The duo, comprising siblings Sean and Sarah Smith, have had their contract with SyCo records terminated after their pop career failed to take off.
Despite coming third in the 2007 series of The X Factor, their debut album Pop failed to break the Top 20, entering the chart at number 23 last November. Their only single 'We R One' peaked at number 13.
"The label sank a lot of money into making them a success - and it didn't work," a source told The Sun.
The group have reportedly blamed their lack of success on the demise of Woolworths, which was a major supplier to young children, according to Portsmouth News.
The pair have claimed that they are in talks to star in children's television programmes and will continue to tour holiday camps and gay venues.
Earlier this year, Same Difference cancelled their first headline tour, instead joining forces with 'their friend' Leon Jackson. Although Jackson was also dropped by his record label last month, the tour is still expected to go ahead.