Getting paid on time starts with sending a correct, professional invoice. Vague or incomplete invoices delay payment, create disputes, and, in a business-to-business context, can fail to meet legal requirements. This guide covers everything that should go on an invoice, the rules around VAT, payment terms that actually work, and what to do when clients do not pay.
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How Do You Write an Invoice?
A professional invoice is a formal request for payment. It documents what you provided, to whom, at what price, and when payment is due. A well-written invoice:
- Contains all legally required information
- Is clear about what the client is paying for
- States exactly when and how payment is due
- Looks professional enough to signal that you run a serious business
Sending a professional invoice also protects you legally, an undisputed invoice becomes evidence in any payment dispute or legal proceedings.
What Must Be Included on an Invoice?
The legal requirements vary by country and business type. For UK businesses:
If you are not VAT registered:
There is no strict legal format, but best practice includes:
- The word "Invoice"
- A unique invoice number
- Your full name (or business name) and address
- Your client's name and address
- Date of invoice
- Description of goods or services
- Amount payable
- Payment due date and method
If you are VAT registered:
HMRC requires a VAT invoice to include all of the above plus:
- Your VAT registration number
- The date of supply (if different from invoice date)
- The net amount (excluding VAT)
- The VAT rate applied
- The VAT amount
- The total including VAT
Simplified VAT invoices (for supplies under £250 including VAT) require less detail but must still show VAT amount and rate.
What Information Should an Invoice Include?
Here is a full checklist of what to include on every invoice:
Your details:
- Full legal name or business name
- Business address (or registered office)
- Email address and phone number
- VAT number (if VAT registered)
- Company registration number (if a limited company)
Client details:
- Client's full name or business name
- Client's billing address
- Client's email address
Invoice reference:
- The word "Invoice" clearly at the top
- Unique invoice number (e.g. INV-2024-001)
- Invoice date
- Payment due date
Services / goods:
- Description of each item or service provided
- Quantity and unit price (where applicable)
- Subtotal per line item
- Subtotal (before VAT)
- VAT amount (if applicable, showing rate and amount)
- Grand total payable
Payment details:
- Bank name
- Sort code
- Account number
- IBAN / SWIFT (for international clients)
- Reference to use with payment (often the invoice number)
- Payment terms (e.g. "Due within 30 days")
Use our Invoice Generator to create a complete, professional invoice with all of the above in under a minute.
How Do I Number My Invoices?
Invoice numbers must be unique and sequential. Use a consistent system from the start:
- Simple: INV-001, INV-002, INV-003
- Year-based: INV-2024-001, INV-2024-002 (resets each year)
- Client-based: ACME-001, ACME-002 (for businesses with few clients)
Never reuse or skip invoice numbers. HMRC expects your VAT invoices to be sequential and may question gaps. For sole traders without VAT registration, consistency is good practice and makes accounting significantly easier.
What Payment Terms Should I Use?
Payment terms define when you expect to be paid. The most common:
| Term | Meaning |
|---|---|
| Due on receipt | Payment due immediately upon receiving the invoice |
| Net 7 | Payment due within 7 days |
| Net 14 | Payment due within 14 days |
| Net 30 | Payment due within 30 days |
| Net 60 | Payment due within 60 days |
Recommendations:
- Freelancers and consultants: Net 14 or Net 30, fast enough to manage cash flow, standard enough that clients expect it
- For new clients with no payment history: Net 7 or 50% upfront
- For project work: request a deposit (30–50%) before starting, with the balance on completion
- Always state terms clearly on every invoice, do not assume the client knows your standard terms
Late payment interest: UK law (Late Payment of Commercial Debts Act 1998) allows businesses to charge statutory interest of 8% over the Bank of England base rate on overdue B2B invoices. You do not have to chase this, but knowing it is your right gives you leverage.
How Do I Add VAT to an Invoice?
If you are VAT registered, you must charge VAT on taxable supplies. For UK VAT in 2024/25:
- Standard rate: 20%, applies to most goods and services
- Reduced rate: 5%, applies to domestic energy, children's car seats, and some other categories
- Zero rate: 0%, applies to most food, children's clothing, books
On your invoice, show:
- Net amount (excluding VAT): £1,000.00
- VAT at 20%: £200.00
- Total due: £1,200.00
Use our VAT Calculator to quickly add or remove VAT from any amount.
You do not have to register for VAT until your taxable turnover exceeds £90,000 in any 12-month period (2024/25 threshold). Below this threshold, you cannot charge VAT on invoices.
How Do I Follow Up on an Unpaid Invoice?
Late payment is one of the most common frustrations for freelancers and small businesses. A structured escalation process helps:
Day 1 (due date): Send a polite payment reminder, often just a "just checking this has been received" email that re-attaches the invoice. Many late payments are accidental.
Day 7 (one week overdue): Send a formal reminder referencing the invoice number, amount, and due date. State that the invoice is now overdue and request payment by a specific date.
Day 14 (two weeks overdue): Email and phone. Be direct but professional. Ask if there is a problem with the invoice or a dispute, sometimes there is a genuine issue that can be resolved quickly.
Day 21–30: Send a letter before action (LBA), a formal written notice that you intend to take legal action if the invoice is not paid within 7 days. This alone often prompts payment.
Day 30+: Consider small claims court (for amounts up to £10,000 in England and Wales, up to £5,000 in Scotland). The process is straightforward and usually costs under £100. You can also use a debt collection agency.
Prevention is better than cure:
- Research clients before taking them on (LinkedIn, Companies House checks)
- Require deposits for new clients and larger projects
- Send invoices promptly and make them easy to pay
- Use clear, specific payment terms on every invoice
What's the Difference Between an Invoice and a Receipt?
An invoice is a request for payment, it says "you owe me this amount for these services."
A receipt is confirmation that payment was received, it says "you paid this amount."
Some businesses issue a combined invoice/receipt after payment is confirmed. For ongoing or credit-based arrangements, keeping invoices and receipts separate creates a cleaner audit trail.
A purchase order (PO) is different again, it is the client's formal authorisation to proceed with work or supply goods, issued before the work is done. Many larger organisations will not pay an invoice that does not reference a PO number.
Frequently Asked Questions
What is an invoice number and does it have to be sequential? An invoice number is a unique identifier you assign to each invoice. HMRC requires VAT invoices to be sequential (no gaps, no duplicates). For non-VAT registered businesses, sequential numbering is best practice for accounting and dispute resolution.
Can I invoice without being VAT registered? Yes. Businesses below the £90,000 VAT threshold do not charge VAT on invoices. Simply omit the VAT section. Do not add a VAT number or charge VAT if you are not registered, that is illegal.
How do I invoice an international client? Include your bank's IBAN and SWIFT/BIC code. State the currency clearly (GBP, USD, EUR). For EU B2B clients, the supply may be zero-rated for UK VAT if you have their VAT number. For US clients, you typically do not charge VAT at all. Consult an accountant for complex international arrangements.
When should I send a credit note? Send a credit note when you need to cancel or partially reduce an invoice, for example, if a client returns goods, work was not completed as specified, or you made an invoicing error. A credit note is the formal document that offsets the original invoice.
What are the consequences of not invoicing properly? For VAT-registered businesses, incorrect VAT invoices can result in penalties and disallowed input VAT claims. For all businesses, vague or incomplete invoices make disputes harder to resolve and may not hold up as legal evidence in a payment claim.
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