Cancelling your VAT registration: the final return and your MTD for VAT records

acrenvo.com/guides/mtd-vat-cancelling-registration, last reviewed 1 November 2026

Grace is fictional. She has run a garden design business for some years, registered for VAT and sending her returns through software under Making Tax Digital (MTD) for VAT. This year she has cut back her hours, and her sales have fallen well below the VAT registration threshold of £90,000. She wants to know whether she can cancel her registration, how to do it, and what happens to her last return and her records. This guide sets out what GOV.UK says.

When you must cancel

Some changes leave you no choice. You must cancel your registration if you’re no longer eligible to be VAT registered. For example:

• you stop trading or making VAT taxable supplies
• you join a VAT group

When you can choose to cancel

Grace is in the other position: she is still trading, but her turnover has dropped. GOV.UK sets the point at which she can ask lower than the registration threshold. If your taxable turnover falls below £88,000 you can ask HM Revenue and Customs (HMRC) to cancel your registration, unless all of the following are true:

• you and your business are based outside the UK
• you supply any goods or services to the UK (or expect to in the next 30 days)

Grace and her business are in the UK, so the exception does not apply to her. The guide to reaching the VAT threshold explains how taxable turnover is measured, in case her sales rise again.

When you do not need to cancel

A change of business structure does not always mean cancelling. You do not need to cancel your VAT registration if:

• you’re changing the legal status or selling a business and you want to keep the same VAT registration number (you should transfer your registration)

GOV.UK lists other cases too, mostly about VAT groups, on its page about cancelling.

How to cancel

GOV.UK offers an online route for the common cases. You can cancel your VAT registration online if:

• you’ve stopped trading and you’re not part of a VAT group
• your taxable turnover is below £88,000
• you’ve stopped making VAT taxable goods or services
• you’re applying for an exemption if most or all of what you sell is VAT zero-rated

A few cases have to go by post instead. You must cancel by post if:

• your legal status has changed and you want a new VAT registration number
• you’ve sold your business and the owner is not keeping the VAT registration number

Cancel your registration by post using form VAT7.

One email a month lists the MTD software price changes we have checked and any changes to HMRC’s list of software. If that would be useful, you can sign up for the monthly price-changes email at the end of this page.

What happens next

HMRC will contact you to confirm your cancellation. This will usually be within 40 working days, although it may take longer during busy periods. The confirmation will include your official cancellation date. This will be either:

• when the reason for your cancellation took effect (for example, when you stopped trading)
• the date you asked to cancel

From then on Grace stops adding VAT to her invoices. You must stop charging VAT from the cancellation date. You’ll need to keep all VAT records for 6 years.

Cancelling is not always the end of it, either. HMRC will automatically re-register you if they realise you should not have cancelled. You’ll have to account for any VAT you should have paid in the meantime.

Your final VAT Return

There is one more return to send after cancelling. You’ll have to submit a final VAT Return for the period up to and including the cancellation date. It does not go through your MTD software, though. You cannot send VAT Returns using Making Tax Digital software if you are no longer VAT registered. You’ll need to send any returns using your VAT online account.

GOV.UK adds a practical point about timing. Do not wait until you’ve received all your invoices before submitting your final return. When you get them you’ll still be able to reclaim VAT.

Stock and equipment can matter on the last return. You must account for any stock and other assets you have on this date if both of the following apply:

• you reclaimed or could have reclaimed VAT when you bought the assets
• the total VAT due on these assets is over £1,000

The final return is one of the cases left out of the late submission points system. The late submission penalty rules do not apply to your:

• first VAT return if you’re newly VAT registered
• final VAT return after you cancel your VAT registration
• one-off returns that cover a period other than a month, quarter or year

The rest of GOV.UK’s VAT points system is explained in the guide to VAT penalty points beside MTD for Income Tax penalty points.

Your records after cancelling

Grace can stop using software for VAT records once she is no longer registered, but she cannot throw the records away. VAT Notice 700/22 says: if you deregister from VAT, you no longer need to keep digital records in functional compatible software. However, you must still retain your VAT records for the required period. GOV.UK’s cancelling page gives the period as six years.

MTD for Income Tax has its own test, based on self-employment and property income rather than on VAT registration, so if Grace’s income keeps her in it, her quarterly updates carry on. The guide to MTD for VAT and MTD for Income Tax explains how the two sets of rules meet, and the guide to stopping a business or letting under MTD covers what happens if the business itself closes.

Questions about cancelling a VAT registration