You can ask HMRC to cancel your VAT registration once you can show that your taxable turnover for the next 12 months will not exceed £88,000, and you must cancel it if the company stops making taxable supplies altogether. The application itself is straightforward — a form in your VAT account and a final return. What is not straightforward, and what turns a tidy decision into an unexpected bill, is the last step: on the day your registration ends you may have to account for VAT on the stock and assets still in the business that you reclaimed VAT on when you bought them. There is a let-out — nothing is due if the total VAT on those assets would be £1,000 or less — but above that, HMRC treats them as though you had sold them to yourself. A van, a workshop full of tools or a stockroom can quietly clear that threshold.
Thresholds and rules below are from gov.uk and VAT Notice 700/11, verified on 13 August 2026. Deregistration cannot be backdated, so the timing decision is worth getting right first time.
What is the VAT deregistration threshold?
£88,000. It sits just under the £90,000 registration threshold, and both have applied since 1 April 2024.
The gap between the two figures is deliberate. It stops a business whose turnover hovers around the line from having to register and deregister every year. Crossing £90,000 obliges you to register; you only get to leave once you fall back below £88,000.
The test is forward-looking. You are not asking HMRC to confirm that last year was quiet — you are satisfying them that your taxable turnover in the next 12 months will not exceed the cancellation limit. That means having a reason: a contract ended, a service line closed, a partner left. "Trade has been slow" is a statement about the past.
When is deregistration compulsory?
You must cancel your registration if the company:
stops making taxable supplies, or stops intending to make them;
ceases trading altogether, or is sold as a going concern;
joins a VAT group, or changes legal entity — for example, a sole trader incorporating.
These are not optional, and they are not the same as the turnover route. A company that has stopped trading but has not deregistered is still expected to file returns, and nil returns that never get filed become penalties. If you are winding the company down, deregistration belongs in the same checklist as the rest of the process — see how to close a limited company.
Note the record-keeping obligation that sits alongside it: if you do not tell HMRC about changes affecting your registration details within 30 days, you may be charged a penalty.
Apply online through your VAT online account, or by post on form VAT7 if you cannot use the online route.
Give the date you want to be deregistered from. It must be a current or future date. HMRC will not backdate it — the notice is explicit that you cannot cancel your registration from a retrospective date. This is the single most common reason an application has to be redone.
Wait for confirmation. HMRC confirms the cancellation and the official deregistration date.
Keep charging and reclaiming VAT as normal until that date arrives. Your registration is live until HMRC says it is not.
File a final VAT return covering the period up to and including the deregistration date.
The final return is where the stock charge appears, so it is worth knowing what is going on that return before you pick the date.
What VAT do you pay on stock and assets?
On your final return you account for VAT on business assets still on hand at the deregistration date, where you were entitled to reclaim VAT when you bought them.
The exemption is the number to check first:
Position at deregistration
VAT due
Total VAT on assets on hand is £1,000 or less
None
Total VAT on assets on hand is more than £1,000
Due on all of it
Where everything is standard-rated at 20%, £1,000 of VAT corresponds to a gross, VAT-inclusive value of £6,000. That is the practical line: if what you are holding is worth more than about £6,000 including VAT, expect a charge.
What counts as assets on hand is broader than "stock". It includes unsold trading stock, plant, equipment, tools, vehicles, computers and interests in land, provided you reclaimed the VAT when you bought them. It excludes anything you bought without reclaiming VAT — a second-hand van from a non-registered seller, for instance.
Two consequences follow. First, the £1,000 test is on the total, not per item, so a modest amount of stock plus one vehicle can cross it when neither would alone. Second, because the charge lands on the value at deregistration, the date you choose changes the bill.
Falling below £88,000 gives you the option, not an instruction. Staying registered can still be the better answer when:
your customers are VAT-registered businesses. They reclaim the VAT you charge, so it costs them nothing, and your prices do not change in real terms. Deregistering saves them nothing and costs you your input VAT.
you are about to make a significant purchase. Equipment, a vehicle or a fit-out are exactly the costs where reclaiming VAT is worth most. Deregistering the month before is an expensive way to simplify your paperwork.
you would trigger the stock charge. If the final return is going to produce a bill, weigh it against however many quarters of input VAT you would have kept.
your turnover is likely to recover. Re-registering later is not penalised, but it is administration twice over.
The clearest case for deregistering is a business selling mainly to consumers, where the VAT you charge is a real 20% on your price and coming off the register lets you cut prices or keep the margin. That is a pricing decision as much as a tax one, and it belongs next to the rest of your running costs — see what it costs to run a limited company.
If instead your turnover is holding up and it is the paperwork you want to reduce, the VAT Flat Rate Scheme is the other option — though for most service companies the limited cost rules have taken the value out of it. Either way, check the position against when a limited company has to register for VAT before you act, because coming off the register does not stop the £90,000 threshold applying again if trade picks up.
How do I deregister for VAT with HMRC?
Apply through your VAT online account, or on form VAT7 by post, giving a current or future deregistration date. HMRC confirms the date, you keep accounting for VAT until it arrives, and you then file a final return covering the period up to and including that date.
What is the VAT deregistration threshold?
£88,000. You can apply to cancel once you can satisfy HMRC that your taxable turnover in the next 12 months will not exceed that figure. The registration threshold is £90,000, and both have applied since 1 April 2024.
Can I deregister for VAT retrospectively?
No. VAT Notice 700/11 states you cannot cancel your registration from a retrospective date. You must give a current or future date, which is why the timing decision has to be made before you apply rather than after.
Do I pay VAT on stock when I deregister?
You account for VAT on business assets still on hand if you reclaimed VAT when you bought them — unless the total VAT on those assets would be £1,000 or less, in which case nothing is due. At the standard rate that limit corresponds to roughly £6,000 of VAT-inclusive value.
Is it worth deregistering for VAT?
It usually is if you sell mainly to consumers, because the VAT you charge is a real cost to them. It usually is not if your customers are VAT-registered businesses that reclaim it, or if you are about to buy equipment you would rather reclaim VAT on.
You can ask HMRC to cancel your VAT registration once you can show that your taxable turnover for the next 12 months will not exceed £88,000, and you must cancel it if the company stops making taxable supplies altogether. The application itself is straightforward — a form in your VAT account and a final return. What is not straightforward, and what turns a tidy decision into an unexpected bill, is the last step: on the day your registration ends you may have to account for VAT on the stock and assets still in the business that you reclaimed VAT on when you bought them. There is a let-out — nothing is due if the total VAT on those assets would be £1,000 or less — but above that, HMRC treats them as though you had sold them to yourself. A van, a workshop full of tools or a stockroom can quietly clear that threshold.
Thresholds and rules below are from gov.uk and VAT Notice 700/11, verified on 13 August 2026. Deregistration cannot be backdated, so the timing decision is worth getting right first time.
What is the VAT deregistration threshold?
£88,000. It sits just under the £90,000 registration threshold, and both have applied since 1 April 2024.
The gap between the two figures is deliberate. It stops a business whose turnover hovers around the line from having to register and deregister every year. Crossing £90,000 obliges you to register; you only get to leave once you fall back below £88,000.
The test is forward-looking. You are not asking HMRC to confirm that last year was quiet — you are satisfying them that your taxable turnover in the next 12 months will not exceed the cancellation limit. That means having a reason: a contract ended, a service line closed, a partner left. "Trade has been slow" is a statement about the past.
When is deregistration compulsory?
You must cancel your registration if the company:
stops making taxable supplies, or stops intending to make them;
ceases trading altogether, or is sold as a going concern;
joins a VAT group, or changes legal entity — for example, a sole trader incorporating.
These are not optional, and they are not the same as the turnover route. A company that has stopped trading but has not deregistered is still expected to file returns, and nil returns that never get filed become penalties. If you are winding the company down, deregistration belongs in the same checklist as the rest of the process — see how to close a limited company.
Note the record-keeping obligation that sits alongside it: if you do not tell HMRC about changes affecting your registration details within 30 days, you may be charged a penalty.
Apply online through your VAT online account, or by post on form VAT7 if you cannot use the online route.
Give the date you want to be deregistered from. It must be a current or future date. HMRC will not backdate it — the notice is explicit that you cannot cancel your registration from a retrospective date. This is the single most common reason an application has to be redone.
Wait for confirmation. HMRC confirms the cancellation and the official deregistration date.
Keep charging and reclaiming VAT as normal until that date arrives. Your registration is live until HMRC says it is not.
File a final VAT return covering the period up to and including the deregistration date.
The final return is where the stock charge appears, so it is worth knowing what is going on that return before you pick the date.
What VAT do you pay on stock and assets?
On your final return you account for VAT on business assets still on hand at the deregistration date, where you were entitled to reclaim VAT when you bought them.
The exemption is the number to check first:
Position at deregistration
VAT due
Total VAT on assets on hand is £1,000 or less
None
Total VAT on assets on hand is more than £1,000
Due on all of it
Where everything is standard-rated at 20%, £1,000 of VAT corresponds to a gross, VAT-inclusive value of £6,000. That is the practical line: if what you are holding is worth more than about £6,000 including VAT, expect a charge.
What counts as assets on hand is broader than "stock". It includes unsold trading stock, plant, equipment, tools, vehicles, computers and interests in land, provided you reclaimed the VAT when you bought them. It excludes anything you bought without reclaiming VAT — a second-hand van from a non-registered seller, for instance.
Two consequences follow. First, the £1,000 test is on the total, not per item, so a modest amount of stock plus one vehicle can cross it when neither would alone. Second, because the charge lands on the value at deregistration, the date you choose changes the bill.
Falling below £88,000 gives you the option, not an instruction. Staying registered can still be the better answer when:
your customers are VAT-registered businesses. They reclaim the VAT you charge, so it costs them nothing, and your prices do not change in real terms. Deregistering saves them nothing and costs you your input VAT.
you are about to make a significant purchase. Equipment, a vehicle or a fit-out are exactly the costs where reclaiming VAT is worth most. Deregistering the month before is an expensive way to simplify your paperwork.
you would trigger the stock charge. If the final return is going to produce a bill, weigh it against however many quarters of input VAT you would have kept.
your turnover is likely to recover. Re-registering later is not penalised, but it is administration twice over.
The clearest case for deregistering is a business selling mainly to consumers, where the VAT you charge is a real 20% on your price and coming off the register lets you cut prices or keep the margin. That is a pricing decision as much as a tax one, and it belongs next to the rest of your running costs — see what it costs to run a limited company.
If instead your turnover is holding up and it is the paperwork you want to reduce, the VAT Flat Rate Scheme is the other option — though for most service companies the limited cost rules have taken the value out of it. Either way, check the position against when a limited company has to register for VAT before you act, because coming off the register does not stop the £90,000 threshold applying again if trade picks up.
How do I deregister for VAT with HMRC?
Apply through your VAT online account, or on form VAT7 by post, giving a current or future deregistration date. HMRC confirms the date, you keep accounting for VAT until it arrives, and you then file a final return covering the period up to and including that date.
What is the VAT deregistration threshold?
£88,000. You can apply to cancel once you can satisfy HMRC that your taxable turnover in the next 12 months will not exceed that figure. The registration threshold is £90,000, and both have applied since 1 April 2024.
Can I deregister for VAT retrospectively?
No. VAT Notice 700/11 states you cannot cancel your registration from a retrospective date. You must give a current or future date, which is why the timing decision has to be made before you apply rather than after.
Do I pay VAT on stock when I deregister?
You account for VAT on business assets still on hand if you reclaimed VAT when you bought them — unless the total VAT on those assets would be £1,000 or less, in which case nothing is due. At the standard rate that limit corresponds to roughly £6,000 of VAT-inclusive value.
Is it worth deregistering for VAT?
It usually is if you sell mainly to consumers, because the VAT you charge is a real cost to them. It usually is not if your customers are VAT-registered businesses that reclaim it, or if you are about to buy equipment you would rather reclaim VAT on.
