How invoices work

Invoices are how a business actually gets paid — and a well-made invoice is also a legal document. Get the basics right and you’ll chase fewer customers, file cleaner accounts, and stay on the right side of VAT rules.

What an invoice is

An invoice is a document you send a customer requesting payment for goods or services you’ve provided. It records what was sold, when, and what’s owed. A receipt is different — it confirms payment was received, and is given after the customer pays.

What every UK invoice must include

HMRC requires these details on a valid invoice:

• Your details — your name or company name and address
• Customer’s details — their name or company name and address
• Invoice number — unique, sequential
• Invoice date — when you issued it
• Supply date — when the goods/services were provided (if different)
• Description — what you supplied
• Amount — the total due and the currency

If you’re VAT-registered, add your VAT number, the VAT rate, the VAT amount and the net amount, and label it clearly (e.g. “VAT Invoice”).

Payment terms

State your terms clearly on the invoice — for example “Payment due within 14 days”. Agreeing terms before you start work matters more than anything on the invoice itself: it sets the expectation that you’ll be paid on time. Consider:

• Deposits for new or large clients
• Payment milestones for longer projects
• Late payment interest and compensation (the law allows it — see the FAQ)

The invoice lifecycle

1. Agree the work and the price
2. Deliver the work, then send the invoice (or invoice on agreed dates)
3. Track when it’s due
4. Chase politely if it slips past the date — a friendly reminder a few days after the due date works wonders
5. Record the payment against the invoice so your books stay accurate

Stay consistent

Number invoices sequentially (INV-001, INV-002…), keep a copy of everything, and file them in a way you can find later. Consistent invoices make bookkeeping, VAT returns and tax time much simpler. See our business bookkeeping basics guide.

Get the VAT right

If you’re VAT-registered, the VAT calculation must be correct on every invoice. The VAT calculator shows the net, VAT and gross amounts for any price, so your invoices are right first time — and our how VAT works guide covers the rules.