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An invoice is a formal document issued by a seller to a buyer that records a transaction for goods or services. It specifies what was sold, the price, and the payment terms. For tax and accounting purposes, it serves as legal proof of the transaction.
You need to issue an invoice in these common situations:
As a freelancer or small business, it's good practice to always issue an invoice — even for small amounts — as it creates a paper trail that protects both parties and simplifies your accounting.
While requirements vary slightly by country, a professional invoice should always include these core elements:
| Field | Details |
|---|---|
| Invoice number | A unique, sequential identifier (e.g., INV-2025-001) |
| Invoice date | When the invoice was issued |
| Due date | When payment is expected (e.g., Net 30) |
| Your name/business name | Full legal name or trading name |
| Your address | Full business address |
| Your tax number | VAT number, UTR, or equivalent |
| Client name/business | Full legal name of the buyer |
| Client address | Full billing address |
| Description of services/goods | Clear itemised list of what was sold |
| Quantity and unit price | Number of units × price per unit |
| Subtotal | Before tax |
| Tax rate and amount | VAT or applicable tax |
| Total amount due | Including all taxes |
| Payment details | Bank account, IBAN, PayPal, etc. |
In the UK, VAT is charged at three rates:
You must register for VAT in the UK once your taxable turnover exceeds £90,000 in a 12-month rolling period (as of April 2024). Once registered, you must charge VAT on your sales and file quarterly VAT returns under Making Tax Digital (MTD).
EU VAT rates vary by country but the standard rate is generally between 19% and 25%. For cross-border B2B transactions within the EU, the reverse charge mechanism often applies: the buyer accounts for VAT in their own country instead of the seller charging it. In this case, the invoice must state "VAT reverse charge applies" and include the buyer's VAT number.
When exporting goods or services to customers outside the UK or EU, VAT is generally zero-rated (not charged). The invoice should note "Zero-rated export" and you may need to retain proof of export for your records.
Standard payment terms define how long the client has to pay from the invoice date. Common terms include:
Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses in the UK can charge statutory interest on overdue invoices. The rate is 8% above the Bank of England base rate, plus a fixed debt recovery charge of £40 (invoices up to £999.99), £70 (£1,000–£9,999.99), or £100 (£10,000+).
Always include a late payment notice on your invoice, such as: "Late payments will incur statutory interest at 8% above base rate under the Late Payment of Commercial Debts Act 1998."
Invoice numbers must be sequential and unique. You cannot reuse or skip numbers. There is no mandated format in most countries — common approaches include:
It's also acceptable to run separate number series (Series A, Series B) for different types of transactions, as long as each series is internally sequential without gaps.
A preliminary document sent before delivering goods or services. It's not a request for payment — rather a confirmation of what will be delivered and at what price. Common in international trade or when a client needs approval before a project begins.
The regular invoice issued after completing the work or delivering goods, requesting payment for the amount due.
Used for ongoing contracts with the same amount billed at regular intervals (monthly retainers, subscriptions, SaaS).
Issued to cancel or reduce a previously sent invoice — for example, when goods are returned, a discount is applied after the fact, or the original invoice contained an error.
Less common — used to increase the amount owed on a previous invoice (e.g., additional charges were incurred after the original was issued).
Common among consultants and freelancers, this invoice details the hours worked along with the hourly rate.
The way you deliver invoices reflects on your professionalism. Best practices:
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