How to Deregister for VAT

Learn when and how to deregister for VAT, the pros and cons, how to cancel with HMRC, and what your responsibilities are after deregistration.

If your business is VAT-registered in the UK but no longer meets the requirements or no longer benefits from being registered, you may want – or need – to deregister. Whether it’s due to falling turnover, changes in business activity, or simply a shift in strategy, VAT deregistration can be a sensible step in some cases.

This article covers what VAT deregistration is, when you must cancel your registration, how to do it, the consequences, and what to expect afterwards.

What Is VAT Deregistration?

VAT deregistration is the process of removing your business from HMRC’s VAT register. Once deregistered, you’ll no longer charge VAT on your sales, submit VAT returns, or reclaim VAT on purchases.

It can be done voluntarily or mandatorily, depending on your business circumstances.

When Must You Cancel VAT Registration?

You are legally required to cancel your VAT registration if:

  • Your VAT-taxable turnover falls below the deregistration threshold (currently £88,000 in a 12-month period) and you stop trading

  • You stop making VAT-taxable supplies altogether

  • You sell or close your business

  • You join a VAT group or change your legal structure (e.g. from sole trader to limited company)

  • You are no longer eligible to be VAT registered for any reason

You must cancel your registration within 30 days of becoming ineligible. Failure to do so could result in penalties from HMRC.

Why Would a Business Deregister for VAT Voluntarily?

Even if you’re not required to deregister, you can apply to cancel your VAT registration voluntarily if your taxable turnover falls below £88,000 (as of 2024).

Reasons a business might voluntarily deregister include:

  • Falling turnover that makes VAT registration no longer worthwhile

  • Serving mainly VAT-exempt customers who can’t reclaim VAT

  • Administrative burden and cost of filing VAT returns

  • No longer benefiting from VAT reclaims on purchases

  • Simplifying accounting and cash flow

Advantages and Disadvantages of VAT Deregistration

Advantages

  • No need to charge or account for VAT on sales

  • Reduced paperwork and admin (no VAT returns)

  • Cash flow improvement for businesses selling to non-VAT registered customers

  • Simpler bookkeeping

Disadvantages

  • You can’t reclaim VAT on purchases or expenses

  • If you plan to grow turnover, you’ll need to re-register later

  • Some suppliers or clients may see you as less established

  • You may need to repay VAT on stock or assets held at the time of deregistration

It’s important to assess the impact on your customers and suppliers before deciding.

How to Cancel Your VAT Registration

You can cancel your VAT registration either online through your Government Gateway account or by filling in and posting VAT7 – Application to Cancel VAT Registration.

To cancel online:

  1. Sign in to your HMRC VAT account

  2. Go to ‘Cancel VAT registration’

  3. Provide the reason and the cancellation date

  4. Submit the request

HMRC will usually confirm your cancellation within 3 weeks. If approved, they’ll send you a letter with:

  • Your official cancellation date

  • Instructions on your final VAT return

You must keep VAT records for at least six years after deregistration.

Your Responsibilities After VAT Deregistration

After deregistering, you must:

  • Submit a final VAT return to HMRC

  • Account for VAT on any assets or stock you hold if their VAT value is over £1,000 in total

  • Stop charging VAT from the date of cancellation

  • Update your invoices and accounting systems to remove VAT references

  • Keep all VAT records in case HMRC requests them

You are still required to keep evidence of your VAT transactions made while you were registered.

Can I Re-register for VAT Later?

Yes. If your circumstances change and your taxable turnover exceeds the VAT registration threshold (£90,000 as of 2024), or you wish to reclaim VAT again, you can reapply online for VAT registration at any time.

You’ll receive a new VAT number unless you request to retain your previous one (which is sometimes possible in certain business transfers).

Can I Transfer My VAT Registration?

If you sell or transfer your business to someone else, you may be able to transfer your VAT number to them. This avoids having to cancel and reapply.

To do this:

  • Complete form VAT68

  • Both parties must agree

  • Notify HMRC within 30 days of the transfer

Transferring the VAT registration is only possible if the business continues as a going concern.

Final Thoughts

VAT deregistration can save time and money if your business no longer benefits from being VAT registered. Whether it’s due to a drop in turnover or a change in your customer base, the process is relatively straightforward – but it comes with some key responsibilities.

Make sure you understand what you’re giving up, how it affects your pricing and tax position, and whether you may need to re-register later. If in doubt, speak to an accountant or tax adviser to help you make the right call.