Pillar Guide · Updated July 2026
VAT Deregistration: A Complete UK Guide for 2026/27
A business does not have to stay VAT registered forever — if turnover falls, or the business closes or changes what it sells, deregistering from VAT can be sensible or compulsory. This guide explains the deregistration threshold, when deregistration is required versus optional, the process involved, and what happens to stock, assets and the final VAT return.
The Deregistration Threshold
A VAT-registered business can apply to deregister once it expects its taxable turnover for the next 12 months to fall below the deregistration threshold of £88,000, which is deliberately set slightly lower than the £90,000 registration threshold to avoid businesses hovering just above and below the line repeatedly registering and deregistering.
When Deregistration Is Required
A business must deregister (rather than simply being allowed to) if it stops trading altogether, stops making taxable supplies, sells the business as a going concern, or changes its legal structure — for example incorporating a sole trader business into a limited company — since the VAT registration belongs to the specific legal entity rather than the underlying trade. Deregistration in these cases must be notified to HMRC within 30 days of the change.
Voluntary Deregistration
Where turnover has genuinely dropped and is expected to stay below £88,000 for the coming year, a business can choose to apply to deregister voluntarily, which removes the administrative burden of filing VAT returns and can make prices appear more competitive to customers who cannot reclaim VAT themselves, though it also means the business can no longer reclaim VAT on its own purchases.
How to Deregister
Deregistration is usually done online through the business's VAT online account (or via an agent), providing the reason for deregistering and the date from which the business wants deregistration to take effect. HMRC reviews the application and, once approved, confirms the deregistration date and issues the requirement to file one final VAT return covering the period up to that date.
Choosing the Effective Date
For voluntary deregistration, a business can generally request the date it wants deregistration to take effect, and HMRC will normally agree to this if the evidence supports turnover staying below the threshold, though HMRC can also propose a different date if it disagrees with the business's forecast.
The Final VAT Return
The final VAT return must cover the period up to the deregistration date and, unlike normal returns, must also include VAT due on any business assets still held at deregistration on which VAT was previously reclaimed, above a de minimis total value threshold, since those assets are treated as though supplied to the business owner personally at that point.
Stock and Assets on Hand
If the total value of stock and capital assets held at deregistration, on which input VAT was claimed, exceeds a set threshold (currently £1,000 of VAT due), the business must account for output VAT on their value as part of the final return, effectively treating deregistration as a deemed sale of those assets. Below that threshold, no VAT is due on the assets retained.
Re-Registering Later
If turnover subsequently rises back above the registration threshold, or the business wants VAT registration back for other reasons (such as reclaiming input VAT on significant purchases), it can register for VAT again in the normal way, though it will need to reassess eligibility for schemes such as Flat Rate or Cash Accounting afresh rather than automatically continuing on the previous basis.