If you’ve ever thought about putting your limited company ‘on hold’ rather than shutting it down entirely, you might be wondering: what is a dormant company? 

A dormant company is essentially one that’s not currently trading but remains registered with Companies House. This can be a smart move if you want to keep your company’s name or plan to return to trading in the future.

What does it mean for a company to be dormant?

A dormant company doesn’t carry out any business activities or earn income. However, it isn’t entirely inactive. While you won’t be issuing invoices or making sales, you’ll still need to meet some ongoing responsibilities. This includes submitting ‘nil returns’ to HMRC (showing zero income) and filing annual accounts with Companies House.

You’re allowed to keep your business bank account open and can even receive payments from old invoices issued before becoming dormant. However, no new trading activity is permitted.

Why make a company dormant?

There are several reasons why you might choose to make your company dormant instead of closing it:

1. Preserve your business name‍

By keeping your company registered, you ensure that no one else can use your business name while you’re not trading.

2. Pause without closing‍

If you’re unsure about your company’s future but don’t want the hassle of starting a new one later, dormancy allows you to ‘hibernate’ your business until you’re ready to return.

3. Simplified administration‍

While there are still some administrative tasks to handle, dormant companies face fewer obligations compared to active ones. For example, dormant companies don’t have to pay Corporation Tax or file full accounts—only basic, simplified returns.

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What are the benefits of keeping a company dormant?

• Flexibility
  Dormancy allows you to resume trading whenever it suits you. This can be helpful if you plan to restart your business after a break.
• Cost-effective
  Maintaining a dormant company is generally cheaper than continuing to trade. You’ll reduce overheads while keeping the company active and ready for future use.
• Avoid starting over
  If you close your company and decide to start up again later, you’ll need to create a new limited company from scratch. Dormancy saves you from repeating this process.

Disadvantages of keeping a company dormant

• Ongoing responsibilities
  Even though a dormant company isn’t trading, you still have legal obligations. These include filing annual accounts, submitting a confirmation statement, and keeping HMRC informed with nil returns. Failing to do so can result in penalties.
• Limited expense claims
  Since the company isn’t trading, you can only claim a very limited range of expenses, such as bank charges and accountancy fees. Any other ongoing costs will either need to be paid personally or treated as director withdrawals, which can complicate your tax situation.
• Can’t pay a salary
  You won’t be able to pay yourself a salary from a dormant company. If you rely on income from the company, you’ll need to consider alternative ways to support yourself

Responsibilities of a dormant company

Even when dormant, your company has a few key responsibilities:

Annual accounts and Confirmation Statement

You’ll need to file annual accounts with Companies House and submit a confirmation statement to keep your company’s details up to date.

Tax returns

Although dormant companies don’t pay Corporation Tax, you’ll still need to inform HMRC by filing a tax return with zero income and expenses.

Payroll (if applicable)

If your company previously had employees or paid a salary to its directors, you’ll need to set up a £0 payroll to keep HMRC updated and avoid penalties.

VAT

If your company is VAT registered, you’ll need to continue filing quarterly VAT returns, even if they’re nil returns. Alternatively, you can choose to de-register for VAT while dormant.

Can you claim expenses while dormant?

Since your company isn’t trading, expense claims are limited to essential costs, such as:

• Bank charges
• Accountancy fees
• Legal fees

Non-essential expenses should either be cancelled or paid personally.

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How to make your company dormant

If you decide to make your company dormant, you’ll need to:

1. Inform HMRC and Companies House that your company is currently dormant. 
2. Ensure all outstanding invoices are settled.
3. File any final Corporation Tax returns for your trading period.
4. Submit a confirmation statement and dormant company accounts annually.

Ready to hibernate your company?

Making your company dormant can be a great way to hit pause without losing everything you’ve built. It keeps your options open, whether you’re planning a temporary career change or waiting for better trading conditions. Just remember, even though there’s less paperwork, you’ll still need to stay on top of a few key responsibilities.

If you need help managing a dormant company, consider using a specialised service to handle filings and ensure you remain compliant with HMRC and Companies House. When the time comes, waking your company back up can be as easy as pressing play.

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