How to Deregister for VAT: A Step-by-Step Guide

You can deregister for VAT once your taxable turnover drops below £88,000, or if your business is closing, being sold, or no longer trading in VAT-taxable goods and services. Some situations make deregistration compulsory rather than optional, and missing that distinction can bring a penalty.

Key Takeaways

• You can voluntarily deregister once your taxable turnover is reliably below £88,000, and expected to stay there.
• Deregistration becomes compulsory if your business stops trading, is sold, joins a VAT group, or changes legal structure, and you have 30 days to act.
• You'll file a final VAT return within one month of your deregistration date, and account for VAT on any remaining stock or assets worth over £1,000.
• You must keep VAT records for six years after deregistering, in case HMRC reviews your past transactions.
• You can register for VAT again later if your circumstances change, deregistering isn't a permanent decision.

Why Would I Deregister for VAT?

A few common reasons come up. Your turnover may have genuinely dropped below the £88,000 threshold, whether from fewer clients, reduced hours, or a change in what you sell. Your business might be closing, being sold, or no longer trading in VAT-taxable goods and services at all. Or you might simply find the ongoing VAT admin isn't worth it if your turnover consistently sits below the threshold, since you can always register again later if things change.

When Do I Have to Deregister, and When Is It My Choice?

Compulsory deregistration applies if your business stops trading entirely, is sold or taken over, joins a VAT group that reports on your behalf, or changes legal structure, from a sole trader to a limited company, for example. You must cancel your registration within 30 days of any of these happening, or you risk a penalty.

Voluntary deregistration applies if your taxable turnover has genuinely fallen below £88,000 and you can show HMRC it's likely to stay there for the next 12 months. Reduced trading hours, lost clients, lower prices, or a drop in demand are all common reasons this happens.

How Do I Actually Deregister for VAT?

Step 1: Gather your details. You'll need your VAT registration number, your business's full official name, a contact number, your trading address, your reason for deregistering, and the date you want VAT activities to stop.

Step 2: Submit your request. The quickest route is online through your Government Gateway account: log in, select "deregister for VAT," and follow the prompts. If you can't do this online, you can apply by post using the VAT7 form, or ask an accountant to handle it on your behalf.

Step 3: File your final VAT return. This covers the period up to your deregistration date, and is due within one month of that date. You don't need to wait for every outstanding invoice first, you can still reclaim VAT on them as they come in, provided the charge falls within the past four years.

Step 4: Account for remaining stock and assets. If you reclaimed VAT (or could have) on stock or business assets you still hold, and their total value is over £1,000, you'll need to account for this in your final return.

Step 5: Keep your VAT records. Hold onto your VAT records, including any correspondence from HMRC, for six years after deregistering, in case of a future review or audit.

Can I Register for VAT Again Later?

Yes. Deregistering isn't permanent, and you can register again whenever your circumstances change, whether that's turnover climbing back up or a new venture that needs it. If your VAT position feels complicated, it's worth checking with an accountant before you start the process, particularly if you're deregistering due to a business restructure rather than a simple turnover drop. Our VAT registration assistance can help whenever you're ready to register again.

FAQs

What's the VAT deregistration threshold?

£88,000. You can voluntarily deregister once your taxable turnover is reliably below this figure and likely to remain so.

How quickly do I need to deregister if my business closes?

Within 30 days of becoming ineligible for VAT registration, whether that's from closing, being sold, or a change in legal structure.

When is my final VAT return due?

Within one month of your chosen deregistration date.

Do I need to account for stock I still hold after deregistering?

Yes, if you reclaimed VAT on it and its total value is over £1,000.

How long do I need to keep VAT records after deregistering?

Six years, including any correspondence from HMRC.

Can I register for VAT again after deregistering?

Yes, at any point your circumstances change. Deregistration doesn't stop you from registering again later.

This article is for general information only and does not constitute tax advice. VAT thresholds and processes can change, so it's worth checking current guidance on GOV.UK or speaking to a qualified accountant.