What information needs to be on an invoice?
Invoices are official requests for payment and therefore require certain information to be valid. This article explores which details are mandatory under UK law.
The rules surrounding invoice details are decided by the UK Government. The mandatory information protects both the buyer and the seller so that both parties have all of the information needed to understand the details of the sale. The reason for the required information is to make invoices as clear as possible and to eliminate the possibility of disputes.
There are two main forms of invoices in the UK: non-VAT invoices, and VAT invoices. The type of invoice you issue to your customers depends on if your business is registered for VAT in the UK.
Once you know what is required on your invoices, you can download our free invoice templates for Word and Excel to start invoicing immediately.
If you're a freelancer or small business owner, chances are that you will not be registered for VAT in the UK. You must register for VAT if your business turnover exceeds £85,000, but you can voluntarily register before the threshold if you think that it would be beneficial for your business.
If you're not VAT registered, you won't need to apply VAT to your invoices. You will, however, be required to input the following information on your sales invoices.
Your name/business name and address
Your customer’s name/business name and address
A unique invoice number
The invoice issue date
The supply date, or date that the goods/services were provided
A description of the products/services being sold
The amounts being charged
The total amount due
Invoicing software can help you by automatically entering the required fields so you don't have to worry about it.
If your business turnover exceeds £85,000, you'll need to register for VAT with HMRC. You can register online and will receive a VAT Registration Number (VRN). You'll also have to submit VAT Returns to HMRC on a regular basis, usually quarterly.
Once you're registered for VAT, you'll need to charge VAT on your sales. You'll also need to issue VAT invoices which require more information than non-VAT invoices.
VAT invoices must include all of the elements in a non-VAT invoice as well as:
Your VAT registration number (VRN)
The price of each product/service excluding VAT
The VAT rate of each product/service
The subtotal excluding VAT
The total amount of VAT being charged
There are different forms of VAT invoices, including full, simplified, and modified invoices. Each has a specific purpose and you should determine which one your business is eligible to use. For the majority of transactions, a full VAT invoice can be used.
Invoice numbers are unique identification numbers assigned to invoices. In the UK, there's no legal requirement for how you should format your invoice numbers. However, it's required that your invoice numbers follow a sequence and don't include any repeats or gaps.
Invoice numbers usually include the year the invoice was created, but it's up to each business to determine the best way to format their invoice numbers. They can include numbers, letters, and special characters.
Programs like Excel and invoicing software can help you automatically generate invoice numbers and keep a correct sequence. If you prefer to write them manually, we have provided a few examples of invoice number formats:
2021-001: This includes the year the invoice was created and the number of the invoice during that year. The following invoice number will be “2021-002”.
2021/INVOICE/001: This format follows the same method as above, but also includes the word “INVOICE” so that it can clearly be identified as an invoice document. This would be useful if you also issue quotations to customers and can replace “INVOICE” with “QUOTE”.
INV/2021-01-006: This format includes the letters “INV” to mark it as an invoice. It also includes the year, the month, and the number of the invoice within that month. This may be useful if you create several invoices every month, and prefer to organise your finances by month rather than by year.
Although it's mandatory for standard invoices to have an invoice number, proforma invoices don't require an invoice number because they're considered “draft” or “preliminary” invoices. Since they're not legally binding documents, an invoice number shouldn't be included.
It is, however, important to distinguish between invoices and proforma invoices by including a “Proforma” or “Invoice” title.
Proforma invoices should also include your business and customer details, a breakdown of the products/services being sold, and the price details.
Essentially, a proforma invoice should include the majority of the details you would find on a standard invoice, but clearly state that it's a “Proforma” document, and exclude an invoice number.
In the UK, it's not mandatory to include a payment due date on the invoice, however, most professionals would recommend doing so.
If no due date is shown on the invoice, then the customer must pay within 30 days from the invoice issue date according to UK law.
If the customer doesn't pay the invoice by the due date, or within 30 days, you have the right to charge interest as a late fee. There are detailed guidelines surrounding late fees on the UK Government website, but generally, you can charge 8% plus the Bank of England base rate for business-to-business (B2B) transactions.
The mandatory invoice details are there for a reason and all invoices must comply with these rules. If you issue an invoice that doesn't contain all of the required information, you may incur fines from HRMC.
HMRC may be lenient if you're a new business, not VAT registered, and the mistake doesn't affect your tax return. However, HMRC is stricter when it comes to VAT invoices and VAT Returns because this may result in your business paying less VAT than required.
HMRC can issue a penalty for inaccurate paperwork that affects your tax liability if:
The error was due to a lack of “reasonable care”: a fine of 0% - 30% of the extra tax due.
The error was intentional: a fine of 20% - 70% of the extra tax due.
The error was intentional and the business took steps to conceal the mistake: a fine of 100% of the extra tax due.
The fines are issued on a case-by-case basis and are linked to the severity of the error. If you notice that you have made a mistake on an invoice or tax return, you should contact HMRC immediately and they'll help you correct it and advise you of any penalties.
The system ensures that all of the required information is input correctly prior to sending an invoice to your customer. The system also automatically generates invoice numbers to follow a sequence and ensures that there are no repeats or gaps.