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The number of UK entrepreneurs voluntarily shutting down viable businesses has reached the highest tax rate since the pandemic.
The figures released by the Companies House Show are surges at solvent companies that have chosen to enter liquidation during the 2024-25 tax year.
The figures also show that the overall speed of liquidation, including both voluntary and bankruptcy, has risen to record highs.
The voluntary closure, known as the voluntary liquidation of members, reached 12,602 in 2024-2025. This is the highest record on the second highest record after a 14,929 liquidation that took place during the height of the pandemic between 2020 and 2021. The total number of all liquidations for 2024-2025 increased to 36,807.
Several tax advisors told the Financial Times that Prime Minister Rachel Reeves had experienced a jump in enquiries about voluntary liquidation after raising the fees for key entrepreneurs’ relief in the fall budget.
Tax cuts, known as disposal relief for business assets, allow owners to steal money from the company at a low tax rate before evading tax. Cash withdrawn from the company is classified as a capital distribution and is taxed at a low tax rate rather than as income, and can be taxed at up to 45%.
In last year’s budget, Reeves announced that relief rates would rise from 10% to 14% on April 6, 2025. It will rise to 18% next year.
Elizabeth Bradley, partner at the law firm BCLP, said: “Many of these businesses probably had great growth potential.”
Michelle Denny West, partner at accounting firm Moore Kingston Smith, added: “The tax hike announced last year (by Reeves) has led many business owners to consider their options.
She said her company had also experienced a “surge” by the end of the tax year on April 5th, and “hopefully we will see the same thing over the next 12 months.”
Tax experts at another accounting firm, Price Bailey, also reported a sharp increase in business closures since the October budget. “We’re excited to see the company’s efforts to help people understand how they’re doing,” said Matt Howard, director of Price Bailey’s bankruptcy and recovery team. “As taxes rise along with economic headwinds, more business owners are exploring options to steal cash. Many have decided to stop the transaction altogether.”
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In addition to rising taxes, other factors have driven more entrepreneurs to pique businesses, advisers reported that it includes more difficult terms of transaction, increased costs and economic uncertainty. In some cases, people had planned to leave the business in the coming years, but decided to accelerate their decision to pay taxes under lower tax rates, the advisor said.
“That’s difficult,” added Howard. “Running a business is becoming more and more difficult.”
“Sometimes, they’re just tired and have plenty of uncertainty and ups and downs,” Denny West said. “A lot of the clients we see (want MVL) have enough. They just want to take cash and run.”
The Treasury said the government “submitted a one-time parliamentary budget in which it took the tax necessary decisions to revise the finances and rebuild the NHS.”
“We recognize the important role entrepreneurs play in boosting economic growth,” he said, adding that “it’s why they maintain the disposal of their business assets at a generous lifetime limit of £1 million.”
