How these figures are worked out
Every step is shown, so you can check the figures line by line.
What has to be true for this to work
The capital treatment shown here is not automatic. These figures assume all of the following,
and every one of them turns on your own circumstances.
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The company is solvent, and corporation tax, VAT, PAYE and all other creditors are paid in
full before anything is distributed.
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You qualify for Business Asset Disposal Relief. Broadly that needs at least 5% of the shares
and voting rights, held for at least two years, while you were an officer or employee, in a
trading company. Investment and property companies do not qualify.
-
The two-year anti-avoidance rule does not apply. That rule can treat the whole distribution
as dividend income rather than capital if you carry on a similar trade or business within two
years of the liquidation. If it applies, the saving shown here would not arise at all.
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Where the total to distribute is £25,000 or less, striking the company off can be cheaper than
a liquidation and can still give capital treatment. An MVL may not be the right route.
Please check these points with us or with your accountant before acting on any figure here.
Want to check the dividend figure yourself? Put your total income and this distribution into the
GOV.UK tax on dividends
guidance and you should reach the same figures as the table below. Anything else that affects your
tax, such as Scottish rates, pension contributions or Gift Aid, will change your own figure.
If you took the funds as dividends
If you close the company through an MVL
What this calculation assumes
These are the figures used to produce the result above. Anything marked as assumed can be changed under
Adjust the detail.
Capital route. BADR rates follow GOV.UK: 10% for disposals on or before 5 April 2025, 14%
from 6 April 2025 to 5 April 2026, and 18% from 6 April 2026. The lifetime limit is treated as £1 million of
qualifying gains. Gains above the remaining lifetime limit are charged at the main capital gains rates of 18%
within any unused basic rate band and 24% above it, with BADR gains treated as using the basic rate band first.
Dividend route. The dividend allowance of £500 is applied as a nil-rate band, so it is taxed
at 0% and occupies the lowest tax band available to the dividend income rather than being deducted from income.
This is the method GOV.UK uses. The personal allowance of £12,570 is set against non-dividend income first and
is reduced by £1 for every £2 of total income above £100,000. Band limits are £37,700 of taxable income for the
basic rate and £125,140 for the higher rate. Taking the dividends can also reduce the personal allowance.
The extra tax that then falls on your other income is included in the dividend route total and shown as a
separate line, because it does not arise on the capital route. That extra tax uses UK rates of 20%, 40% and
45%. A Scottish taxpayer would pay different rates on that part, though the dividend and capital gains
figures are the same across the UK.
Liquidation costs. Costs are paid by the company before the funds are distributed, so they
reduce the amount you receive and therefore the capital gain. The default is an estimate built from our
published costs. Our insolvency practitioner fee starts from £1,245 plus VAT for a transfer within 35 days,
and from £1,495 plus VAT for a standard payout. On top of that come Gazette advertising of £388.80 and a
statutory bond of between £55 and £205. The default figure in the calculator uses the standard payout tier
and the top of the bond range, and includes VAT. The exact fee depends on your circumstances and is confirmed in a written quote, so treat the
figure here as an estimate rather than a quote. Where the company is still VAT registered it may be able to
recover the VAT on the fee, which would improve the net benefit shown. Change the figure under Adjust the
detail to match your own quote.
Important. The comparison assumes the whole distribution would otherwise be taken as dividends
in a single tax year, which is the most expensive way to extract it. Spreading dividends across several tax
years, or having no realistic alternative to closing the company, will change the saving. The dividend route is
compared on the full sum because it does not incur liquidation costs, although a company still has to be closed
afterwards. Where the amount is small, striking the company off can be cheaper than either route and
distributions of up to £25,000 can still be treated as capital. Figures are estimates for a single individual
shareholder, assume a single capital distribution in one tax year, and assume no other chargeable gains or
reliefs. A real liquidation often pays an interim and a final distribution, which are separate disposals and can
fall in different tax years. Rates and allowances change, so confirm the current position before relying on any
figure.
About us. Clarke Bell Limited provides insolvency services and our insolvency practitioners are
licensed and regulated by the Institute of Chartered Accountants in England and Wales. We are not tax advisers.
Nothing on this page is tax advice or a personal recommendation. Please take advice on your own circumstances
before acting on any figure shown here.
Rates and allowances are those published by GOV.UK for the tax year containing your closure date. Sources:
BADR guidance,
tax on dividends,
capital gains tax rates,
income tax rates,
HMRC CG64174.
