VAT registration is a crucial milestone for many UK businesses, but there are circumstances where deregistration becomes necessary or beneficial. As of 2026/26, nearly 800,000 UK businesses are VAT-registered, yet some find that cancelling their VAT registration better suits their operational needs or circumstances. Understanding when and how to deregister from VAT with HMRC is essential to avoid penalties and ensure smooth financial management.
| VAT Deregistration Thresholds and Key Figures (2026/27) | |
|---|---|
| Mandatory VAT Deregistration Threshold | Taxable turnover below £83,000 over the past 12 months |
| Voluntary Deregistration Threshold | Taxable turnover below £83,000 or expected to fall below this level in the next 12 months |
| Standard VAT Rate | 20% |
| Reduced VAT Rate | 5% (e.g., home energy) |
| Zero VAT Rate | 0% (e.g., most food items, children’s clothing) |
| Deadline to Notify HMRC of Deregistration | Within 30 days of the intended deregistration date |
When to Deregister for VAT
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Use Free VAT Calculator →Deregistering from VAT is not as common as registering, but it’s sometimes necessary or advantageous. The primary reason businesses choose to deregister is when their taxable turnover falls below the deregistration threshold, currently set at £83,000. This means if your business turnover has dropped below this level over the past 12 months, or you expect it to do so in the next 12 months, you can voluntarily deregister.
There are also mandatory deregistration circumstances. For example, if you cease your business entirely, you must deregister within 30 days of stopping trading. Additionally, if your business sells only VAT-exempt goods or services, or you no longer make taxable supplies, deregistration may be required or beneficial.
On the other hand, sometimes businesses find deregistration advantageous even if their turnover remains above the threshold—perhaps to reduce administrative burdens or if most customers cannot reclaim VAT (such as if you mainly supply to consumers rather than VAT-registered businesses).
How to Deregister for VAT
You can deregister for VAT online through the HMRC VAT online services account or by submitting a VAT7 form. The process is generally straightforward but must be done correctly to ensure compliance.
HMRC requires you to notify them within 30 days of the date you want your deregistration to take effect. This date can be a past date if you’ve already stopped trading or made your last taxable supply.
Steps to Deregister for VAT
- Review your turnover to confirm eligibility for deregistration.
- Gather your VAT registration details, including your VAT number and business information.
- Log in to your HMRC online account and select the option to deregister for VAT.
- Complete the deregistration form, specifying your deregistration date.
- Submit the form and retain confirmation from HMRC.
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What Happens After Deregistration?
Once HMRC processes your deregistration, your business will no longer charge VAT on sales or reclaim VAT on purchases. You must keep VAT records for at least six years, as HMRC may audit your past VAT returns.
If you have stock or assets on which you reclaimed VAT, you might need to account for VAT on them as if you had sold them at market value on the deregistration date. This is known as a “deemed supply” and could result in a VAT payment to HMRC.
You should also inform your customers and suppliers about your VAT deregistration to avoid confusion.
Implications of VAT Deregistration
Deregistering for VAT affects your pricing, cash flow, and accounting obligations. Here are some key implications:
- Pricing Changes: You can no longer add VAT to your invoices, which may affect your competitiveness if your customers are VAT-registered businesses that can reclaim VAT.
- Cash Flow: You won’t be able to reclaim VAT on business purchases, potentially increasing your costs.
- Record Keeping: You still need to keep detailed records for at least six years, including invoices, receipts, and accounting records.
- Invoice Requirements: Your invoices should no longer show VAT amounts or VAT numbers once deregistered.
Special Cases and Exceptions
Certain situations require specific consideration when deregistering from VAT:
Deregistering if You Sell Your Business
If you sell your business as a going concern, you might not need to deregister immediately. The VAT treatment depends on the sale structure and whether the buyer will register for VAT. It’s advisable to consult with a tax advisor or HMRC directly in such cases.
Deregistering from the Flat Rate Scheme
If you are on the VAT Flat Rate Scheme and deregister, you must notify HMRC and stop using the scheme. After deregistration, normal VAT rules apply if you re-register later.
Partial Deregistration
VAT deregistration applies to your entire business, so partial deregistration is not an option. If you have multiple businesses or trading names, you must deregister the whole VAT registration.
Additional Resources and Related Articles
For more detailed guidance, visit the GOV.UK VAT deregistration page and the VAT section on GOV.UK. You may also find our Corporation Tax Guide and Sole Trader vs Limited Company articles helpful when considering your business structure and tax obligations.
- You can deregister for VAT if your turnover falls below £83,000 or if you stop trading.
- Notify HMRC within 30 days of your intended deregistration date using their online service or VAT7 form.
- Deregistration means you stop charging VAT and cannot reclaim VAT on purchases, affecting pricing and cash flow.
- Keep all VAT records for at least six years after deregistration.
- Special cases such as business sales or Flat Rate Scheme membership require tailored advice.
Can I deregister for VAT if my turnover is still above the threshold?
Yes, you can voluntarily deregister if your taxable turnover is below £83,000 or if you expect it to fall below this threshold in the next 12 months. However, if your turnover remains above the threshold, HMRC may reject your application unless you have a valid reason.
What happens if I don’t deregister when I should?
Failing to deregister when required can result in penalties and interest charges from HMRC. It may also cause complications with your VAT accounting and increase your risk of an HMRC audit. Always notify HMRC promptly if you meet deregistration criteria.
Do I need to pay VAT on my remaining stock when I deregister?
Yes, if you have stock or assets on which you previously reclaimed VAT, you may need to account for VAT on these goods at the point of deregistration. This is called a “deemed supply” and can result in a VAT payment to HMRC. Check HMRC guidance or speak to an accountant for specific advice.
Official Sources
* GOV.UK: Set up a business · * HMRC: Income Tax rates · * HMRC: Corporation Tax · * HMRC: VAT registration