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. Voluntary closures known as members’ voluntary liquidations reached 12,602 in 2024–25, the second highest on record after the 14,929 liquidations 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 Cash withdrawn from a company is classed as a capital distribution and taxed at a lower rate rather than as income, which can be taxed at up to 45 per cent.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, Ms Reeves announced that the rate of this relief would rise from 10 per cent to 14 per cent on 6 April 2025, and to 18 per cent in the following year.
Tax experts at Price Bailey also reported a sharp increase in 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 driving entrepreneurs to wind up their companies include difficult trading conditions, rising costs, and economic uncertainty. Some planned retirements have been accelerated to lock in the lower tax rates before they climb further.
A Treasury spokesperson 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”. The spokesperson added that the government “recognises the essential role entrepreneurs play in boosting economic growth, which is why we’re maintaining business asset disposal relief with a generous lifetime limit of £1mn”.
