Should I close my limited company or make it dormant?

It comes down to two questions: will you plausibly use the company again, and can it pay its debts? If it is solvent and you may trade through it again, or its name is worth keeping, dormancy keeps it alive cheaply. If you are done with it, closure is cleaner: strike off for a solvent, debt-free company, or a members' voluntary liquidation if there is meaningful retained profit to extract. If the company cannot pay its debts, dormancy is not an option at all, and the right route is a creditors' voluntary liquidation.

When dormant is the right answer

Dormancy suits a solvent company you may want again: you are taking a career break, testing employment for a while, or protecting a company name. The company must cease trading entirely and have no significant accounting transactions. You notify HMRC that the company is dormant for Corporation Tax, deal with payroll and VAT registrations, and keep up the annual dormant accounts and confirmation statement. Kept properly, a dormant company can sit for years and be restarted by simply trading again and telling HMRC. The most common mistake is drifting: neither trading nor deciding, missing filings, and ending in compulsory strike off with the mess that brings.

When closing is the right answer

If there is no realistic future use, closure removes the ongoing filing duties and risk. A solvent company with little in it can be closed by strike off. A solvent company with meaningful retained profit is often better closed through an MVL, which can be significantly more tax-efficient. Our step-by-step closure guide walks the whole decision.

Debts change everything

A company that cannot pay its debts cannot hide in dormancy. The debts remain due, interest and pressure continue, and a creditor owed enough can petition to wind the company up whether or not it is trading. If the company is insolvent, the honest comparison is not dormant versus strike off but CVL versus doing nothing, and doing nothing is the option with personal risk attached. Check the position with the insolvency test and take advice early.

Related: closing a company, strike off, MVL, and the closure route chooser.

Dormant or closed: common questions

What does making a company dormant actually involve?

You stop trading completely, tell HMRC the company is dormant for Corporation Tax, settle outstanding bills, and close off things like payroll and VAT registration if no longer needed. The company then files dormant accounts and a confirmation statement each year at Companies House. Dormant means no significant accounting transactions at all, so even paying a bank fee through the company can break dormancy.

How much does it cost to keep a company dormant?

Very little in fees, mainly the annual confirmation statement fee and any accountant costs for the dormant accounts. The real cost is attention: the filings must happen every year on time, or the company can be struck off and fined, and directors remain responsible throughout.

Can a company with debts be made dormant?

No, not meaningfully. Dormancy does not pause or write off debts, and creditors can still pursue the company and ultimately petition to wind it up. A company that cannot pay its debts needs a proper route, usually a creditors' voluntary liquidation, not dormancy. Dormancy is for solvent companies you may want to use again.

If I have never traded, should I strike the company off or keep it dormant?

If you have no plans to use it, strike off is simple and cheap for a company that has never traded. Keep it dormant only if the name or the company itself has future value to you, and you are confident the annual filings will get done. A dormant company you forget about ends in compulsory strike off and possible penalties.

This is general information, not legal, tax or financial advice. The right route depends on solvency, retained profit and your plans. Speak to an accountant on the tax side and a Licensed Insolvency Practitioner if the company has debts.

Not sure which route fits?

Tell us briefly what’s happening and we’ll review it, free and confidential, and reply with what we think the right next step is.

Send my situation, free and confidential

Free, confidential and no obligation. We are an independent information service. Getting in touch does not appoint an insolvency practitioner or create a professional engagement. We review your situation and reply with what we think the right next step is. This is general information, not regulated advice.