Can I de-register for VAT if I'm below the VAT Threshold?
If you’re running a business in the UK and your annual taxable turnover has fallen below the VAT deregistration threshold, you might be wondering whether you can de-register for VAT. The short answer is: yes, but it isn’t quite as simple as just deciding you want to. Here’s a full breakdown of when de-registration is possible, what you’ll need to do, and some tips depending on your business finances.
1. Can you de-register for VAT when turnover is below the threshold?
Yes: under UK rules you can ask HM Revenue & Customs (HMRC) to cancel your VAT registration if your taxable turnover is expected to fall below the deregistration threshold, currently £88,000 (for 2024/25).
That threshold exists as a buffer rather than being automatic; you’re not forced to de-register simply because you fall below it.
Here are the key points:
- The threshold is measured on taxable supplies, on a VAT-exclusive basis.
- If your 12-month rolling turnover (excluding VAT) falls below that level and you expect it to remain below, you may apply.
- HMRC may ask for reasons and evidence that turnover will stay below the threshold.
- De-registration cannot be back-dated, the cancellation date must be the date you apply, or a future date agreed with HMRC.
2. Why de-register? Pros and cons
Benefits if your business finances are modest
De-registering for VAT can significantly cut down admin, as you’ll no longer need to file VAT returns. If most of your customers aren’t VAT-registered, removing VAT can make your prices more competitive. And when you have little VAT to reclaim, staying unregistered keeps bookkeeping simpler and more efficient.
Potential drawbacks, things to watch
Once de-registered, you can’t reclaim VAT on purchases, so major spending could become costlier. Supplying VAT-registered clients may also be trickier, as they often prefer VAT-registered suppliers. You might need to repay VAT on stock or assets you’ve previously reclaimed, and if your turnover later exceeds the threshold, re-registering can cause disruption.
3. What to check, depending on your business finances
Here are some tailored steps depending on your current financial situation:
a) Your turnover has fallen and you expect it to stay low
- Review your last 12-month taxable supplies (VAT-exclusive). Confirm the figure is well under £88,000.
- Project the next 12 months: if you’re confident you won’t exceed the threshold, that strengthens your case for de-registration.
- Check if you have significant input VAT to reclaim or large assets/stock on hand: if yes, estimate what you might lose by de-registering.
- Make your application to HMRC via your online VAT account (or complete form VAT7 by post).
- Once HMRC confirms de-registration, stop charging VAT from the effective date. Submit your final VAT return and handle VAT on any assets as required.
b) Your turnover is low now, but you expect growth/planned investment
If you anticipate ramping up sales or buying major equipment:
- Consider staying VAT-registered (or re-registering later) so you can reclaim VAT on purchases.
- Model both scenarios: staying registered vs. de-registering now and possibly re-registering later.
- Speak with your accountant, growth may mean the de-registration benefits don’t outweigh the admin and opportunity cost.
c) You sell to mostly VAT-registered customers and reclaim lots of VAT
- Being VAT-registered may remain preferable: your customers can reclaim the VAT you charge, so your pricing is unaffected by VAT.
- De-registration could increase your net prices (you cannot charge VAT) which might affect your margin/position.
- In that case, you may choose not to de-register despite falling below threshold.
4. Step-by-step summary for de-registration
- Check eligibility: turnover below £88,000 (VAT-exclusive) and expected to stay so.
- Decide if de-registration makes sense given input VAT, asset value, customer base.
- Prepare supporting evidence/forecast for HMRC if applying voluntarily.
- Log in to your HMRC VAT account → select ‘Deregister for VAT’ (or complete form VAT7 if doing by post).
- Choose an effective date. Continue charging VAT until that date.
- Submit your final VAT Return covering period up to de-registration date.
- Account for stock/assets if required (VAT reclaimed initially and now on hand).
- Keep all VAT records for at least six years.
- Monitor your turnover going forward, if you exceed the threshold again, register promptly to avoid penalties.
5. Final thoughts for business managers
As a business owner you’ll recognise that any decision around VAT de-registration is a strategic one: it’s not just about the threshold, but about your plan for growth, your cost base, your customer mix and your administrative capacity. If your business is lean, with modest sales and to customers who aren’t VAT-registered, de-registering could free up time and reduce cost. But if you’re on an upward trajectory, or your investment plans are significant, then staying registered may be the better option.
It’s wise to run scenarios: what happens if turnover remains low? What if you exceed the threshold again? Speak with your accountant or tax advisor, the rulebook is clear, but the right choice depends on your business context.
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