Invoice incorrectly and expect HMRC to send you a big tax bill or fine. Invoicing properly can result in an increase in 20% of your income. Read on to find what details you need to include on your invoice.

All details and tax thresholds are accurate until 30th March 2019.

Are you a sole trader or do you have a limited company?

Depending on whether you are a sole trader (also known as self-employed) or limited company than invoicing rules are different. We will explain the differences between the invoices below.

What to include on your invoice

Here is a comprehensive criterion for what you must include on your invoices. Our information is digested for you straight from the HMRC website:

  • a unique identification number
  • your company name, address and contact information
  • the company name and address of the customer you’re invoicing
  • a clear description of what you’re charging for
  • the date the goods or service were provided (supply date)
  • the date of the invoice
  • the amount(s) being charged
  • VAT amount (if applicable – see below)
  • the total amount owed

Invoicing can be quick and effortless if you set up properly. 

Shall we add an invoice template for you to download for free? If so comment below.

Sole trader invoices

If you’re a sole trader, the invoice must also include:

  • your name and any business name being used
  • an address where any legal documents can be delivered to you if you are using a business name

Limited company invoices

If your company is a limited company, you must include the full company name as it appears on the certificate of incorporation.

If you decide to put the names of your directors on your invoices, you must include the names of all directors.

Are you VAT registered?

If you are VAT registered then you will need to include your VAT registration number on your invoices. This won’t apply if you are not VAT registered.

Are unsure whether you are VAT registered than ask your accountant. If you don’t have an accountant then check if your turnover/revenue exceeds £85,000. When or if your revenue does exceed the threshold, then you will need to register for VAT. Thresholds can change each tax year, usually on the 1st April each year. So check the HMRC website for the latest VAT thresholds and rates.

Registering for VAT means you have to charge 20% more on top of your service/product. You must clearly state the amount of VAT on a separate line to the amount you charge for your service/product. For example, the Silver package from Start Smarter website design services costs £299. So if we were VAT registered we would have to state:

Silver package for website designing:

£299

VAT @ 20%:

£59.80

Total to pay:

£358.80

If you are not VAT registered, charging 20% on top of your service and identifying the charge as VAT is illegal. If you are VAT registered to be sure to:

  • issue and keep valid invoices – these can be paper or electronic
  • keep copies of all the sales invoices you issue even if you cancel them or produce one by mistake. This helps to keep an audit trail and to provide evidence to HMRC should they ask.
  • keep all purchase invoices for items you buy

Whilst charging 20% VAT on top of your service increases your turnover by 20%, you effectively act as a tax collector for HMRC. You should keep this money aside as it will be paid to HMRC each year.

Further details of VAT invoicing can be found on the HMRC website.

Did you know you can voluntarily register for VAT? Shall we write a whole post on registration about VAT? Perhaps including the advantages and disadvantages of voluntarily registering? If so, comment below!

Have you registered for VAT voluntarily? Share your experience in the comment section below.