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The number of UK entrepreneurs voluntarily shutting down viable businesses has hit the highest rate since the pandemic, with advisers blaming rises to tax rates for the jump in liquidations.
There has been a surge in solvent businesses choosing to enter liquidation during the 2024-25 tax year, figures released by Companies House show.
The figures also show that the overall rate of liquidations, including both voluntary and insolvencies, rose to a record high.
Voluntary closures, known as members’ voluntary liquidations, reached 12,602 in 2024-25, the second highest on record after the 14,929 liquidations that took place in 2020-21 during the height of the pandemic. The total number of all liquidations in 2024-25 rose to 36,807.
Several tax advisers told the Financial Times they had experienced a jump in inquiries about voluntary liquidations after the chancellor, Rachel Reeves, raised rates on a key relief for entrepreneurs at the autumn Budget.
A tax break called business asset disposal relief allows owners to take money out of their companies at a lower rate of tax before shutting them down. Cash withdrawn from a company is classed as capital distribution, and taxed at a lower rate rather than as income, which can be taxed at up to 45 per cent.
In last year’s Budget, Reeves announced the rate of relief would rise from 10 per cent to 14 per cent on April 6 2025. It will climb again to 18 per cent next year.
“We have seen a flood of enquiries from business owners looking to sell before the April tax rises,” said Elizabeth Bradley, a partner at BCLP, a law firm. “Many of these businesses likely had significant growth potential.”
Michelle Denny-West, a partner at accountancy firm Moore Kingston Smith, added: “The tax rises announced [by Reeves] last year have led many business owners to review their options. The expectation of further tax increases later this year have persuaded some of them to ‘cash in their chips’ while current rates remain available.”
She said her firm had also experienced a “surge” of inquiries before the end of the tax year on 5 April and was “expecting to see the same over the next 12 months”.
Tax experts at Price Bailey, another accountancy firm, also reported a sharp increase in business closures since the October Budget. Matt Howard, head of the insolvency and recovery team at Price Bailey, said: “Tax rises together with economic headwinds are pushing more business owners to explore their options for taking cash out. Many are deciding to cease trading altogether.”
Alongside the tax rises, other factors were driving more entrepreneurs to wind up their companies, advisers reported, including more difficult trading conditions, increased costs, and economic uncertainty. In some cases, people had been planning on retiring from the business in the next few years but had decided to accelerate the decision to do so to pay tax under the lower rates, the advisers said.
“It’s tough out there,” Howard added. “It’s getting increasingly difficult to run a business.”
“Sometimes they’re just tired and have had enough of the uncertainty and the ups and downs,” said Denny-West. “A lot of clients we see [wanting an MVL] have just had enough. They just want to take the cash and run.”
The Treasury said the government had “delivered a once-in-a-parliament budget that took necessary decisions on tax to fix the public finances and rebuild the NHS”.
It said it recognised “the essential role entrepreneurs play in boosting economic growth”, adding “that’s why we’re maintaining business asset disposal relief with a generous lifetime limit of £1mn”.
