Deregistering for VAT in 2025? What You Don’t Know Could Cost You

Are you considering deregistering from VAT in 2025? Many UK business owners get confused when their income drops or they stop trading. They don’t know when to deregister for VAT, or what could go wrong if they don’t do it properly.

This easy guide explains everything clearly: when you should cancel, how to do it with HMRC, who qualifies, and what to watch out for. It’s made for small business owners, sole traders, and companies who want to avoid mistakes and stay on the safe side.

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What Does Deregistering from VAT Mean?

Deregistering from VAT means you cancel your registration with HMRC, either because you are no longer eligible or because you voluntarily decide to do so. After deregistration:

  • You stop charging VAT on your sales
  • You can no longer reclaim VAT on purchases
  • You must submit a final VAT Return

VAT deregistration in 2025 is subject to current HMRC rules, including a threshold of £88,000.

Who Needs to Deregister for VAT in 2025?

You must deregister from VAT within 30 days if any of the following apply:

Voluntary VAT Deregistration: Should You Opt Out?

You can voluntarily cancel your VAT registration if your VAT-taxable turnover falls below £88,000 and you don’t expect it to exceed this in the next 12 months. This can be a strategic decision if:

  • VAT adds complexity to your finances
  • Your customers are mostly non-VAT registered (e.g., retail consumers)
  • You want to reduce your prices to improve competitiveness

Step-by-Step Guide to Deregister from VAT in the UK

You can cancel your VAT registration online or by post.

Option 1: Cancel VAT Online via Government Gateway

  1. Sign in to your VAT online account
  2. Select “Cancel VAT registration.”
  3. Enter:
    • VAT number
    • Business name and address
    • Reason and date for deregistration
  4. Submit the request

Option 2: Submit Form VAT7 by Post

  1. Download and complete form VAT7
  2. Print and send it to the HMRC address on the form

Note: You cannot use form VAT7 if you are transferring a VAT number (e.g., during a change of ownership or structure). Instead, use form VAT68.

What Happens After You Apply to Deregister from VAT?

  • HMRC response time: Usually within 3 weeks
  • You must continue charging VAT until HMRC confirms deregistration
  • You will receive a confirmation notice showing your official cancellation date

If you hear nothing within 40 days, call HMRC VAT enquiries at 0300 200 3700.

Final VAT Return Requirements

Once deregistered, you must:

  • Submit a final VAT Return up to the deregistration date
  • Account for stock/assets if the total VAT due is over £1,000
  • File the return within one month (or two months if using the Cash Accounting Scheme)

You can still reclaim VAT on past purchases for up to four years, as long as those expenses occurred before deregistration.

Can You Re-Register for VAT?

Yes. You can voluntarily re-register for VAT in the future. However, you will receive a new VAT number unless you’re transferring a registration via VAT68.

Can You Transfer Your VAT Number?

Yes, VAT numbers can be transferred in cases of:

  • Change of legal entity (e.g., sole trader to limited company)
  • Sale of the business as a going concern

Use form VAT68 and register the new business structure with HMRC.

Pros and Cons of VAT Deregistration

Benefits

  • Lower prices for customers
  • Simpler bookkeeping
  • No more quarterly VAT returns

Drawbacks

  • Can’t reclaim input VAT
  • May reduce credibility with suppliers/clients
  • Clients may perceive you as a smaller or unstable business

How VAT Deregistration Affects Your Business

Once you cancel your VAT registration:

  • Stop charging VAT immediately from the official cancellation date
  • Update your invoices and receipts to remove your VAT number
  • Maintain records for 6 years (HMRC may audit post-deregistration)

Should You Deregister for VAT in 2025?

Here’s a quick checklist to help you decide:

  • Is your taxable turnover under £88,000?
  • Are most of your clients not VAT-registered?
  • Is VAT compliance too burdensome?
  • Would you benefit from simplified finances?

Still unsure? Speak to an accountant or VAT advisor before making a final decision. Deregistering from VAT is free, but choosing the wrong timing could cost you in missed reclaims or lost credibility.

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