Business Invoices UK: What to Include & How to Issue

Overview

A business invoice is a commercial document issued by a seller to a buyer that sets out the goods or services supplied, the amount owed, and when payment is due. In England and Wales, an invoice is evidence of a transaction and, depending on the circumstances, can form part of a contract between the parties.

It tells the customer what they are paying for and tells HMRC (if you are VAT registered) exactly what tax has been charged and on what basis. Invoices come in several forms. A standard commercial invoice is the everyday document most businesses use.

A VAT invoice contains additional information required by HMRC when the supplier is VAT registered. A pro forma invoice is issued before a sale is finalised, often as a quote or advance notice, and is not a demand for payment.

Credit notes reverse or reduce previous invoices. Each type has its own purpose, and using the wrong one can cause confusion with customers and complications with your accounts.

Key steps

1. Decide which invoice type you need. Before drafting anything, work out whether you are issuing a standard invoice, a VAT invoice, a pro forma, or a credit note. Your VAT registration status and the stage of the transaction both matter here. A VAT-registered business must issue a proper VAT invoice for taxable supplies to other VAT-registered customers within a set period.
2. Include the mandatory information. Every invoice should carry a unique sequential number, the date of issue, your business name and address, the customer's name and address, a clear description of the goods or services, the amount due, and payment terms. Limited companies must also show their registered company name and number, and VAT-registered businesses must include their VAT number and a breakdown of VAT charged.
3. Set clear payment terms. State when payment is due, how the customer should pay, and what happens if they pay late. Common terms are 14, 30 or 60 days from the invoice date. If you want the right to charge statutory interest and compensation on late commercial payments, say so on the invoice and keep your terms consistent.
4. Send the invoice promptly and keep a copy. Issue the invoice as soon as the work is complete or the goods are delivered, unless you have agreed otherwise. Electronic invoices are accepted in the UK as long as the customer agrees. Keep copies of every invoice you send and receive for at least six years for tax purposes, longer if other rules apply.
5. Follow up on unpaid invoices. If an invoice goes unpaid, send a reminder, then a formal chase, and keep a written record of what you have done. For persistent non-payment you may need to consider a letter before action, mediation, or a claim through the small claims track. Clear invoicing from day one makes all of this much easier.

Common questions