Cancel your VAT registration

How to deregister for VAT, including when you must notify HMRC, completing your final VAT return, and accounting for VAT on stock and assets you keep.

UK-wide
Guide summary

You must cancel your VAT registration if your business stops trading or your turnover falls below £88,000. Notify HMRC within 30 days and submit a final VAT return. You may need to pay VAT on stock and assets you keep.

  • Notify HMRC within 30 days if you must cancel VAT
  • Deregistration threshold is £88,000 per year
  • Submit a final VAT return after cancellation
  • Pay VAT on stock and assets if over £1,000
  • HMRC takes up to 40 working days to process
  • Continue charging VAT until cancellation confirmed
  • Use Form VAT7a for late invoice claims
  • Penalties apply for late notification
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If you're closing your business, selling it, or your turnover has fallen below the deregistration threshold, you may need to cancel your VAT registration. You must notify HMRC within 30 days of the circumstances requiring cancellation.

Getting deregistration wrong can result in penalties and unexpected VAT bills. This guide explains when you must deregister, how to handle your final return, and what happens to VAT on stock and assets you keep.

When you can or must deregister

You can apply to cancel your VAT registration if your taxable turnover has fallen below the deregistration threshold, or you must cancel if you''re no longer making taxable supplies.

TURNOVER £88,000

VAT deregistration threshold 2026/27

You can apply to cancel your VAT registration if you expect your taxable turnover in the next 12 months to fall below £88,000.

This is different from the registration threshold (£90,000). The gap prevents businesses from repeatedly registering and deregistering.

Above threshold:

If your turnover is between £88,000 and £90,000, you remain registered but can apply to deregister if you expect it to stay below £88,000.

Below threshold:

You can apply to deregister. HMRC will consider whether your turnover is likely to stay below the threshold.

Strategic considerations: Consider whether staying VAT-registered benefits you. If most customers are VAT-registered businesses, voluntary registration lets you reclaim input VAT. Deregistering means you can no longer reclaim VAT on purchases.
Compliance timeline: Apply within 30 days of becoming eligible to deregister
Cancel VAT registration (GOV.UK) (opens in a new tab)

Voluntary deregistration

You can apply to deregister if you expect your taxable turnover in the next 12 months to be below the deregistration threshold. HMRC may refuse if they believe you will exceed the threshold.

Compulsory deregistration

You must cancel your registration if you:

  • Stop making taxable supplies entirely
  • Sell your business (unless using Transfer of Going Concern rules)
  • Change to a different legal entity
  • Join a VAT group

Continue charging and accounting for VAT until HMRC confirms your cancellation. Do not stop collecting VAT early.

Notification deadlines

Missing the notification deadline can result in daily penalties. You must notify HMRC promptly when circumstances change.

How to apply for cancellation

You can cancel your VAT registration online through your VAT online account. You will need:

  • Your VAT registration number
  • The date you want the cancellation to take effect
  • Reason for cancelling
  • Details of any stock and assets you are keeping

HMRC typically processes applications within 3 weeks, but allow up to 40 working days before chasing. Contacting HMRC earlier may delay processing.

Your final VAT return

You must submit a final VAT return covering the period up to your cancellation date, even if you owe no VAT.

What to include in your final return

Your final return must include:

  • All output VAT from your final trading period
  • All input VAT you are entitled to reclaim
  • VAT on stock and assets if above the threshold (see below)

If you receive invoices after submitting your final return, you can claim input VAT using Form VAT7a.

VAT on stock and assets you keep

If you are keeping stock or business assets on which you claimed input VAT, you may need to account for VAT on these items in your final return.

Calculating whether you owe VAT

Work through these steps:

  1. List all items: Identify all stock and assets where you claimed input VAT on purchase
  2. Value at market rate: Use current market value, not what you paid
  3. Calculate total VAT: Apply 20% to the total value
  4. Check threshold: If total VAT is over £1,000, you must pay it; if £1,000 or less, nothing is due

Example: You have stock and equipment worth £6,000 at market value. VAT at 20% is £1,200. This exceeds £1,000, so you must include £1,200 in your final return.

Transfer of Going Concern: If you sell your business to a VAT-registered buyer as a going concern, no VAT is due on the assets transferred.

Penalties for late notification

If you fail to notify HMRC within 30 days when you should have deregistered, you may face daily penalties.

Avoiding penalties

You can avoid penalties by:

  • Notifying HMRC as soon as circumstances change, even if exact dates are uncertain
  • Keeping evidence of when you stopped trading or became eligible to deregister
  • Demonstrating reasonable excuse if you do notify late

In practice, HMRC typically only assesses penalties if VAT was lost due to your failure to notify.

Records you must keep

After deregistering, you must retain your VAT records for at least 6 years.

Why record keeping matters after deregistration

HMRC can open enquiries into your VAT affairs for up to 6 years after deregistration. Good records protect you by:

  • Proving you correctly calculated VAT on stock and assets
  • Supporting input VAT claims you made
  • Demonstrating you notified HMRC within the required deadline

If 6 years' retention causes serious storage problems, you can apply to HMRC for permission to destroy records earlier.

After deregistration

Once HMRC confirms your cancellation:

  • Stop charging VAT on invoices immediately
  • Update your invoices and price lists to remove VAT
  • You can no longer reclaim VAT on purchases
  • Keep your VAT records for 6 years

If you later exceed the registration threshold again, you will need to re-register for VAT.