VAT Deregistration: When and How to Leave VAT in 2026/27

Registration and deregistration thresholds

The figure everyone knows is the VAT registration threshold, GBP 90,000 of taxable turnover for 2026/27. Less well known is the deregistration threshold of GBP 88,000. The GBP 2,000 gap is deliberate: it stops businesses that hover around the line from registering and deregistering every few months.

If your taxable turnover has fallen, or you expect it to fall, deregistering can cut your admin and may make you more competitive when selling to customers who cannot reclaim VAT.

When you can deregister

You can apply for voluntary deregistration if you can satisfy HMRC that your taxable turnover in the next 12 months will be below GBP 88,000. You must deregister, rather than may, if you stop making taxable supplies, for example because you cease trading, sell the business, or join a VAT group.

Why deregistration can help

For a business selling mainly to consumers or to other non-VAT-registered customers, charging 20% VAT effectively raises your prices. Leaving VAT lets you either drop prices or keep the margin. The trade-off is that you lose the ability to reclaim input VAT on your costs.

A simple way to think about it:

• If most customers can reclaim VAT, deregistering saves them nothing and costs you input VAT recovery. Usually not worth it.
• If most customers cannot reclaim VAT, deregistering can make your prices 20% more competitive or boost your margin. Often worth it.
• Either way, you cut quarterly VAT returns and Making Tax Digital VAT obligations.

A worked example

You are a self-employed gardener with turnover that has dropped to around GBP 70,000, serving mostly homeowners who cannot reclaim VAT.

• While registered, a GBP 600 job costs the customer GBP 600 plus GBP 120 VAT, so GBP 720.
• After deregistration, you can charge GBP 660, still more than your old net price, and the customer pays GBP 60 less.
• You give up reclaiming VAT on tools and fuel, but those input costs are modest compared with the pricing advantage.

The final return and stock charge

When you deregister you submit a final VAT return up to the date of deregistration. If you hold stock or assets on which you reclaimed input VAT, you may have to account for output VAT on them, but only if that VAT comes to more than GBP 1,000. This deemed supply stops businesses stripping out assets VAT-free on the way out.

The bottom line

For 2026/27 you can leave VAT once your taxable turnover is set to fall below GBP 88,000, just under the GBP 90,000 registration line. It can sharpen your pricing for non-VAT customers and cut admin, but you lose input VAT recovery and may face a small charge on stock and assets.

Test the numbers with the calchub.uk VAT calculator, and confirm the deregistration threshold and final return rules on gov.uk before you apply to cancel your registration.