Invoice Guide: Legal Requirements & Best Practices

What Must an Invoice Include?

UK invoices must include: your business name and address, customer's name and address, a unique invoice number, the invoice date, a description of goods or services, the amount due, payment terms, and your VAT number (if VAT-registered).

VAT Invoice Requirements

VAT-registered businesses must also show: VAT rate applied, VAT amount, total excluding and including VAT. For invoices over £250, you must include the customer's name and address.

Payment Terms

Common options: due on receipt, net 14, net 30 (most common), net 60 (for larger clients). The Late Payment of Commercial Debts Act allows you to charge interest (8% + Bank of England base rate) and compensation (£40-100) on overdue invoices.

Invoice Numbering

Use sequential numbering (INV-001, INV-002) or date-based (2026-03-001). HMRC requires a consistent numbering system with no gaps. This also helps with record-keeping and tax returns.

Chasing Late Payments

1. Send a polite reminder the day payment is due
2. Follow up by phone at 7 days overdue
3. Send a formal overdue notice at 14 days
4. Consider statutory interest and compensation at 30 days
5. Small Claims Court or debt collection agency as a last resort

Invoicing Software

Free options: Wave, Zoho Invoice (up to 5 clients). Paid: FreeAgent (£25/month), Xero (£15-40/month), QuickBooks (£12-35/month). All include automatic reminders, recurring invoices, and Making Tax Digital compliance.

Best Practices

Invoice immediately upon completing work. Offer multiple payment methods. Set clear terms upfront. Keep copies of all invoices for 6 years (HMRC requirement).