures from our CGT and dividend engines for 2026/27.
| Amount paid out | CGT through an MVL | Dividend tax, one year | Difference |
|---|---|---|---|
| £100,000 | £17,442 | £27,843 | £10,401 |
| £300,000 | £53,442 | £107,661 | £54,219 |
| £600,000 | £107,442 | £225,711 | £118,269 |
A dividend route would also need the company closed afterwards, and dividends spread over several tax years can use the basic rate band each year, which narrows the gap. Run your own figures in the CGT calculator and the dividend tax calculator.
The TAAR phoenix rule
ITTOIA 2005 s.396B, in force from 6 April 2016, treats a distribution in a winding up as income if all of Conditions A to D are met and the distribution is not excluded:
- A: immediately before the winding up you had at least a 5% interest (5% of the ordinary share capital and of the voting rights).
- B: the company is a close company when wound up, or was at any time in the 2 years before the winding up started.
- C: at any time within 2 years beginning with the date of the distribution, you carry on the same or a similar trade or activity, alone, in a partnership, through a company in which you have at least 5%, or are involved with one carried on by a connected person.
- D: it is reasonable to assume that a main purpose of the winding up, or of arrangements it forms part of, is avoiding or reducing Income Tax. The fact that Condition C is met is one of the circumstances taken into account.
Excluded: the part of a distribution that does not exceed the amount giving no gain (broadly your base cost), and distributions of irredeemable shares. HMRC's guidance on each condition, the exclusions and clearance requests is at CTM36300 onwards.
Strike-off (DS01) or MVL?
- Total distribution of £25,000 or less: a company that meets the strike-off conditions can apply on form DS01 (£13 online / £18 paper; see how to close a company by strike-off). Under CTA 2010 s.1030A a distribution made in anticipation of that dissolution is capital, provided the company has collected or intends to collect what it is owed and has paid or intends to pay its debts. No insolvency practitioner is needed.
- Over £25,000: the limit in s.1030A(5) is on the total distributed, and above it the whole amount is taxed as income on a strike-off, not just the excess. Capital treatment then needs a formal liquidation, which for a solvent company is an MVL.
- Gains above the £1,000,000 BADR limit: the excess is taxed at the normal CGT rates, 24% above the basic rate band.
- Insolvent company: an MVL is not available, because the declaration of solvency would be false. A creditors' voluntary liquidation is the route.
Related calculators and guides
- Capital Gains Tax calculator - CGT with and without BADR.
- CGT allowance 2026/27 guide - the £3,000 annual exempt amount.
- BADR guide - Business Asset Disposal Relief in detail.
- Optimum director salary 2026/27 - extraction before closure.
- Dividend tax calculator - the comparison route.
- Director's loan account and section 455 - clearing the DLA before closure.
- Corporation Tax calculator - the company's final tax bill.
- SEIS / EIS guide - deferral relief on reinvested gains.
Frequently asked questions
What is a members' voluntary liquidation (MVL)?
It is the formal way to close a solvent company. The directors make a statutory declaration of solvency (Insolvency Act 1986 s.89) that the company can pay its debts in full, with interest, within a stated period of no more than 12 months; the shareholders then pass a resolution for voluntary winding up and appoint a licensed insolvency practitioner as liquidator. What the liquidator pays out to shareholders is a capital distribution, so it is normally taxed as a capital gain on the shares rather than as a dividend. If you qualify for Business Asset Disposal Relief, that gain is taxed at 18% in 2026/27.
What is BADR and what rate applies in 2026/27?
Business Asset Disposal Relief (formerly Entrepreneurs' Relief) reduces Capital Gains Tax on qualifying business disposals. Per GOV.UK the rate is 18% on disposals from 6 April 2026, 14% between 6 April 2025 and 5 April 2026, and 10% on or before 5 April 2025. There is a £1,000,000 lifetime limit on qualifying gains. For shares, for at least 2 years up to the disposal you must be an employee or office holder, the company must be a trading company (or holding company of a trading group), and it must be your personal company: at least 5% of the shares and voting rights, plus at least 5% of either distributable profits and assets on a winding up, or disposal proceeds on a sale. The statute is TCGA 1992 from s.169H.
When does an MVL beat taking the money as a dividend?
For any sizeable sum, usually, because 18% is well below the 35.75% and 39.35% dividend upper and additional rates. On our worked figures, with a salary at the Personal Allowance as your only other income, a £100,000 distribution costs about £17,442 in CGT through an MVL against about £27,843 of dividend tax taken in one year. Against that you pay the liquidator, whose fees are not regulated, so get quotes. Dividends spread over several years can use the basic rate band each year, which narrows the gap. The TAAR described below can turn an MVL distribution back into income.
What is the TAAR phoenix rule?
ITTOIA 2005 s.396B, in force from 6 April 2016, treats a distribution in a winding up as income (taxed like a dividend) if four conditions are all met. A: immediately before the winding up you had at least a 5% interest in the company. B: it was a close company when wound up or at any time in the 2 years before. C: at any time within 2 years after the distribution you carry on a trade or activity the same as or similar to the company's, directly, through a partnership, through a company in which you have at least 5%, or are involved with one carried on by a connected person. D: it is reasonable to assume that a main purpose of the winding up, or of arrangements it is part of, is to avoid or reduce Income Tax; meeting Condition C is one of the circumstances counted. The rule does not apply to the part of a distribution that does not exceed your base cost, or to a distribution of irredeemable shares. HMRC guidance is at CTM36300 onwards.
What is voluntary strike-off and the £25,000 limit?
A company that has not traded or sold stock in the last 3 months, has not changed its name in that time and is not threatened with liquidation can apply to be struck off on form DS01 (£13 online, £18 on paper per the Companies House fees list). Under CTA 2010 s.1030A, a distribution made in anticipation of that dissolution is treated as capital rather than income if the company has collected, or intends to collect, what it is owed and has paid, or intends to pay, its debts, and the total distributed does not exceed £25,000. Above that, the whole distribution is income, not just the excess. This section replaced Extra-Statutory Concession C16 in 2012.
What are the steps in an MVL?
Per GOV.UK: a majority of directors sign the declaration of solvency, including a statement of assets and liabilities; a general meeting is called no more than 5 weeks later to pass the winding-up resolution and appoint a licensed insolvency practitioner as liquidator; the resolution is advertised in The Gazette within 14 days; and the signed declaration goes to Companies House within 15 days of the resolution. The liquidator then realises assets, pays creditors and distributes the rest. Once the liquidator's final account is registered, the company is deemed dissolved 3 months later (Insolvency Act 1986 s.201(2)). How long the whole process takes depends on the company.
When is the gain taxed?
Each distribution is a disposal (or part disposal) of your shares when it is made, so it is taxed in the tax year you receive it, not the year the company is dissolved. A distribution received in 2026/27 goes on that year's Self Assessment return, due by 31 January after the tax year ends. The BADR claim itself must be made by the first anniversary of that 31 January (TCGA 1992 s.169M(3), HMRC CG63970).
What if the distribution is more than the £1m BADR limit?
Only £1,000,000 of lifetime gains gets the BADR rate; the rest is taxed at the normal CGT rates, which for share gains above the basic rate band is 24%. GOV.UK allows the annual exempt amount to be set against the gains charged at the highest rate. On our assumptions, a £1,500,000 distribution with no earlier BADR use gives about £1,000,000 at 18% and £496,900 at 24%, about £299,256 in total, against about £579,861 if the same sum were a single-year dividend. The limit is lifetime, so BADR used on an earlier disposal reduces what is left.
What is the difference between an MVL and a CVL?
An MVL is for a solvent company: the directors declare it can pay its debts in full within 12 months, and what is left goes to the shareholders. A creditors' voluntary liquidation is for an insolvent company: the liquidator acts for the creditors, who are paid first, and shareholders usually receive nothing. A director who makes a declaration of solvency without reasonable grounds commits an offence (Insolvency Act 1986 s.89(4)), and directors of an insolvent company that kept trading can face wrongful trading claims under s.214. Take advice on solvency before signing.
Can I close my company and start a new one straight away?
You can, but that is exactly the pattern the TAAR targets. Carrying on the same or a similar trade within 2 years of the distribution meets Condition C of ITTOIA 2005 s.396B, and that fact counts towards Condition D, the tax-avoidance purpose test. If all four conditions are met the distribution is taxed as income rather than as a capital gain. HMRC's Spotlight 47 warns against schemes that claim to get round the rule. If you intend to work in the same field afterwards, take advice before the company is wound up; CTM36345 covers exclusions and CTM36350 clearance requests.
How do I claim BADR on my tax return?
Report the disposal on the Capital Gains Tax pages of your Self Assessment return and claim the relief there; HMRC CG63970 says that where you have been sent a return, the claim should be made in it. HMRC's helpsheet HS275 explains the conditions and includes a claim form. Keep the evidence that you met the conditions for the whole 2 years: shareholding, voting rights, your role as employee or office holder, and the company's trading status.
What else can reduce the tax on an MVL?
The CGT annual exempt amount (£3,000 in 2026/27) and any capital losses reduce the gain. Shares transferred to a spouse or civil partner pass at no gain, no loss, but BADR depends on each person meeting the conditions themselves for the 2 years before the disposal, so a late transfer does not give a second limit. Reinvesting a gain in Enterprise Investment Scheme shares can defer it; see our SEIS / EIS guide. Take advice before relying on any of these.