If you’re the director of a solvent limited company and have your eyes on the exit – whether you’re retiring, restructuring or planning a new venture altogether – then you’ll be aware that the clock is ticking. 

Taking a well-earned break over the Christmas and New Year season is appealing and you no doubt deserve one but delaying the closure of your firm until the New Year could cost you – literally.

A Members’ Voluntary Liquidation (MVL) is the most appropriate formal legal procedure used to wind up the affairs of a solvent company – meaning it can repay all its debts in full, with interest if necessary, within a 12 month period. This is the most efficient and tax-effective route for directors to release cash and assets. 

Here’s some reasons why directors should initiate an MVL process now rather than wait for the new year.

The coming Capital Gains Tax increase in April 2026

The immediate urgency comes from the significant, phased increases to the tax relief available when you close your business with an MVL. 

The primary tax benefit is that distributions of surplus funds to shareholders are treated as Capital Gains rather than as standard income or as dividends which results in a lower overall tax rate. 

For those who qualify, the benefit is amplified by Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief. 

The tax efficiency of BADR is rapidly decreasing:

  • Eligible gains are currently taxed at 14%.
  • The BADR rate is scheduled to rise to 18% on disposals made on or after April 6th 2026. 

By the end of the 2026/27 financial year, CGT rates under BADR will have increased by 8% overall, from 10% to 18%. For company directors seeking to liquidate their solvent business, this will bite into their profits which will affect their future plans. 

To benefit from the lower rate, consider beginning and fast-tracking an MVL now as waiting until the new year means you will only have weeks to ensure the process is complete before the April 6th deadline. 

Tax pressure is rising across the board

The MVL route becomes even more critical when viewed against other upcoming taxation changes that reduce the efficiency of the alternatives. 

  • Higher Dividend Taxes – Dividend tax rates are increasing by two percentage points for both basic and higher rate taxpayers starting in April. This increases the cost of extracting profit from the company outside of liquidation. 
  • Reduced Exit Efficiency: Capital Gains Tax relief on qualifying disposals to Employee Ownership Trusts (EOTs) have also been reduced from 100% to 50%. This means directors planning a business sale or transfer need to revisit their exit planning and timelines. 

Business owners and directors who rely on dividends face reduced flexibility with these measures making the capital distribution treatment of the MVL a much stronger alternative.

An MVL process demands time and preparation

While the MVL process itself is structured and quick once formally underway, it requires essential preparatory tasks that must be completed before a licensed insolvency practitioner can be appointed to oversee the case. 

If you’re targeting a capital distribution date before the April 2026 deadline, delays in preparation can be risky.

Key steps that require most planning:

  • Final Accounts and Tax Clearance: You must instruct your accountants to prepare and submit final accounts and a final Corporation Tax return. You may also need to deregister for VAT and PAYE and also ensure that all non-cash assets such as Director’s Loans, are dealt with.
  • HMRC Clearance: Is required from HMRC before the company can be formally dissolved.
  • Formal Declaration: Directors also have to swear a formal Declaration of Solvency before a solicitor, affirming the company can pay all debts within a 12 month period.

Although the liquidator can often complete the core liquidation and fund distribution quickly – sometimes as soon as ten working days if everything is correct and in-order – the preparatory stage above can be subject to delays if loose ends are not tied up sufficiently quickly. 

Missing necessary deadlines could push the process perilously close to the April 6th deadline and that 4% increase which would apply literally overnight.

By starting the necessary groundwork now, before the year ends, will maximize the window available for your accountant to finalise records and for the Insolvency Practitioner to obtain the necessary clearances, ensuring you benefit from the more advantageous tax rate.

Preserving your hard-earned capital

A Members’ Voluntary Liquidation is the most straightforward route to closing a solvent business (absolutely best suited for companies with £25,000 or more in retained profits). In addition to securing lower CGT rates, a well-planned MVL can lead to a Corporation Tax early repayment discount, which in some cases has been known to exceed the cost of the liquidation itself – effectively making the MVL free or deeply discounted!

Get in touch with us today for an initial chat if you think you could benefit from an MVL.

The sooner we begin, the sooner you can enjoy the benefits and begin to move onto the next stage of your personal and professional journey.