How to make your side-hustle limited company dormant

By Ben Davies · Updated 5 October 2026

Thousands of side-hustle directors are quietly pressing pause on their limited companies this year — not because the business failed, but because the maths no longer works once dividends are taxed almost like salary. Going dormant lets you keep the company name, the bank record and the option to switch back on, without paying an accountant £80–£300 a year to file accounts for a company that does nothing.

Dormant vs dissolved — why pause beats close

If you dissolve (strike off) your company, it is gone. The name becomes available for someone else to register. Your company number disappears. Any future client wanting to hire "YourBrand Ltd" hits a dead end, and you lose the trading history that makes invoicing larger clients easier.

Going dormant is the opposite: the company stays on the register, keeps its number, keeps its name, keeps its history — it just does nothing. No invoices, no expenses, no dividends, no Corporation Tax bill. You file two cheap documents a year and that is it. If you want to start trading again in 12 months, you flip a switch with HMRC and carry on. See our guide on dormant vs non-trading for the legal distinction, and how to reactivate a dormant company when you are ready to come back.

For most side-hustle directors the question is not "should I close it?" — it is "is it worth keeping a side hustle ltd alive for about £69 a year — the £50 confirmation statement fee plus DormantFile at £19?". For almost everyone, the answer is yes. Mothballing the company costs less than one dinner out and preserves every bit of optionality.

Why so many side-hustle directors are going dormant in 2026

The dividend regime has been steadily squeezed:

• The tax-free dividend allowance has fallen from £5,000 (2017) to £2,000, then £1,000, and now sits at £500.
• The additional-rate threshold dropped from £150,000 to £125,140, dragging more dividend income into the 39.35% band.
• Employer's National Insurance changes have made the small-salary-plus-dividends strategy less efficient.
• Corporation Tax went from a flat 19% to a tiered 19–25% depending on profit.

If your side-hustle Ltd makes £8–15k a year on top of a PAYE day job, the effective tax rate on the dividends you can actually extract has climbed sharply. Many directors have done the sums, decided the admin and tax cost outweighs the side income for now, and are choosing to pause the limited company rather than dissolve it.

This is the textbook case for going dormant. You stop trading, you stop the tax bill, but you keep the company alive for the next opportunity.

Before you go dormant — the prerequisites

You cannot just stop replying to emails. To meet the Companies Act definition of dormant, the company must have no significant accounting transactions in the period — and that has to be true all the way through to the next accounting reference date.

Work through this checklist first:

• Invoice everything outstanding. Send your final invoices and chase them in. Once you are dormant, no money can move through the company account.
• Pay all creditors. Suppliers, subscriptions, software, anything billed to the company. Cancel recurring direct debits.
• Settle any director's loan you mean to repay. If the company owes you (or you owe it) and the balance is going to move, clear it before the dormant period begins. A balance that stays untouched, with no interest added, can simply sit on the books.
• Pay any final Corporation Tax owed for the trading period you are about to close.
• Empty the bank account. Take the final dividend or salary, leave the account at zero, and close it — or switch it to a fee-free, interest-free account. Even £0.02 of bank interest blows your dormant status. See what counts as "no significant accounting transactions", or run the free Am I dormant? checker to pressure-test your setup before the cut-off.
• Deregister for VAT if you are VAT-registered. File a final VAT return and submit form VAT7. A dormant company should not be sitting on a VAT number it does not need.
• Close the PAYE scheme if you ran one. Submit a final FPS marked as the final submission for the scheme, then ask HMRC to close it.
• Cancel any business insurance, software subscriptions, and merchant accounts in the company's name.
• Update your registered office and director's service address if you are moving — you still need a valid registered office while dormant.

None of this means the balance sheet has to be empty. A company that has just stopped trading usually still has figures on it — a director's loan, money owed to or by it, retained profit. Those can stay, as long as nothing about them changes once the dormant period starts: nothing paid or collected, no interest added, nothing written off or written down. Equipment, a vehicle or anything else still being depreciated is the exception: the yearly depreciation charge is an accounting entry, and accountants generally treat it as ending dormancy, so deal with those assets before the cut-off.

Skip any of these and you risk a stray transaction landing in the dormant period, which means you cannot file dormant accounts. For most companies in that spot the fallback is micro-entity (FRS 105) accounts plus a CT600 — which DormantFile also files — but it is more figures to enter than the dormant route, so a clean cut-off is still worth the effort.

Step-by-step: how to mothball your limited company

Here is the sequence to make your side-hustle company dormant cleanly:

1. Pick the cut-off date. The cleanest cut-off is the end of your current accounting period (your accounting reference date, or ARD). Trade up to that date, then stop. You can stop earlier — just make sure no transactions occur after the cut-off.
2. Run the prerequisites checklist above. Final invoices, final payments, deregister VAT and PAYE, close or sanitise the bank account.
3. Take the final dividend or salary. You don't have to strip the balance sheet back to zero. Anything left — retained profit, a director's loan, a debt still owed — sits on the balance sheet through the dormant period. That is fine; it just needs to not move.
4. File the final "active" accounts and CT600 for the trading period that just ended. This is your last full set of accounts. The next set will be dormant.
5. Answer any HMRC notice to deliver a Company Tax Return with a nil return (see next section).
6. Wait for your next accounting reference date. This is when your first set of dormant accounts is due at Companies House.
7. File dormant accounts and your annual confirmation statement (CS01). Two filings, both short, both cheap.
8. Diary the same two filings for every year afterwards until you either reactivate or dissolve the company.

HMRC and the Company Tax Return

Once the company is dormant, a Company Tax Return (CT600) is due only when HMRC sends a notice to deliver one. If a notice arrives, it has to be answered, even for a dormant period — with a nil return. DormantFile files it, using the company's UTR (its 10-digit tax reference), which HMRC sent on form CT41G when the company was new. See do I need to file a CT600 for a dormant company.

Telling Companies House — your first dormant accounts

Companies House finds out you are dormant when you file your first set of dormant company accounts at your next ARD. There is no separate "we are now dormant" notification — the accounts themselves are the signal.

Dormant accounts are short: a balance sheet and a statement that the company was dormant. Because your company traded, its balance sheet will usually still carry figures from those years — money owed to or by the company, assets, accruals — shown unchanged, as long as nothing about them changed in the year. Having traded also means Companies House's own online dormant accounts form and the paper AA02 form are not available to you — both are for never-traded companies only. DormantFile files the full dormant accounts, and can start from the figures in your last accounts on the Companies House register: you check them and save, and the next year they carry forward on their own. Full walkthrough in how to file dormant company accounts.

The deadline is nine months after your ARD for a private company. Miss it and a late-filing penalty follows — £150 at first, moving into higher bands the later the accounts are.

What you still have to do every year while dormant

Going dormant cuts the work massively, but it is not zero. You still need to:

• File the annual confirmation statement (CS01) at Companies House. £50 filing fee, due once every 12 months.
• File dormant accounts at Companies House each year, by the nine-month deadline.
• Keep the registered office address valid. If it changes, file the update.
• Keep director and PSC details accurate. Any change in directors, shareholders or persons with significant control needs filing.
• Complete ECCTA identity verification. Under the Economic Crime and Corporate Transparency Act, all directors and PSCs now need verified identity at Companies House. This applies even to dormant companies. Our free director ID verification checker shows who at your company still has to, and by when.
• Keep statutory registers up to date — registers of members, directors, PSCs.
• Watch for HMRC correspondence. If HMRC issues a notice to deliver a return (its letter asking for a Company Tax Return, form CT603), it has to be answered — DormantFile files the nil return. Open the post.

That is the lot. No bookkeeping. No VAT returns, once you have deregistered. No payroll. No Corporation Tax return, unless HMRC sends a notice. See our full guide to keeping a dormant company compliant without an accountant.

Mothballed, ready when you are

A dormant side-hustle Ltd costs you the £50 confirmation statement fee, plus DormantFile from £19 a year to file the dormant accounts. That is it. The company sits there quietly with its name, number and trading history intact, ready to switch back on the moment a freelance contract, consultancy opportunity or new venture makes the maths work again.

DormantFile files the dormant accounts at Companies House — including the figures left over from your trading years — and the nil CT600 at HMRC if you still need one. It also reminds you about the accounts and confirmation statement deadlines, shows which directors still have to verify their identity, and emails you if someone changes the company's directors, address, owners or name on the register. A flat £19/year, no per-filing charges, no upsells. See how it works and pricing.