How much does it cost to keep a company dormant in the UK?

If you’ve stopped trading or aren’t ready to launch your business just yet, making your company dormant can be a practical way to press pause without shutting everything down.

But while a dormant company is inactive, it isn’t invisible. There are still legal responsibilities to meet – and if you get them wrong, the costs can quickly outweigh the benefits.

In this guide, we’ll explain what it means to keep a company dormant in the UK, how much you’re likely to spend each year, and whether it’s worth doing compared to striking off your company entirely.

How much does it cost to keep a company dormant each year?

While the legal duties for dormant companies are limited, they’re not cost-free – and the total amount you spend depends on how much support you use to meet those duties. Here’s how the numbers typically break down:

These costs rise sharply if you miss deadlines or break dormancy accidentally. A late accounts penalty alone can be £1,500, and that’s before potential strike-off proceedings.

What happens if a dormant company trades or receives money?

If a dormant company starts trading again, or receives income or payment of any kind, it stops being dormant, and the following applies:

• You’ll need to file full statutory accounts for that financial year
• HMRC must be informed that the company has resumed trading
• You will need to inform HMRC that you are active again for Corporation Tax, resume your tax filings, and pay any tax owed
• Any failure to file correctly can result in fines and penalties

Should I keep my company dormant or strike it off?

If you’re not sure whether to keep your company dormant or strike it off altogether, the right choice will depend on your long-term plans and whether the admin is worth it. Here’s how the two options compare.

If you’re confident the company won’t be needed again, and it holds no assets or intellectual property, striking off is often the simpler, cheaper option.

What is a dormant company?

‘Dormant’ means a company is not actively trading, but the exact legal definition differs slightly depending on which authority you’re dealing with. That difference matters when it comes to filing obligations and costs. A company can be dormant for Companies House but still active in HMRC’s eyes, or vice versa. That’s why it’s important to understand both definitions.

• How to set up a dormant company
• Do I need to file a Company Tax Return?
• The difference between accounts for Companies House and accounts for HMRC

Dormant for Companies House

A company is dormant for Companies House purposes if it has had no ‘significant accounting transactions’ during a financial year. That means no trading income, no outgoing expenses, no bank charges or interest, and no payments to accountants or service providers. If this condition is met – and the company qualifies as small – it can usually submit dormant accounts, which are simpler than full statutory accounts.

Dormant for HMRC

HMRC uses ‘dormant’ to refer to a company that has stopped trading and has no other income – such as investment returns, asset sales, or interest payments. If your company becomes dormant in this sense, you must inform HMRC. Usually, no Corporation Tax return will be required if you’ve told HMRC you are dormant.

Can a dormant company have any expenses?

A company that’s officially dormant isn’t supposed to have any ‘significant accounting transactions’, which means most types of expenses aren’t allowed. That means your company can lose dormant status due to expenses such as:

• Bank charges or fees
• Payments to accountants
• Software subscriptions
• Utility bills

There are very limited exceptions – for example, Companies House filing fees and the penalty for late annual accounts are not considered significant. Still, the safest approach is to avoid any financial activity that would create an entry in your company’s accounts. Even a £3 bank charge could technically trigger the need to file full accounts.

Why would you want to keep a company dormant?

Keeping a company dormant isn’t free, but for many business owners, the annual cost is justified. The decision often comes down to balancing that expense against the flexibility, protection, and future options the company structure preserves.

Protecting a company name

Keeping a dormant company on the register ensures that your business name stays reserved and can’t be registered by anyone else. While there is an annual cost to maintaining dormant status, many companies see it as a relatively small price to pay to protect their branding, intellectual property, and long-term business identity.

If you were to dissolve the company, the name could become available to others – and rebuilding under a different name may prove far more costly than maintaining compliance each year.

Pausing a business

Dormancy allows a company to put things on hold without shutting down completely. You might be restructuring, focusing on another venture, relocating, or waiting for the market to recover.

Although you’ll still need to meet certain filing requirements and legal obligations, keeping the company dormant can sometimes be more cost-effective than dissolving it and going through the process of forming a new company later. It preserves the legal structure and avoids the time, expense and complications of starting from scratch.

Holding assets

Some directors use dormant companies to hold valuable assets – such as trademarks, web domains, or intellectual property – separately from their main trading entity.

There are ongoing compliance costs to consider, but these may be modest compared to the value of the assets being protected. In that context, dormancy can support long-term planning, licensing arrangements, or succession strategies without exposing those assets to unnecessary risk.

Switching legal structure

If you’ve moved from a limited company to operating as a sole trader, you may decide to keep your company dormant in the background.

Maintaining dormant status means the legal entity remains available should you wish to return to a limited structure in future. For some business owners, the annual cost of keeping the company on the register is preferable to re-incorporating and setting everything up again later.

How do you inform HMRC that your company is dormant?

When a company stops trading and has no other income, you should tell HMRC that it is dormant for Corporation Tax purposes. This is usually done using HMRC’s online ‘Tell HMRC your company is dormant’ service, or by writing to your company’s Corporation Tax office.

Once HMRC accepts that the company is dormant, they typically stop issuing Company Tax Return requests. However, this may not cancel a tax return obligation that already exists.

If HMRC has already issued a formal notice requiring a Company Tax Return for a specific accounting period, that return must still be dealt with. In practice, this means either:

• Submitting a nil Company Tax Return for that period (if appropriate), or
• Asking HMRC to withdraw the notice (which they may do if the company genuinely had no taxable activity), or
• Submitting the Company Tax Return and paying any Corporation Tax due (if the company was active for at least part of that accounting period).

Ignoring an outstanding notice can lead to late filing penalties, regardless of dormancy.

What filings are required, and how much do they cost?

Even dormant companies must meet certain legal requirements. These are the minimum tasks needed to remain compliant and avoid fines.

1. Confirmation statement (£50)

All companies, including dormant ones, must file a confirmation statement at least once every 12 months. This costs £50 if filed online (or £110 by post) and confirms your company’s key details, such as:

• SIC code (business activity classification)
• Share capital
• Shareholders

Since recent changes, your confirmation statement must also include a statement that your company’s future activities will be lawful.

2. Dormant company accounts (free)

Even if your company is completely inactive, you must still submit annual accounts to Companies House. If you qualify as a small company and haven’t traded, you can file dormant company accounts, which are simplified, free, and require minimal information. Bear in mind, however, that late filings still incur the following penalties:

• Up to 1 month late: £150
• 1-3 months late: £375
• 3-6 months late: £750
• Over 6 months late: £1,500

3. Notifying Companies House of any changes (mostly free)

You must notify Companies House of certain changes to your company’s details as soon as they occur. This applies even if your company is dormant. Most updates can be filed online and are free. Common changes you must report include:

• Registered office address
• Director’s service address or residential address
• Appointment or resignation of a director
• Changes to people with significant control (PSC)
• Changes to your company name (fee applies)
• Changes to your SIC code (reported via the confirmation statement)

Failing to update Companies House can result in fines and, in serious cases, lead to your company being struck off the register.

Need help managing your dormant company?

Keeping a company dormant can be a smart move – whether you’re protecting a name, holding intellectual property, or simply pausing while you plan next steps. But even when a company is inactive, there are still filings to submit and deadlines to meet. Staying compliant is essential to avoid late penalties or an unintended strike-off.

1st Formations offers a range of affordable services for dormant companies, including annual account filing, confirmation statement submissions, and registered office services. Whether you’re pausing operations, protecting a company name, or planning for the future, we’ll help you stay compliant and take the stress out of ongoing admin.