You can cancel your VAT registration when your taxable turnover falls below £88,000 — or you must cancel within 30 days if you stop trading or stop making taxable supplies. You apply online through your HMRC VAT account or send form VAT7 by post. Keep charging VAT until HMRC confirms your deregistration, then submit a final VAT return.
New to the whole process? Read our complete guide to VAT registration in the UK first — it covers the £90,000 threshold, current rates and the step-by-step application.
When you must cancel your VAT registration
Some deregistrations are not a choice. Under HMRC’s rules (VAT Notice 700/11), you must cancel your registration if:
- You stop trading entirely
- You stop making taxable supplies — for example, you switch to selling only VAT-exempt goods or services
- You sell the business and the buyer isn’t taking on your VAT number
- You change legal status — for example, from sole trader to limited company — without keeping the number
- You disband your VAT group, or you join an existing VAT group
- You join the Agricultural Flat Rate Scheme
If you stop being eligible, you must tell HMRC and cancel within 30 days of the change. Miss that deadline and HMRC may charge you a penalty. Your registration is cancelled from the date you apply, or a later date you agree with HMRC.
When you can choose to cancel (voluntary deregistration)
If you’re still trading but turnover has slipped, deregistration is voluntary — HMRC won’t chase you for staying registered. You can ask HMRC to cancel your registration if your taxable turnover in the next 12 months will stay below the £88,000 VAT deregistration threshold.
HMRC won’t just take your word for it. You’ll need to explain why turnover is falling — for example, you’ve lost contracts, cut your opening hours, or changed what you sell — and say what you expect turnover to be over the following 12 months. Work your figures out on a VAT-exclusive basis.
One trap to know: if you’re a retailer, HMRC may only agree if you’re going to reduce your prices by the VAT element. That’s because once VAT is added back onto your VAT-exclusive figure, your turnover would sit above the threshold again — and in that case HMRC will simply refuse the request.
Also note: if you originally registered voluntarily, HMRC normally expects you to stay registered for at least 2 calendar years, unless your entitlement to be registered has ceased (for example, you’ve stopped trading).
The two VAT thresholds at a glance
The registration threshold and the deregistration threshold are deliberately different — the £2,000 gap stops businesses registering and deregistering every few months as turnover wobbles. Here are the figures that matter in 2026:
| Situation | Threshold | What it means |
|---|---|---|
| Must register for VAT | £90,000 | Taxable turnover over £90,000 in any rolling 12 months (or expected in the next 30 days) |
| Can cancel VAT registration | £88,000 | Turnover expected to stay below £88,000 in the next 12 months — apply to HMRC |
| Must cancel VAT registration | N/A | You stop trading or stop being eligible — notify HMRC within 30 days |
When you should NOT cancel your VAT registration
Just because you can deregister doesn’t mean you should. Run through this checklist first:
- You still reclaim a lot of input VAT. If your customers are mostly VAT-registered businesses (who can reclaim the VAT you charge them) and you buy lots of VAT-able stock or equipment, staying registered often leaves you better off — deregistration means you can no longer reclaim VAT on your purchases.
- Your turnover might bounce back. Re-registering a few months later is more paperwork than staying put, and HMRC charges penalties for late registration if you miss the threshold the second time.
- You registered voluntarily less than 2 years ago. HMRC normally expects you to stay registered for two calendar years.
- Clients expect a VAT number. Some larger customers prefer dealing with VAT-registered suppliers — rightly or wrongly, it signals an established business.
How to cancel VAT registration: step by step
You have two routes. Most straightforward cases can cancel online; some need the paper form.
Option 1: Cancel online (most businesses)
- Sign in to your Government Gateway account and open your VAT online account.
- Choose the option to cancel your VAT registration.
- Give HMRC the reason for deregistration, the date you stopped (or expect to stop) being eligible, and an estimate of the stock and assets you hold.
- Submit and wait for HMRC’s confirmation letter with your official cancellation date.
Your accountant or agent can do this for you, but you stay responsible for the accuracy of the information.
Option 2: Cancel by post with form VAT7
Fill in form VAT7 (available from GOV.UK) and post it to HMRC at the address shown on the form. Note that you must complete the form online before printing it — there’s no option to save a part-finished form, so have your VAT number, business details and reason for deregistration to hand first.
Use the post route — not the online one — if you’re changing legal status and want a fresh VAT number, selling the business without transferring the number, disbanding a VAT group, or closing after liquidation. If you’re selling the business and the buyer is keeping your VAT number, don’t cancel at all — transfer the registration with form VAT68 instead.
What happens after you deregister
Deregistration doesn’t end your VAT obligations immediately. Work through this list:
- Keep charging VAT until HMRC confirms. HMRC usually confirms within around 40 working days. Your official cancellation date is the date on the confirmation — charge VAT on everything up to that date.
- Submit a final VAT return. This covers all transactions up to and including your cancellation date, and it’s due within one month of deregistration (two months if you’re on the Cash Accounting Scheme).
- Account for VAT on stock and assets. On your final return you must pay back VAT on stock and business assets you still hold if the total VAT due is over £1,000 — HMRC treats these as if you’d sold them at market value (a “deemed supply”).
- Remove your VAT number from invoices, your website, letterheads and marketing materials from the cancellation date.
- Keep your VAT records for at least six years — invoices, returns, payment confirmations and HMRC correspondence.
- Tell HMRC promptly if you become liable to register again. Penalties apply for registering late, and if HMRC finds you wrongly deregistered, it will re-register you and the VAT due from the re-registration date is still payable.
Worked example: the stock-and-assets bill
Say you deregister holding £8,000 of stock on which you reclaimed £1,600 of VAT when you bought it. Because the VAT due (£1,600) is over the £1,000 limit, you must add that £1,600 to your final VAT return and pay it to HMRC. This is the step most business owners overlook — list every asset and check the VAT position before you apply.
VAT deregistration FAQs
Can HMRC refuse my voluntary deregistration request?
Yes. HMRC will refuse if it’s not satisfied you’ll stop charging VAT — or, if you’re a retailer, that you’ll reduce your prices by the VAT element. Once VAT is added back to your VAT-exclusive figure, your turnover would exceed the threshold, and that’s grounds for refusal.
How long does VAT deregistration take?
HMRC usually confirms within around 40 working days of your application, and it can take longer at busy periods. Keep charging VAT until the confirmation arrives with your official cancellation date.
Can I re-register for VAT after deregistering?
Yes — HMRC treats it as a fresh registration. If your turnover climbs back over the £90,000 threshold, or you expect it to, tell HMRC promptly: there are penalties for failing to register at the proper time.
Do I have to deregister the moment turnover drops below £88,000?
No. A dip below £88,000 only opens the voluntary route — it’s your choice whether to apply. Deregistration becomes compulsory only when you stop trading or otherwise stop being eligible, and then the 30-day clock applies.
Conclusion
Cancelling your VAT registration is straightforward once you know which route you’re on: compulsory within 30 days when you stop being eligible, or voluntary when turnover will stay under the £88,000 VAT deregistration threshold. Before you apply, weigh the lost input-VAT reclaims against the admin you save, list your stock and assets for the £1,000 rule, and keep charging VAT until HMRC’s confirmation arrives. If your figures are climbing again instead of falling, make sure you’re on the right side of the registration threshold — and check GOV.UK’s VAT Notice 700/11 for the official cancellation rules in full.
