Closing your business is a big step. Whether you’re retiring, restructuring, or simply ready for a change, you’ll want to make sure it’s done smoothly and efficiently.
For many UK business owners, a Members’ Voluntary Liquidation (MVL) is the best option. It’s a tax-efficient and structured way to close a solvent company with assets over £25,000.
In this article, we’ll explain why so many company owners are choosing MVLs, the key benefits, and what you need to consider to make your exit simple and stress-free.
What Is a Members’ Voluntary Liquidation?
An MVL is a formal liquidation process designed for solvent companies that can repay all their debts (including interest) within 12 months. It is not a process for struggling or insolvent businesses; instead, it serves as a structured and legal way to wind up a company that has fulfilled its purpose.
How Does an MVL Work?
The MVL process involves several critical steps:
Declaration of Solvency: Directors must sign a formal declaration stating that the company can pay all its debts, including interest, within 12 months. This document is legally binding, and providing false information can have serious legal consequences.
Appointment of an Insolvency Practitioner: The company must appoint a licensed insolvency practitioner to act as the liquidator. They will oversee the process and ensure compliance with legal requirements.
Distribution of Remaining Funds: Once any debts are cleared, the remaining funds are distributed to shareholders in a tax-efficient manner.
Final Accounts and Dissolution: Final accounts are prepared and submitted to Companies House, and the company is formally dissolved.
This structured approach ensures transparency, accountability, and compliance throughout the entire liquidation process.
Why Are So Many Business Owners Choosing MVLs in 2025?
Over the past few years, the business landscape has seen considerable shifts. From tax policy changes and economic uncertainty to shifting retirement trends, these factors have created a surge in the number of business owners opting for Members’ Voluntary Liquidations.
Tax Efficiency Remains a Major Incentive
Tax efficiency is a key reason business owners choose a Members’ Voluntary Liquidation. Distributions through an MVL are taxed as capital gains, often resulting in significant savings compared to income tax.
Currently, shareholders eligible for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) benefit from a 10% Capital Gains Tax (CGT) rate on qualifying profits. For example, extracting £1 million via an MVL would incur a £100,000 tax bill, which is lower than if taken as salary or dividends.
However, upcoming tax changes will affect these benefits. From 6 April 2025, the CGT rate for Business Asset Disposal Relief will increase from 10% to 14%, and from 6 April 2026, it will rise further to 18%.
These changes mean higher tax liabilities for future MVL distributions. Business owners considering an MVL should act promptly if they want to take advantage of the current lower rates before the increases take effect.
Economic Uncertainty Prompts Strategic Exits
Economic unpredictability remains a concern for many business owners. While some sectors have bounced back after the pandemic, others still face challenges such as rising operational costs, fluctuating consumer demand, and ongoing inflation.
Rather than navigating an unpredictable future, many directors are choosing to close their businesses while they are still solvent. This allows them to secure the value tied up in their company and avoid potential financial challenges down the line.
An MVL can act as a proactive safeguard in uncertain economic climates, allowing directors to extract their hard-earned profits before potential market downturns erode their value.
Retirement Trends are Driving MVL Activity
The UK is experiencing a wave of retirements among business owners. Many directors who set up their companies decades ago are now reaching retirement age and are ready to step away from the day-to-day operations of running a business.
An MVL provides an ideal route for these business owners to close their companies in an organised and tax-efficient manner.
Additionally, succession planning is becoming less common. Fewer younger family members are choosing to take over family businesses, leaving owners with the decision to either sell or liquidate their company. For those who wish to wind down operations entirely, an MVL is often the most logical choice.
Key Considerations When Planning Your MVL
While an MVL offers clear benefits, it’s essential to approach the process with proper planning.
Timing Matters
Given potential changes in tax legislation, initiating an MVL sooner rather than later could be beneficial. The Autumn Budget 2024 introduced immediate increases in CGT rates, with further changes expected in the next tax year.
Professional Advice is Essential
An MVL cannot proceed without the involvement of a licensed insolvency practitioner. Seeking professional advice early on can help identify potential challenges and ensure a smooth process. Your accountant will also be able to help you, as they will be familiar with your company’s situation.
Declaration of Solvency Must be Accurate
Directors must be confident in their company’s ability to meet its obligations within 12 months. Any doubts should be discussed with a professional before proceeding.
MVLs Remain the Smart Choice for UK Business Owners
As more UK business owners plan their exit strategies in 2025, Members’ Voluntary Liquidation continues to stand out as one of the most tax-efficient, structured, and transparent options available. For companies that meet the right conditions, it’s a great option.
Whether you’re preparing for retirement, restructuring your organisation, or simply ready to move on, an MVL offers a clear pathway to closing your company responsibly and efficiently.
