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When you can deregister
You can apply to deregister if your VAT-taxable turnover is expected to fall below the deregistration threshold of £88,000 in the next 12 months. You must deregister if you stop trading or stop making taxable supplies. Registration and deregistration thresholds are close but not identical — check the current figures before acting.
Why leaving can help
If your customers are mainly consumers or non-VAT-registered businesses, they cannot reclaim the VAT you charge, so your prices are effectively 20% higher than an unregistered competitor's. Deregistering lets you cut prices or widen margin. For B2B sellers to VAT-registered customers, the benefit disappears — they reclaim it anyway.
The deemed-supply catch
When you deregister you may face a "deemed supply" charge: VAT on assets and stock you still own on which you reclaimed input VAT, if that VAT exceeds £1,000. It stops businesses reclaiming VAT on assets then leaving VAT-free. Value your remaining stock and equipment before deregistering so the bill does not surprise you.
The admin upside
Coming out of VAT removes quarterly returns, Making Tax Digital obligations and the reclaim paperwork. For a small consumer-facing business the simplicity is real, but weigh it against losing input-VAT recovery on future purchases.
Plan the transition
Time deregistration around large purchases and your stock position, and keep records for six years afterwards. If the deemed-supply charge creates a one-off bill, short-term finance can cover it.
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Frequently asked questions
What is the VAT deregistration threshold?
You can apply to deregister if your VAT-taxable turnover is expected to stay below £88,000 in the next 12 months. You must deregister if you cease trading or stop making taxable supplies altogether.
Will I owe VAT on my assets when I deregister?
Possibly. There is a deemed-supply charge on stock and assets you keep on which you reclaimed input VAT, if that VAT is over £1,000. Value your remaining assets before deregistering so you can budget for it.
Should a business selling to consumers deregister?
Often it is worth considering, because consumers cannot reclaim your VAT, so being registered effectively raises your prices 20%. If turnover has fallen below the threshold, deregistering can make you more competitive.
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