Pep Guardiola had hoped he could rekindle a fee for the 30-year-old, either this or next summer.
But Hart is set to let the remainder of his contract at the Etihad run down, leaving him to exit on a free and make more cash.
His hefty wages put off admirers after an inconsistent campaign with Torino last year and shaky start to West Ham life.
City know slashing his valuation next summer will prove problematic due to the £6m he would still be eligible in wages.
Hart’s position is further boosted because he managed to get fixed-up with the Hammers going into a World Cup year.
An Etihad source said: “The club fear they have kissed goodbye to money for Joe as he’s ready to run down his contract.
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