You can cancel your VAT registration online through your business tax account, or by post on form VAT7. HMRC usually confirm within 40 working days.
The application is the easy part. What catches people out is the bill that comes with it — because on the day your registration ends, you may have to pay VAT on the stock and equipment still sitting in your business. That is the deemed supply charge, and it is the most expensive thing about deregistering.
Here is when you must cancel, when you can choose to, and what happens afterwards.
When you must cancel
Deregistration is compulsory if you stop being eligible to be registered. That means:
- you stop making taxable supplies, or stop intending to
- you sell the business
- your legal status changes — sole trader to limited company, for example
- you join a VAT group
- your VAT group disbands
- you join the Agricultural Flat Rate Scheme
You must cancel within 30 days of ceasing to be eligible, or you may be charged a penalty. That window is easy to miss when a business winds down gradually.
Two situations look like deregistration but are not. If you are changing legal status or selling the business and the same VAT number is being kept, that is a transfer on form VAT68. If you are joining, leaving or amending a VAT group, that is form VAT50-51.
When you can choose to cancel
Voluntary deregistration is available if you satisfy HMRC that your taxable turnover in the next 12 months will not exceed the deregistration threshold of £88,000.
The threshold has been £88,000 since 1 April 2024, when it rose from £83,000. It sits deliberately below the £90,000 registration threshold so businesses trading around that level are not constantly registering and deregistering.
Three points trip people up:
You calculate on a VAT-exclusive basis. HMRC warn that if you cannot show you will stop charging VAT — or, if you are a retailer, that you will cut prices by the VAT element — they add VAT back to your figure and refuse the application, because the result exceeds the limit.
You need a reason. “My turnover will fall” is not enough. HMRC expect an explanation: reduced opening hours, a lost contract, a closed division, a changed business model.
A temporary pause does not count. HMRC will not allow deregistration where the reduction comes from an intention to stop trading or suspend taxable supplies for 30 days or more in the next 12 months.
A separate route exists for businesses whose supplies are wholly or mainly zero-rated, even above the registration threshold — though if you make any standard-rated supplies you qualify only where your input tax normally exceeds your output tax. That application goes in writing to HMRC’s VAT Registration Service.
Should you deregister?
Falling below £88,000 does not mean you should cancel.
| Deregistering usually helps | Deregistering usually hurts |
|---|---|
| Your customers are consumers | Your customers are VAT-registered businesses |
| You are consistently in a payment position | You are consistently in a repayment position |
| Your input VAT is small | You have significant standard-rated costs |
| You want to price against unregistered rivals | You make zero-rated supplies |
| Little stock and few assets on hand | Stock on which you claimed VAT |
Run the deemed supply calculation before you apply. It is the difference between a clean exit and an unexpected five-figure liability.
How to cancel
Cancel online through your VAT online account if you have stopped trading and are not part of a VAT group, your taxable turnover is below £88,000, you have stopped making taxable supplies, or you are applying for exemption because most or all of what you sell is zero-rated.
Cancel by post on form VAT7 if you cannot use the online route — where your legal status has changed and you want a new VAT number, where you have sold the business and the new owner is not keeping the number, where your VAT group is disbanding, or where the business stopped trading after liquidation. VAT7 must be completed in full before you can print it; you cannot save a part-finished form.
The date your registration ends
You cannot backdate a cancellation. For a voluntary deregistration the end date is either the date HMRC receives your application or a later date you agree with them. Nothing earlier. Where cancellation is compulsory, the date is fixed by the event — when you ceased making taxable supplies, sold the business, or changed legal status.
Keep charging and accounting for VAT until HMRC confirms. Stopping early, assuming approval, leaves you with output tax you have not collected. HMRC send a formal notice with the official cancellation date, usually within 40 working days.
The deemed supply charge on stock and assets
This is the part that costs money. When your registration ends you are treated as making a deemed supply of the business goods you still hold, and you account for VAT on them on your final return.
The de minimis: no VAT is due if the total VAT on those assets would be £1,000 or less. Where they are all standard-rated at 20%, that means a total VAT-inclusive value of £6,000 or less.
It is a cliff edge, not an allowance. If the total gross value comes to more than £6,000, you account for VAT on all of the goods — not just the excess.
| Include | Exclude |
|---|---|
| Unsold stock | Anything you did not claim VAT on when you bought it |
| Plant, machinery and tooling | Cars, unless a taxi, self-drive hire or driving school car on which input tax was claimed |
| Furniture and computers | Goods bought under a VAT margin scheme |
| Commercial vehicles | Goods used wholly for business entertainment |
| Land you have opted to tax | Goods bought from unregistered businesses or individuals |
| Goods received VAT-free in a going concern transfer | Goods directly attributed to an exempt business activity, unless some input tax was reclaimable under the partial exemption rules |
| Land or buildings obtained free of VAT, even where you used them to make standard-rated supplies | |
| Intangibles — patents, copyrights, goodwill |
Value the goods at what you would expect to pay for them, or for similar goods, in their present condition. Second-hand value, not original cost.
Two exemptions. Transfer the business as a going concern to someone who is VAT registered and you do not charge VAT on the assets. Deregister to join the Agricultural Flat Rate Scheme and no VAT is due on business assets at all.
Your final VAT return
You must submit a final VAT return covering the period up to and including your cancellation date. It can be a very short period — sometimes a single day.
- Include the deemed supply on stock and assets, if it exceeds the de minimis
- File by the due date, which HMRC will tell you or you can check in your VAT online account
- File a nil return if nothing is due — silence is not an option
- Do not wait for outstanding purchase invoices. Submit on time and reclaim afterwards
One helpful quirk: late submission penalty points do not apply to your final return after cancelling, just as they do not apply to your first return after registering. Late payment interest still does, so this is not a reason to be casual.
Reclaiming after cancellation happens on a separate form, not a return. You can recover VAT on supplies received while registered and not already claimed, and on some services received afterwards that relate to your taxable business — a solicitor’s or accountant’s bill for winding up, for instance. You cannot claim VAT charged more than 4 years ago.
What survives deregistration
Cancelling your registration does not end your VAT obligations.
Keep all your VAT records for 6 years, including HMRC’s cancellation notice, which becomes part of those records. Keep a list of every business asset on hand at the cancellation date and the value of each — even the ones no VAT was due on. HMRC require that specifically.
Stop charging VAT immediately from the cancellation date. Do not issue VAT invoices, or any invoice showing your old VAT number. If customers self-bill you, tell them at once. There is a financial penalty for issuing a VAT invoice after cancellation.
An option to tax on property survives cancellation, and you must keep monitoring that income against the £90,000 registration threshold. HMRC can also re-register you if they conclude you should not have cancelled — and if your turnover recovers, the obligation to notify them is yours.
Frequently asked questions
What is the VAT deregistration threshold?
£88,000 of taxable turnover. You can ask HMRC to cancel your registration if you can satisfy them your taxable turnover in the next 12 months will not exceed that figure. It has been £88,000 since 1 April 2024.
Can I backdate my VAT deregistration?
No. Cancellation runs from the date HMRC receives your application or a later date you agree with them. Where deregistration is compulsory, it runs from the date of the event that triggered it. Retrospective cancellation on turnover grounds is not available.
Do I have to pay VAT on my stock when I deregister?
Only if the total VAT due on your stock and assets on hand exceeds £1,000 — roughly £6,000 of VAT-inclusive value at the standard rate. Above that, you account for VAT on all of the goods, not just the amount over the limit.
How long does VAT deregistration take?
HMRC usually confirm within 40 working days, though it can take longer at busy times. Keep charging and accounting for VAT until you receive the formal notice confirming your cancellation date.
How long do I have to keep VAT records after deregistering?
6 years. That includes HMRC’s cancellation notice and a list of every business asset you held on the cancellation date with its value, even for assets no VAT was due on.
Getting the final return right
The final return is the one nobody has practice at. It covers an odd period, carries the deemed supply calculation, and errors on it surface later, when the records are harder to reconstruct.
SmartFiling handles MTD VAT filing for a fixed fee, including final returns on deregistration, working from Xero, QuickBooks or FreeAgent. Every return is reviewed by an ICAEW Chartered Accountant before it goes to HMRC.
