Completing a Members’ Voluntary Liquidation quickly has a lot of advantages

If you’re director of a profitable, solvent company and you’re considering winding down operations for various reasons – new opportunities or retirement – a Members’ Voluntary Liquidation (MVL) is typically the most strategic and tax-efficient exit route available to you. 

Taking your time is usually advisable for big decisions but for the next four weeks in particular, procrastination could be costly. 

The Budget will take place on November 27th 2025 and with confirmed tax increases affecting MVLs already taking place in April 2026, the best time to start an MVL process is now. 

If you move swiftly you can lock in existing favourable tax rates and insulate yourself from any potentially adverse policy changes coming next month.

Why every month matters with tax rises on the horizon

An MVL is a formal legal process used to close down a solvent business that can pay all its debts in full, with interest if necessary, within 12 months. Its primary benefit – beyond providing a structured and clean closure – is its significant tax efficiency.

When closing a company through an MVL, distributions to shareholders are treated as capital gains rather than income or dividends. This difference is substantial as the rate of Capital Gains Tax (CGT) is considerably lower than comparable Income Tax rates, which can climb as high as 45% for dividends.

For qualifying business owners, the key relief is Business Asset Disposal Relief (BADR), previously known as Entrepreneurs’ Relief. BADR provides access to a reduced CGT rate on qualifying gains up to a lifetime limit of £1 million. 

We’ve already seen the tax efficiency of MVLs being downgraded following last year’s Autumn Budget:

  • The BADR rate was increased to 14% from 10% for disposals made on or after April 6th 2025. 
  • The rate is scheduled to rise again to 18% for disposals made on or after April 6th 2026. 

By the 2026/27 financial year, the CGT rate under BADR will have increased by 8% overall (from 10% to 18%). For a shareholder distributing, for example, £500,000 in qualifying assets securing the 14% rate now, compared to the 18% rate after April 6th 2026 would be a direct tax saving of £20,000.

Beginning an MVL before November 27th 2025 is vital to maximise the value you extract ensuring you lock in the current 14% rate before the increase takes effect. 

Mitigating budget uncertainty

Beyond any tax rises next year, initiating an MVL before the November Budget is a critical financial defensive strategy against any other potential unannounced changes.

With the Treasury facing well publicised fiscal challenges, tax reliefs are frequently scrutinised for any “generous” ones that can be removed and seen as a quick-win to raise additional funds by removing them from entrepreneurs. 

Areas such as pension salary sacrifice schemes are already under active consideration for reform. 

While BADR increases are already legislated until 2026, future Budgets always carry the risk of accelerating planning increases or introducing new restrictions that could erode the value of your accumulated profits.

MVL benefits that reward early action

While tax savings are the most prominent motivation for an MVL, the procedure offers other compelling benefits that are unlocked sooner with early action:

  • Corporation Tax Early Repayment Discounts: Companies undergoing an MVL may qualify for early repayment discounts on their Corporation Tax liabilities. With effective planning, this discount could even realise more than the cost of the liquidation itself effectively resulting in a free MVL. 
  • Quick access to funds: An MVL is structured and formal, providing a specific timeline and certainty. The process can often be concluded relatively quickly – possibly finalised within ten days for simpler cases, allowing for the swift withdrawal of funds.
  • Efficiency and peace of mind: An MVL saves management time working with your accountants preparing statutory returns. The licensed insolvency practitioner oversees the entire process, ensuring compliance and reducing risk to directors.

Speed requires preparation

The overall MVL process from initiation to formal dissolution typically takes between six and 12 months, although the immediate distribution of assets can be much quicker. This timeline highlights why delaying is risky.

To ensure speed and efficiency, directors must complete crucial preparatory tasks before appointing their chosen insolvency practitioner (IP). These include:

  • Confirming the company has ceased trading
  • De-registering for VAT and PAYE scheme and submitting final returns
  • Instructing accountants to prepare final accounts and the final Corporation Tax return
  • Dealing with non-cash assets such as director’s loans or fixed assets
  • Consolidating all funds into instant access bank accounts

While not critical, any failure to complete these tasks upfront can add time and potentially increase the final fees. The most important legal step – sweating the Declaration of Solvency before a solicitor, which affirms the company can pay its debts within 12 months – must be completed within five weeks prior to the liquidation meeting. 

Acting now before the Chancellor gets to her feet in a month is a sensible and prudent choice. 

That’s why we offer a free consultation for any director who wants to explore how an MVL could benefit them. Get in touch today to arrange yours.