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How do I deregister for VAT?

Lucy Cohen
Updated

You must deregister for VAT if you stop trading or stop making VAT taxable supplies. You can also apply to deregister if your taxable turnover falls below the deregistration threshold.

Deregistering means you will no longer:

  • Charge VAT on your sales

  • Submit VAT returns

  • Reclaim VAT on business purchases

HMRC guidance is available here:
https://www.gov.uk/deregister-for-vat

When must you deregister?

You must cancel your VAT registration within 30 days if:

  • You stop trading

  • You sell or close the business

  • You join a VAT group

  • You change your business structure and the original legal entity no longer exists

Failing to notify HMRC on time can result in penalties.

When can you deregister voluntarily?

You can apply to deregister if your VAT taxable turnover falls below the deregistration threshold.

The deregistration threshold is lower than the registration threshold and can change over time, so it is important to check the current limit on the HMRC website.

If HMRC agrees, they will confirm your deregistration date.

How to deregister

You can apply online through your VAT online account.

In some cases, such as insolvency or where the business has been sold, a paper form may be required.

You must continue to submit VAT returns and pay any VAT due until HMRC confirms your deregistration.

What happens on deregistration?

On your final VAT return, you may need to account for VAT on:

  • Stock and assets you still hold

  • Business equipment

  • Goods you have reclaimed VAT on but have not yet sold

You only need to account for VAT if the total VAT due on these assets is over £1,000.

This is often overlooked and can create an unexpected liability.

After deregistration

Once deregistered:

  • You must stop charging VAT from the effective date

  • You cannot reclaim VAT on future purchases

  • You should update invoices and pricing if necessary

You must keep VAT records for at least 6 years.

Important things to consider

Before deregistering, consider:

  • Whether your customers are VAT registered

  • Whether deregistration will affect your pricing

  • Whether you may go back over the threshold soon

If your turnover increases again and exceeds the VAT registration threshold, you must register again.

If you are unsure whether deregistering is right for your business, it is important to review the financial and tax impact before applying.

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