Let’s be honest: “VAT deregistration” is not the phrase that gets anyone leaping out of bed in the morning. But stick with us, because thanks to a change that landed on 1 April 2026, this is quietly one of the more interesting tax questions your small business gets to ask all year. (Yes, we put “interesting” and “tax” in the same sentence and we stand by it!)
Here’s the short version: the rules just changed, the door to deregistering swung open for a lot more businesses, and walking through it could either save you a pile of admin or land you with a surprise bill. Let’s work out which.
First, the big news
For the first time since 2009 (when skinny jeans still felt fresh), SARS has raised the compulsory VAT registration threshold. From 1 April 2026, you are only obliged to register for VAT once your taxable supplies pass R2.3 million in any rolling 12-month period. The old line in the sand was R1 million.
The voluntary registration threshold got a bump too, climbing from R50 000 to R130 000.
What does that mean in plain English? A whole lot of small businesses that were forced into the VAT net under the old R1 million rule are now sitting comfortably below the new line. Which raises the obvious question: if you no longer have to be VAT registered, should you stay?
Plot twist: it is not automatic
Before you celebrate, one important thing. Dropping below the threshold does not magically deregister you. SARS will not send a friendly “you’re free to go” text. If you want out, you have to apply for it, and have clear reasons.
And here is the part that trips people up: you remain a fully fledged VAT vendor until SARS officially confirms your cancellation date. That means you keep charging VAT and keep filing those VAT201 returns right up until the day they say stop. Jump the gun and stop charging early, and you are the one who ends up owing the difference. Patience, friend.
The case FOR deregistering
Deregistering can be a genuinely smart move, especially if:
- Most of your customers are everyday people, not other businesses. If you sell to the public (think a hair salon, a small bakery, a personal trainer), those customers cannot claim VAT back anyway. Drop your registration and you can effectively shave 15% off your prices or simply enjoy better margins. Instant competitive edge.
- You are a service business with very few input costs. Consultants, coaches, bookkeepers, copywriters: if you are not buying much stock or equipment, you are not claiming much input VAT in the first place. The paperwork may be costing you more than the benefit.
- You are drowning in admin. Less VAT to track, fewer returns to file, more time to actually run your business. For a small team, that breathing room is worth real money.
The case AGAINST (and the trap nobody warns you about)
Now for the reality check, because deregistering is not a free lunch.
- You lose the right to claim input VAT. The moment you are out, the 15% VAT you pay on rent, software, stock, equipment and professional fees stops being claimable and becomes a flat-out cost. If your business spends heavily on VAT-able expenses, that one stings.
- Your VAT-registered clients may cool off. If you sell mainly to other businesses, many of them prefer dealing with VAT vendors so they can claim their own input tax. Deregister and your invoices suddenly look a little less attractive to them.
- And then there is “exit VAT”. This is the big one. When you deregister, SARS treats your business as if it sold off all its assets the day before, things like trading stock, equipment, computers and vehicles that you claimed VAT on when you bought them. You then owe output VAT on those assets, even though no actual sale happened and no cash came in.
A quick example: say you are holding around R200 000 worth of equipment and stock that you originally claimed VAT on. Your exit VAT bill could land at roughly R26 000. Ouch. The small mercy is that SARS lets you pay it off in six equal monthly installments rather than all at once, but it is still a real cost that disappears entirely if you simply stay registered.
So, should you?
Here is the honest answer your accountant gives and the salesperson never does: it depends. Run through these questions first:
- Who are my customers, businesses (who want the VAT) or the public (who do not)?
- How much input VAT do I actually claim each year?
- What is my exit VAT bill going to be, and can my cash flow handle it?
- Is my dip below the threshold a temporary wobble or the new normal?
If you are a lean, service-based business selling to the public, deregistering might be a brilliant call. If you are asset-heavy, expense-heavy, or selling to VAT-registered clients, staying put could quietly be the smarter, cheaper option.
The bottom line
VAT deregistration is one of those decisions that looks simple on the surface and gets complicated the second you run the numbers. The threshold change has handed small businesses a genuine opportunity, but “you qualify” and “you should” are two very different things!
This is exactly the kind of call worth modelling properly before you fill in a single form. At Leading Edge, we live for this stuff (truly, we do), and we are happy to crunch the figures with you so your decision rests on your numbers, not a hunch.
Thinking about it? Let’s connect for a chat and work out whether deregistering is your next clever move or a trap best avoided.
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Let our team help you navigate the tides, whether you’re staying on board with VAT or preparing to set sail.
– The Leading Edge Team
