Yes, you can deregister from VAT. You must cancel if you stop trading or stop making taxable supplies, and you may cancel voluntarily if your VAT-taxable turnover falls below the deregistration threshold of £88,000 over the next 12 months. You apply online or by form VAT7, and HMRC usually confirms within 40 working days.
The rest of this guide explains when you qualify, how the process works, and the tax sting in the tail most people forget: the final VAT return.
When Can I Deregister From VAT?
There are two routes, and they are not the same thing.
Compulsory deregistration, you must tell HMRC within 30 days if any of these happen:
- You stop trading or stop making VAT-taxable supplies.
- You sell the business (though the new owner may take over the registration).
- You join a VAT group, change legal structure, or the partnership or company is dissolved.
Voluntary deregistration, you can ask HMRC to cancel if you can show your taxable turnover over the next 12 months will be below £88,000. This is the deregistration threshold for the 2026/27 tax year. It sits £2,000 below the £90,000 registration threshold, so businesses hovering near the line aren't bounced in and out every year.
| Threshold (2026/27) | Amount |
|---|---|
| VAT registration threshold | £90,000 |
| VAT deregistration threshold | £88,000 |
| Records you must keep after cancelling | 6 years |
| HMRC confirmation time (typical) | 40 working days |
What Counts Toward the £88,000 Threshold?
It is your taxable turnover, standard, reduced and zero-rated sales, not your profit, and not exempt income such as certain insurance or financial services. If a one-off large sale pushed you over but your underlying trade is well below the line, you can still apply; you just need a credible reason the figure is genuine and not a temporary blip.
How Do I Deregister From VAT?
You have two practical options:
- Online, sign in to your VAT online account (Government Gateway) and request cancellation. This is the fastest route for most businesses.
- Form VAT7, download, complete and post it to HMRC if you can't apply online or your situation needs explaining.
You'll choose an effective date of cancellation. For voluntary deregistration this is usually the date you apply or an agreed future date, HMRC won't normally backdate it. From that date you stop charging VAT and stop reclaiming input VAT on purchases.
HMRC will write to confirm the cancellation, typically within 40 working days. Until you receive that confirmation, keep charging and accounting for VAT as normal.
For the official rules straight from the source, see HMRC's guidance on cancelling your VAT registration (VAT Notice 700/11).
The Final VAT Return, Don't Get Caught Out
This is where deregistration costs people money. After your cancellation date you must file one final VAT return covering the period up to and including that date.
On that final return you have to account for VAT on stock and assets you still own, if:
- You reclaimed VAT when you bought them, and
- The total VAT due on those assets is more than £1,000 (that is, standard-rated assets worth over £6,000 including VAT at 20%).
So if you're sitting on vans, tools, stock or equipment you claimed VAT back on, you may owe HMRC a sum on the way out. Factor this in before you pick a cancellation date, timing the deregistration after you've sold or run down stock can save real cash.
You must also keep all VAT records for 6 years after you've left the scheme.
Should I Deregister From VAT? Quick Decision Points
Deregistering can be the right call if:
- Your customers are mostly consumers or non-VAT-registered businesses, dropping VAT lets you cut prices or keep the 20% margin.
- Your turnover has genuinely and durably fallen below £88,000.
- Your input VAT (what you reclaim) is small, so you lose little by leaving.
Think twice if:
- You buy a lot of standard-rated stock or services, you'd lose the input VAT reclaim.
- Your clients are VAT-registered businesses who reclaim the VAT anyway and don't care about it.
- You're close to the threshold and likely to climb back over £90,000 soon, triggering re-registration.
If you're unsure which side of the line you fall, our VAT services team can model both scenarios on your actual numbers. You'll also find quick answers on our FAQ page.
Frequently Asked Questions
What is the VAT deregistration threshold for 2026?
For the 2026/27 tax year the deregistration threshold is £88,000 of taxable turnover. If you can show your VAT-taxable turnover over the next 12 months will fall below this, you can apply to HMRC to cancel your registration.
How long does VAT deregistration take?
HMRC normally confirms cancellation within 40 working days, though it can take longer in busy periods. Keep charging and accounting for VAT as usual until you get written confirmation of your effective cancellation date.
Do I have to pay VAT on my assets when I deregister?
Possibly. On your final VAT return you must account for VAT on stock and assets you still own if you reclaimed VAT when buying them and the VAT due is more than £1,000. If the total VAT due is £1,000 or less, no charge applies.
Can I deregister and then register again later?
Yes. If your turnover climbs back above the £90,000 registration threshold, you must register again. There's no penalty for re-registering, but the admin churn is a good reason to avoid deregistering if you're only just below the line.
Not sure whether leaving VAT helps or hurts your bottom line? We'll run the numbers on your real turnover, stock and client mix and give you a clear recommendation, plus handle the VAT7 and final return for you. Get in touch with Zmartly and we'll take it from here.
