If you’re preparing to close a solvent limited company with over £25,000 in retained profits, a Members’ Voluntary Liquidation (MVL) is often the most tax-efficient exit route available. This is because an MVL converts your company’s remaining profits into capital, making them eligible for Capital Gains Tax (CGT) rather than Income Tax.
Important tax change: BADR rising to 18% from April 2026
The Business Asset Disposal Relief rate is set to increase from 14% to 18% for disposals made on or after 6 April 2026.
This shift reduces the tax efficiency of taking funds out through an MVL.
If you’re thinking about closing your company, timing matters. Acting before the change could mean a noticeably better outcome. A quick conversation with one of our qualified insolvency practitioners will confirm whether an MVL before the deadline is in your interests.
What is Business Asset Disposal Relief?
Business Asset Disposal Relief is a tax relief that’s designed to benefit business owners when they sell or close their solvent company by reducing the CGT rate significantly. It only applies to individuals, rather than companies, and can usually be used when:
- Selling a cash-rich business or shares in a trading company
- Closing a company that qualifies for an MVL
It’s important to note that the lifetime limit for BADR is £1 million of qualifying gains. You can use the relief more than once, provided the total gains claimed stay inside this limit.
When an MVL makes the most sense
Your company has more than £25,000 in retained profits
Below this amount, a strike-off can sometimes still provide capital treatment. Above it, strike-off becomes less effective and often results in the higher Dividend Tax rate being applied, making an MVL the better option.
You qualify for BADR
You must meet the BADR criteria. This includes being a director or employee, holding at least 5% of the shares and voting rights, and the company being a trading company rather than an investment vehicle, for at least two years before the date of liquidation.
You need a clean, controlled close-down
An MVL is a formal, structured process run by a licensed insolvency practitioner. It gives certainty, reduces risk and ensures every part of the closure is handled correctly.
You’re closing the company permanently
MVLs are ideal when stepping into employment, retiring, finishing a project-based limited company or simplifying a group structure.
Why the April 2026 change matters
Until April 2026, BADR applies at 14%. After that, the rate increases. If your company has a meaningful cash balance and you don’t need the company anymore, closing now allows you to access the lower rate before it changes.
Many directors who planned to close within the next few years are now bringing the date forward to benefit while the 14% rate is still available.
Why you must be solvent
An MVL is only available if your company is solvent. This means:
- every liability can be paid in full
- statutory interest can be covered
- liquidation costs can be paid
- all payments can be completed within 12 months
Before an MVL begins, directors must swear a statutory declaration of solvency, confirming they have carried out a full, detailed review of the company’s financial position. As the statutory declaration guidance explains, this review must be evidence-based and thorough, not based on assumptions or outdated information.
If the company later proves to be insolvent:
- the MVL must convert into a CVL
- the liquidator will review why solvency was misjudged
- directors may face consequences if the declaration was made without proper inquiry
This is why solvency checks, forecasting and reviewing contingent liabilities are essential. A licensed insolvency practitioner will help you confirm the position before any paperwork is signed.
Key takeaways on whether MVL is the most tax-efficient way to close your company
- An MVL is usually the most tax-efficient way to close a solvent, cash-rich company
- BADR offers a lower CGT rate than dividend tax, even after the April 2026 increase
- Solvency is essential — directors must be able to pay all liabilities in full within 12 months
- An MVL provides a clean, compliant and structured route to closure
- Where solvency is unclear or profits are low, alternatives may be more appropriate
Get advice on whether an MVL is the right choice
If your company is solvent and you’re thinking about closing it, now is the right time to get clear advice on a Members’ Voluntary Liquidation. With the current 14% BADR rate ending in April 2026, acting early can make a real difference to what you receive personally.
An MVL can reduce your tax bill, speed up the payout and give you a clean, well-managed closure. But it only works if the company is genuinely solvent and the process is handled properly. That’s where speaking to a qualified insolvency practitioner helps.
We’ll look at your figures, confirm solvency, check whether you qualify for BADR and explain exactly how much you could save by using an MVL. If an MVL isn’t the right option, we’ll tell you that too and point you to a safer alternative.
There’s no pressure, no obligation and no cost for the initial conversation. Just straight, practical guidance so you can make the best decision for your circumstances.
Get in touch today for free, confidential advice and secure the most tax-efficient route while the lower BADR rate is still available.
