The Three Ways Out
There are only three ways out of a business: sell it, close it, or pass it on. Each one is taxed differently, and the gap between a planned exit and an unplanned one is usually measured in tens of thousands of pounds. More than nine in ten UK private businesses are family businesses, yet most owners spend more time planning a holiday than planning the exit. The rules reward the ones who start early: reliefs have qualifying periods, closures have thresholds, and the best options quietly close if you leave it late.
Strike-off or MVL? If your company is solvent and total distributions on closing stay within £25,000, a voluntary strike-off costs £18 and the money can still be taxed as capital. Above that threshold, capital treatment needs a members’ voluntary liquidation, run by a licensed insolvency practitioner, with the directors signing a declaration of solvency. The MVL has real costs, but on a healthy retained-profits balance the tax saved dwarfs them. Getting this choice right is the single most common win in exit planning.
The close-and-reopen trap. Wind up a company, take the money as capital, then carry on the same trade in a new company, and HMRC can tax the whole distribution as a dividend instead. The anti-avoidance rule looks at whether you’re involved in the same or a similar trade within two years, and whether saving tax was a main purpose. If there’s any chance you’ll work in your field again, this needs screening before the liquidation, because there’s no undo afterwards.
Passing it on: family or employees. Handing shares to your children counts as a disposal at market value even though no money changes hands, but holdover relief can defer the gain, and business property relief can shelter the inheritance tax side, currently up to £2.5 million per person at 100%. Selling to an Employee Ownership Trust relieves half the gain from capital gains tax under the current rules. Both routes reward early planning and punish the last-minute version.
Where Good Advice Makes The Difference
Closing after a contracting career. Take £200,000 of retained profits out as dividends and the higher rates take a heavy slice. Through an MVL with Business Asset Disposal Relief, the same money is taxed at 18%, keeping roughly £35,000 more (illustrative). The catch: the relief conditions must already have been met for two years.
The small pot. Not every closure needs a liquidation. Below the £25,000 threshold, a £18 strike-off with the right timing does the same job without the liquidator’s fees. We’ll tell you when the cheap option is the right one.
The comeback. An owner closes the company, banks the capital treatment, then starts a similar business within two years. The anti-avoidance rules can reclassify the whole distribution as a dividend. Screening for this first is the difference between a plan and a problem.
The sale that’s two years away. Business Asset Disposal Relief needs its conditions met throughout the two years before a sale. An owner who checks early can restructure in time. One who checks at heads of terms usually can’t.
The family handover. Gifting the company to the next generation triggers capital gains tax on paper profits, unless holdover relief is claimed jointly and on time. Paired with business property relief, a well-planned handover can pass the company on with little or no tax moving.
The employee buyout. Selling a controlling stake to an Employee Ownership Trust takes half the gain out of capital gains tax and keeps the business independent. For many owners without a buyer or a successor, the numbers still stack up, but they need running honestly against the alternatives.
How It Works
1. Book a call. Tell us about the business, what you’d like to happen next, and roughly when you’d like to be out.
2. We map the routes. You get a clear comparison of selling, closing, and handing on, with the tax cost of each in pounds and our honest view of which fits. Fees are fixed and agreed before we start, with no surprises.
3. We run the plan. Relief conditions checked and fixed in time, the right specialists brought in, and the paperwork done properly through to the final distribution.
The best exits are planned years out, but even months help. Book a call and let’s look at where you stand.
Robert Marjoram, Founder and Owner
Exit Planning Isn’t One-Size-Fits-All. Here’s What We Cover.
We handle the planning and the paperwork, whatever your exit looks like. That includes:
Why Choose Together Accounting
Together Accounting was founded by Robert Marjoram in 2013, and we’ve been advising UK small business owners, landlords, and investors on tax planning ever since. We’re Xero and QuickBooks specialists, rated 5.0 on Google, and we work with clients across the UK, not just locally in Norwich. We work with company owners weighing up how to close, contractors and consultants at the end of a limited-company career, owners preparing a business for sale in the next one to five years, family businesses planning the handover to the next generation, and owners exploring employee ownership as an alternative to a trade sale. Exit planning sits alongside the capital gains and inheritance tax work we already do, which matters, because an exit touches all three and advice that looks at one in isolation gets it wrong.
We’re also honest about where you need us and where you don’t. If your company can be closed with an £18 strike-off, we’ll say so rather than sell you a liquidation. If the company can’t pay its debts, you need a licensed insolvency practitioner, not an accountant, and we’ll tell you that straight and help you find one. And where an MVL is the right answer, the liquidator runs the liquidation while we run the tax planning around it, so the two never pull in different directions.
If you’d like to find out where your exit stands while there’s still time to shape it, contact our team today. We’re looking forward to hearing from you.
Business Exit FAQs
For a solvent company there are three: voluntary strike-off at Companies House, members’ voluntary liquidation, or keeping the company dormant if you might want it later. Strike-off is usually the cheapest. If the company can’t pay its debts, the routes are different, creditors come first, and you need a licensed insolvency practitioner rather than an accountant.
Rarely nothing, but often far less than you’d think. Distributions on closing can be taxed as capital rather than income, which currently means 18% or 24% instead of dividend rates that reach nearly 40%. With Business Asset Disposal Relief the rate on qualifying gains is 18%, and everyone has an annual exempt amount. The route, the timing, and the paperwork decide which rates apply.
A voluntary strike-off costs £18 in Companies House fees. A members’ voluntary liquidation costs more because a licensed insolvency practitioner must run it, which is why it’s only worth it when the tax saving is bigger, usually once distributions would pass the £25,000 threshold. We’ll show you both numbers before you choose.
It mostly turns on the £25,000 rule. If total distributions stay at or below £25,000, strike-off keeps capital treatment and the cost down. Above that, capital treatment needs a formal liquidation, and the company must actually be dissolved within two years of a distribution. There are edge cases, which is exactly what the planning conversation is for.
Carefully, and sometimes not. If you take a capital distribution on winding up and then carry on the same or a similar trade within two years, anti-avoidance rules can tax the distribution as a dividend instead, and HMRC applies them. If a comeback is even a possibility, tell us before the liquidation, not after.
A straightforward strike-off generally takes a few months: the notice sits in The Gazette for around two months before the company is struck off, and HMRC can object if returns or tax are outstanding. An MVL varies with the company’s affairs, though a first distribution often lands within weeks of appointment. Tidy books shorten everything, which is one more reason to start early.
Legally, no. In practice, the closures that go wrong are the ones where final accounts, tax clearances, and the capital-versus-income question were handled by guesswork. Our job is making sure the cheap route is taken when it’s right, the reliefs are actually claimed, and nothing comes back from HMRC a year later.
Because most of the value in a family business transfers exactly once, and the tax rules around that transfer all reward preparation: holdover relief needs a joint election, business property relief has conditions and, currently, a £2.5 million cap at 100%, and a successor needs time to be ready. A written plan turns an emotional decision into a manageable one.
Often, yes. The relief now covers half the gain rather than all of it, so the arithmetic is less dramatic than it once was, but half of a large gain relieved from capital gains tax is still substantial, and employee ownership keeps the business and its jobs independent. The conditions are strict, including trustee independence and a clawback period, so it needs doing properly or not at all.
Call us today
01603 627963
Leave on your terms.
Half an hour now can be worth more than any advice you get after you’ve already decided. Tell us about your situation and we’ll review your options.