What every invoice must include

There’s no single “invoicing law” in the UK that applies to every business — the requirements are a mix of general commercial practice, company law, and VAT rules that stack depending on your setup. But regardless of what kind of business you run, every invoice you send should include:

• A unique invoice number, issued in sequence.
• Your business name and address.
• Your customer’s name and address.
• A clear description of the goods or services provided.
• The date the invoice was issued.
• The date the goods or services were supplied, if different from the invoice date.
• The amount(s) due, and the total.
• Payment terms — when payment is due and how to pay.

None of this is optional in practice. A missing invoice number makes your bookkeeping a mess by month three. A missing due date gives a slow-paying client an easy excuse. Get the basics right from the first invoice you ever send, because retrofitting a numbering system across eighteen months of old invoices is not a fun afternoon.

If you’re a sole trader trading under your own name, that’s largely it. If you’re VAT-registered or operating as a limited company, there’s more to add.

If you’re VAT-registered: the extra rules

Once you’re VAT-registered, HMRC expects a “full VAT invoice” for most transactions, which needs everything above plus:

• Your VAT registration number.
• The tax point — the date of supply, which determines which VAT period the sale falls into.
• The rate of VAT charged on each line — 20%, 5%, or 0%.
• The net amount for each line, excluding VAT.
• The VAT amount for each line.
• The gross total, including VAT.

For anything under £250 including VAT, you can issue a simplified VAT invoice instead, which drops some of that detail — useful for retail-style transactions but rarely relevant if you’re invoicing for services.

Two things trip people up here. First, the invoice number has to be genuinely sequential — HMRC can query gaps in your numbering during a VAT inspection, so skipping numbers (even by accident, because you cancelled a draft) is worth avoiding or at least explaining in your records. Second, a fake or incorrect VAT number on an invoice isn’t just sloppy; it’s a criminal offence, so if you’ve recently registered, double-check the number on every template and every piece of accounting software before you send anything out.

You’re required to keep digital records of VAT invoices under Making Tax Digital, and to retain them for six years — accounting software handles this automatically, which is one of several reasons it’s worth setting up properly the moment you register for VAT rather than limping along with spreadsheets.

If you’re a limited company: the extra rules

Company law adds its own layer, separate from VAT. If you trade as a limited company, your invoices — along with your website, letterheads, and order forms — must display:

• Your company’s full registered name, exactly as it appears at Companies House.
• Your company registration number.
• Your registered office address.

This applies whether or not you’re VAT-registered. It’s a Companies Act requirement, not a tax one, and it’s one of the more commonly missed items on invoices from newly incorporated businesses — particularly if you’re trading under a shortened or different brand name from your registered company name. If your invoice says “Bright Ideas Studio” but your company is registered as “Bright Ideas Studio Ltd”, the full legal name still needs to appear somewhere on the document.

Invoice numbering — the bit people get wrong

It sounds trivial, but a proper numbering system is one of the easiest ways to look professional and keep your own records straight. A few sensible approaches:

• Simple sequential — INV-0001, INV-0002, and so on.
• Year-prefixed — INV-2026-001, resetting the sequence each January.
• Client-coded — ABC-001 for a client called ABC Ltd, useful if you invoice a small number of clients repeatedly and want to track their history at a glance.

There’s no rule about which format to use. The rule is that once you pick one, every number should be used once, in order, with no unexplained gaps — particularly important if you’re VAT-registered. Most accounting software numbers invoices automatically, which removes the temptation to skip or reuse numbers.

Setting payment terms that actually get paid

“Payment terms” usually means two things: how long the client has to pay, and what happens if they don’t. Get both onto the invoice itself, not just in a separate contract the client may not have to hand when the invoice lands in their inbox.

Standard terms range from payment on receipt to 30, 60, or occasionally 90 days. As a small business, shorter terms are generally better for your cash flow, and there’s nothing wrong with setting 14 or 30 days as your default — you don’t have to match whatever a larger client’s standard terms happen to be, though you may need to negotiate.

A few things worth building into your process:

• State the due date as an actual date, not just “30 days” — it removes any ambiguity about when the clock started.
• Ask for a deposit on larger projects, particularly with new clients, so you’re not carrying all the risk.
• Send the invoice the moment work is delivered, not at the end of the month when you finally get round to admin — the sooner it’s sent, the sooner the payment clock starts.
• Follow up before the due date passes, not weeks after, with a short polite reminder a few days out.

Late payment: what you’re entitled to charge

If a client doesn’t pay on time, UK law already gives you more leverage than most small business owners realise. Under the Late Payment of Commercial Debts (Interest) Act 1998, you’re entitled to charge statutory interest on overdue business-to-business invoices, even if your contract or invoice doesn’t mention it.

The statutory rate is the Bank of England base rate plus 8%. With the base rate currently at 3.75%, that puts statutory interest at 11.75% — and the rate that applies is whichever was in force on the date the invoice became overdue, not necessarily today’s rate, since the figure is fixed for six-month blocks running from 1 January and 1 July.

On top of interest, you can also claim fixed compensation per overdue invoice:

Big changes coming to UK late payment law

Late payment has been a long-standing problem for UK small businesses, and it’s finally getting more serious attention from government. A Bill introduced to Parliament in May 2026 proposes what’s being described as the biggest shake-up of late payment law in a generation, including:

• A 60-day cap on payment terms that large companies can impose on smaller suppliers.
• Statutory interest applying automatically to commercial contracts, rather than only when a contract doesn’t already override it.
• Expanded powers for the Small Business Commissioner to investigate poor payment practices and fine persistent offenders.

Choosing an invoicing tool

You can invoice from a Word template or a spreadsheet, and plenty of very small businesses do. But once you’re sending more than a handful of invoices a month — or you’re VAT-registered and need Making Tax Digital-compliant digital records — dedicated software earns its keep quickly.

Xero, QuickBooks, and FreeAgent are the three most commonly used by UK small businesses, typically £15–35 a month depending on the plan, and all three handle sequential numbering, VAT calculations, and MTD submission automatically. For a lighter-weight option, tools like Invoice Simple or Wave cover the basics without the full accounting package attached.

Adding a payment link — through Stripe, GoCardless, or SumUp, for example — to your invoices tends to shorten payment times noticeably. Clients are more likely to pay immediately when the option is one click away rather than requiring them to log into online banking separately.

Common invoicing mistakes to avoid

A few patterns show up again and again with small businesses just getting their invoicing process established:

• Vague descriptions — “consulting services” tells a client (and HMRC, if they ever ask) very little. Be specific about what was delivered.
• No due date — “payment terms: 30 days” without a calendar date invites confusion about when the clock actually started.
• Inconsistent numbering — skipping, reusing, or restarting invoice numbers without a clear system, which becomes a real headache if you’re ever VAT-inspected.
• Sending late — the invoice doesn’t start the payment clock until it’s sent, so delaying the invoice delays the payment.
• Missing legal details — no VAT number when you’re registered, no company number when you’re a limited company — small omissions that can cause real friction later.

Useful resources

• HMRC VAT invoicing guidance — Notice 700, section 16, at gov.uk/guidance/vat-guide-notice-700
• Companies House trading disclosure requirements — at gov.uk/guidance/company-trading-disclosures
• Small Business Commissioner — Fair Payment Code — at smallbusinesscommissioner.gov.uk
• Statutory interest calculator — for working out exactly what a late-paying client owes under the Late Payment of Commercial Debts (Interest) Act 1998, available through several free online tools or your accounting software
• Your accountant — for anything invoice-related that touches VAT schemes or company law specifics, worth a quick check before you finalise your template