VAT Deregistration: When and How to Leave the VAT Register

When Can You Deregister?

You can apply to deregister for VAT if:

1. Your taxable turnover falls below the deregistration threshold — currently £88,000 for 2025/26. You must expect it to stay below this level.
2. You stop making taxable supplies — you've closed your business or stopped trading.
3. You no longer make taxable supplies — your business now only makes exempt supplies.

Voluntary Deregistration (Below the Threshold)

If your taxable turnover has fallen below £88,000 and you expect it to remain below this level, you can apply to cancel your VAT registration. This is voluntary — you don't have to deregister just because your turnover has dropped.

Reasons to Deregister

• Competitive pricing: Without VAT, your prices drop by up to 20% for non-VAT-registered customers (consumers and small businesses).
• Less administration: No more quarterly VAT returns, VAT invoices, or MTD requirements.
• Cash flow: You no longer need to collect and remit VAT to HMRC.

Reasons to Stay Registered

• Input VAT recovery: You can continue reclaiming VAT on business purchases.
• Business credibility: Some larger clients expect suppliers to be VAT-registered.
• Turnover expectations: If your turnover might recover above the threshold, deregistering and re-registering creates unnecessary work.

Compulsory Deregistration

You must deregister if you stop making taxable supplies entirely — typically because you're closing your business.

How to Deregister

Online

1. Sign in to your Government Gateway account
2. Go to your VAT account
3. Select "Cancel VAT registration"
4. Complete the form with your reason for cancelling and the effective date
5. Submit

By Post

Complete form VAT7 and send it to HMRC.

Through an Agent

Your accountant can deregister you on your behalf.

The Final VAT Return

When you deregister, you must submit a final VAT return covering the period up to your deregistration date. This return must include:

VAT on Stock and Assets

Here's the part many people forget: when you deregister, you must account for output VAT on any stock and business assets you hold on the deregistration date — if the VAT-exclusive value of these items exceeds £1,000.

Example: You hold stock worth £3,000 (excluding VAT) and equipment worth £5,000 on your deregistration date. Total value: £8,000. You must account for VAT on this: £8,000 x 20% = £1,600 payable to HMRC.

If the total value is £1,000 or less, no VAT is due on stock and assets.

This catches many businesses by surprise. If you have significant stock or recently purchased equipment, the final VAT bill can be substantial.

Timing Your Deregistration

You can request a specific deregistration date. HMRC will usually agree to a date up to three months ahead or backdate to when you stopped trading (if applicable).

Consider timing carefully:

• End of a VAT quarter: Simplifies your final return
• After major purchases: If you're planning a big purchase with VAT, make it before deregistering so you can reclaim the input VAT
• Before the stock/asset charge becomes large: If you're building stock, deregistering before stock levels peak reduces the final VAT charge

After Deregistration

Once deregistered:

• Stop charging VAT on your invoices immediately from the deregistration date
• You can no longer reclaim input VAT on purchases
• Keep your VAT records for at least 6 years
• You must re-register if your turnover exceeds £90,000 again in the future

With Accounted, Penny helps you track your turnover and advises whether deregistration makes financial sense for your specific situation.

Make informed decisions about your VAT status. Start your free trial with Accounted today.