If you’re considering closing down your solvent business – the clock is definitely ticking

From April 6th 2026, the tax landscape for business exits is going to change, directly impacting the final funds you’re able to take home.

For business owners with over £25,000 in retained profits, a Members’ Voluntary Liquidation (MVL) remains the gold standard for extracting assets efficiently. However, with upcoming changes to Capital Gains Tax (CGT) and Business Asset Disposal Relief (BADR), acting quickly before the new tax year could save you thousands of pounds. 

Here’s why you need to instigate your MVL before April 6th, what benefits you’ll secure and what costly disadvantages you’ll avoid.

The looming deadline

An MVL allows you to treat the funds extracted from a solvent business as capital distribution rather than income so it is subject to Capital Gains Tax rather than the higher rate Income Tax. 

For those that qualify, BADR makes a good deal even better as it applies a lower preferential CGT rate to these gains.

On April 6th 2026, the BADR rate is going to rise 4% from 14% to 18%. This is in addition to CGT rates already rising to 18% (basic rate) and 24% (higher rate). 

By beginning an MVL before the increase deadline, you avoid an unnecessarily higher tax bill. 

Example: If you planned to distribute £500,000 under the current 14% BADR rate then your tax liability would be £70,000. If the distribution is delayed until after the deadline then the rate climbs to 18% and the tax bill becomes £90,000. Not acting quickly would cost an avoidable £20,000. 

Leaving an exit too late also introduces further risks. 

Tax reliefs that require specific conditions such as holding 5% of voting rights and shares for at least two years can become harder to reach or navigate if they’re rushed to the last minute. These can be exacerbated by complexities in the shareholding or ownership structure. Even small issues such as the presence of minority shareholders or growth shares can become costly and irreversible if not managed well in advance.

More benefits for moving quickly

Beyond the immediate monetary advantages of securing tax savings, an MVL offers a suite of benefits for directors looking to close their business:-

  • Speed and certainty – A formal MVL is the quickest and cleanest way to close a solvent business. If affairs are in order then the initial process can be concluded in seven days or less.
  • Freedom – Instead of leaving a dormant company lingering on, an MVL allows you to close this chapter of your professional career and move onto the next one – potentially within a week. 
  • Fairness – An appointed liquidator ensures that all assets are distributed fairly and legally according to shareholdings.
  • Protection – During increasingly uncertain economic conditions, cashing in on your investment through an MVL prevents business funds from eroding over time.
  • Risk of reactive decisions – Waiting until the last minute as a deadline approaches increases the risk of making reactive, tax-driven decisions that aren’t grounded in commercial reality. Rushing an exit or restructuring deal in these circumstances can undermine long-term value, introduce unforeseen liabilities or strain relationships with buyers. 
  • Loss of certainty – With ongoing pressure on public finances, the trajectory of capital taxation suggests that further squeezes on reliefs and tax rates are likely in future budgets. By missing the current deadline, you could remain exposed to an uncertain tax landscape, whereas acting early provides the certainty of locking in today’s known rats.

The 12-month rule – a crucial caveat

The key facet of any MVL process is that it must be able to pay all of its debts within 12 months of the winding-up commencing. This is set out in Section 89 of the Insolvency Act 1986 and liquidators have no discretion at all to extend this. 

If debts cannot be paid within this timeframe then the MVL has to be converted into a Creditors’ Voluntary Liquidation (CVL). This highlights why it’s critical to properly finalise a company’s affairs – such as writing off non-cash assets, concluding litigation and paying any tax liabilities – before the process begins.

Next steps: act fast and complete your side quests

While the MVL process itself can be swift, there are some essential steps required before an insolvency practitioner can be appointed. 

The company needs to cease trading, deregister for VAT and PAYE, prepare final accounts, ensure all debts are paid and all funds moved into an instant access bank account.

The first essential step is to work closely with your accountant. They can guide you through preparing the necessary groundwork and ensure you haven’t missed any critical tasks that could delay the MVL process or increase your final fees. 

This checklist has to be completed before an insolvency practitioner is appointed to conduct the process:

  • Cease trading – formally confirm that the company has completely stopped all trading activities.
  • Deregister for tax – make sure the business has deregistered for both VAT and as an employer for PAYE with final returns submitted for both.
  • Finalise accounts – prepare and submit final company accounts and the final Corporation Tax return covering the period up to the date that trading was ceased.
  • Clear all liabilities – ensure that all tax liabilities and any other outstanding debts are paid in full.
  • Resolve non-cash assets – make sure all non-cash assets including fixed assets, stock, outstanding customer debts and director’s loans – are sold, collected or written off. 
  • Close pension schemes and end litigation – if your company operates a pension scheme for employees, it must be closed and the members’ benefits transferred. Additionally, any ongoing legal action brought by or against the company must be completely concluded.
  • Consolidate funds – move all remaining company money into an instant-access bank account that does not require a notice period for withdrawals.

Final preparatory steps

Once the groundwork is complete it’s time to contact a professional, licenced insolvency practitioner. It’s their job to perform ID checks, verify the company’s readiness and agree on fees. Before they are officially instructed and appointed as liquidators, there are a couple of final tasks to be completed:

  • Withdraw all company funds – You’ll be instructed to withdraw the entirety of the company’s funds into your personal bank account (apportioned appropriately between shareholders) and close the company bank account(s). In the short term, this money is legally treated as a temporary loan from the company to you. During the liquidation, the liquidator will clear this loan by officially declaring it a distribution of assets (in specie). 
  • Swear a Declaration of Solvency – the liquidator will provide you with a formal declaration detailing the company’s final position and confirming it is solvent. This document has to be signed physically in the presence of a solicitor, who will witness and countersign it. Remember – making a false declaration of solvency is a criminal offence.

Once you provide the insolvency practitioner with evidence of the withdrawn funds and the original, legally sworn Declaration of Solvency, they will formally step in, the company will enter liquidation and the process to officially close your business will begin. 

With the April 6th deadline fast approaching, the time to begin these preparatory steps with your accountant is right now. 

Get in touch with us today and we’ll help you get your affairs in order to ensure you cross the finish line and secure the 14% lower tax rate – before the window closes.