When to deregister for VAT

Are you VAT registered with revenue sitting between R1m and R2.3m in revenue?

Yes?

This one is for you.

From 1 April 2026, the South African Revenue Service increased the compulsory VAT registration threshold to R2.3 million. This means many businesses now have a choice they did not have before.

And the moment you have a choice, the question changes from
“What do I have to do?”
to
“What actually makes sense for my business?”

Let’s break that down simply.

First, being “small enough” is not the full answer

A lot of business owners assume that if their revenue is below the threshold, they should just deregister.

But VAT does not work like that.

The real decision is not based on your bank balance, your profit, or how many people you employ.

It comes down to how your business actually operates.

Who your customers are
How your cash flows
What you own
And how you price your work

That is where the real decision sits.

Now let’s talk about the hidden cost most people miss

On paper, deregistering sounds simple. Less admin. Fewer returns. Less back and forth.

But there is one thing that catches most people off guard.

Exit VAT.

When you deregister, you are treated as if you sold certain assets and stock, even if you did not.

That means you may need to pay VAT on:

Equipment
Computers
Tools
Inventory you still have on hand

If you previously claimed VAT on these, SARS may expect a portion back.

This can create a once off VAT bill that hits your cash flow immediately.

And for many businesses, that number is bigger than expected.

The supplier trap

If you have claimed VAT on supplier invoices but have not paid those suppliers, there is another catch.

You may need to pay that VAT back as well when you deregister.

So what felt like a simple admin decision can quickly turn into a cash flow problem.

Now think about your customers

This is where the decision becomes very practical.

If most of your clients are businesses that are VAT registered, they expect VAT invoices.

They claim that VAT back. It does not cost them anything.

If you deregister, you effectively become more expensive in their eyes, because they can no longer claim that VAT.

That can lead to pricing pressure or even lost work.

On the other hand, if your clients are mostly individuals or non VAT registered businesses, they care about the final price.

In that case, not charging VAT could actually make you more competitive.

The real questions

So the real question becomes

Not “can I deregister”
But “what happens if I do”

In summary

Here is a simple way to think about it

Deregistering usually makes sense when:

Your revenue is comfortably below R2.3m
Your clients are mostly non VAT registered
Your expenses do not carry a lot of VAT
You do not hold significant stock or assets

It usually does not make sense when:

You work with big corporates or
Your clients are VAT registered businesses
You regularly claim VAT back
You have assets or inventory with VAT claimed
You expect to grow past the threshold soon

This is not just about admin

It is a pricing decision.
A cash flow decision.
And a growth decision.

And getting it wrong can either cost you money upfront or slowly eat into your margins over time.

So before you make a move

Take a step back and look at:

Your revenue over the next 12 months
Your customer base
Your current assets and stock
Your unpaid supplier invoices

That will give you a much clearer answer than the threshold alone.

If you want to talk through your specific numbers and see whether staying registered or deregistering makes more sense for your business, contact me here with and I’ll help you assess whether VAT deregistration makes financial sense.