Preferential creditor outcomes: how often they are actually paid
Ranking as a preferential creditor does not mean being paid. In the Insolvency Service's study of 2,717 completed creditors' voluntary liquidations, 905 owed money to preferential creditors, and in 708 of those (78%) the preferential creditors got nothing. In the median case the liquidator realised just £5,798 of assets. When there was enough, though, they tended to be paid in full: the median recovery in the 197 cases that paid them anything was 100%. Unsecured creditors did far worse, paid something in only 10% of cases. The sample is of liquidations that started in 2017, when preferential creditors were mainly employees. In insolvencies starting on or after 1 December 2020, HMRC is also a secondary preferential creditor for VAT and PAYE-type deductions. Insolvency Service, CVL research report, December 2024
Data as of: Insolvency Service research published 17 December 2024, covering CVLs that started in England and Wales in 2017 and had closed by the time the data was collected · Sources: CVL research report for the Insolvency Service and its annex, Tables 6 and 9 · Law checked on legislation.gov.uk, 24 September 2026.
Who was paid, by creditor class
Recovery here means the amount a class was paid as a percentage of what it was owed. The medians and means are the report's own; the shares are our calculation from its counts.
| Creditor class | Cases owing this class | Share of the 2,717 cases | Cases where the class was paid anything | Share paid anything | Median recovery where paid | Mean recovery, all cases owing the class |
|---|---|---|---|---|---|---|
| Fixed charge holders | 250 | 9% | 59 | 24% | 100% | 17% |
| Preferential creditors | 905 | 33% | 197 | 22% | 100% | 18% |
| Floating charge holders | 250 | 9% | 49 | 20% | 63% | 10% |
| Unsecured creditors (including HMRC in this sample) | 2,697 | 99% | 266 | 10% | 9% | 2% |
| All creditors together | 2,712 | 100% | 374 | 14% | 9% | 2% |
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In 86% of the cases no creditor of any class received a payment. The report sets this against how little most of these companies had: the median value of assets realised was £5,798, and the median case took 712 days to close.
When preferential creditors are paid, it is usually in full
The spread of outcomes is sharply split. Most cases paid preferential creditors nothing, and most of the rest paid them close to everything they were owed, which fits their place ahead of the prescribed part, floating charge holders and unsecured creditors in the order of payment. 146 of the 197 cases that paid them anything (74%, our calculation) paid more than 90% of the preferential debt.
| Share of the preferential debt that was paid | Cases | Share of the 905 cases |
|---|---|---|
| Nothing (0%) | 708 | 78% |
| More than 0% up to 10% | 6 | 1% |
| Over 10% up to 20% | 5 | 1% |
| Over 20% up to 30% | 5 | 1% |
| Over 30% up to 40% | 8 | 1% |
| Over 40% up to 50% | 8 | 1% |
| Over 50% up to 60% | 9 | 1% |
| Over 60% up to 70% | 5 | 1% |
| Over 70% up to 80% | 4 | Under 1% |
| Over 80% up to 90% | 1 | Under 1% |
| Over 90% up to 100% | 146 | 16% |
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Who ranks as preferential now
The study's sample pre-dates the most important change. In the 2017 cases, the report counts preferential claims as those relating to employment, such as arrears of wages, and treats HMRC as an unsecured creditor. For any insolvency where the relevant date is on or after 1 December 2020, part of what a company owes HMRC ranks as a secondary preferential debt, paid after employees but ahead of floating charge holders and unsecured creditors.
| Class | What it covers | Where the law says so |
|---|---|---|
| Ordinary preferential | Employees' pay for the 4 months before the relevant date, up to £800 each; accrued holiday pay; certain occupational pension contributions. They rank equally and share proportionally if there is not enough to pay them in full | IA 1986 s386(1A); Sch 6 paras 8 to 10; s175(1A); £800: SI 1986/1996 art 4, per Insolvency Service guidance |
| Secondary preferential (since 1 December 2020) | HMRC for VAT and for tax the company deducted from other people's pay or payments: PAYE income tax, employee National Insurance, student loan repayments and Construction Industry Scheme deductions. Not Corporation Tax, employer National Insurance, penalties or interest | IA 1986 Sch 6 para 15D; s175(1B); Finance Act 2020 s98; HMRC policy paper |
| Between 15 September 2003 and 30 November 2020 | HMRC was not preferential at all and ranked with ordinary unsecured creditors. Preferential creditors were in practice employees and pension contributions | Enterprise Act 2002 s251; Insolvency Service guidance, para 49.55 |
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What this means for outcomes in recent cases is not yet measured. In principle, with HMRC's VAT and PAYE-type debts now in the preferential class, more cases are likely to have preferential creditors, and money that would once have reached floating charge holders and unsecured creditors goes to HMRC first. We have not found any official figures on how preferential creditors, including HMRC, have fared in liquidations that started after December 2020, so we do not estimate them here.
The order of payment
This is the broad order set out by HMRC in its 2020 policy paper, for insolvencies starting after 1 December 2020. The creditor dividend estimator applies it to your own figures.
| Order | Who is paid |
|---|---|
| 1 | Fixed charge holders, from the assets their charge covers (after the costs of realising them) |
| 2 | Costs of the insolvency, including the insolvency practitioner's fees and expenses |
| 3 | Ordinary preferential creditors |
| 4 | Secondary preferential creditors (HMRC, for insolvencies starting on or after 1 December 2020) |
| 5 | The prescribed part set aside for unsecured creditors |
| 6 | Floating charge holders |
| 7 | Unsecured creditors |
| 8 | Shareholders |
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Preferential debts also rank ahead of a floating charge holder on the floating charge assets themselves, to the extent the company's free assets cannot pay them (s175(2)(b)). To model a waterfall on your own numbers, use the creditor dividend estimator.
If the company owes staff wages, holiday pay, VAT or PAYE, those debts are paid before most other creditors in a liquidation, so they shape what everyone else receives. Keep an accurate list of who is owed what, and take advice before paying some creditors ahead of others.
- Creditor list template
- Statement of affairs worksheet
- Creditor dividend estimator
- My company cannot pay staff wages
General information, not advice about your company.
About the study
In 2021 the Insolvency Service drew a simple random sample of 2,900 of the 10,197 CVLs that started in England and Wales in 2017, and this study analysed 2,717 completed cases from that sample, using documents filed at Companies House such as the liquidator's appointment papers, the directors' statement of affairs and the liquidator's final account. Because the sample is random, the Insolvency Service says the findings generalise to CVLs that started in 2017. Only closed cases could be used, since final costs and distributions are not known until the end. The findings do not cover compulsory liquidations, administrations or company voluntary arrangements, and they do not reflect HMRC's secondary preferential status. One figure differs inside the report: its text says 2,299 cases paid unsecured creditors nothing, while its annex table gives 2,431, which is the figure consistent with 266 paid cases out of 2,697. We use the annex table. This page is general information, not legal or insolvency advice.
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