How to complete a VAT invoice

For businesses not VAT-registered, the main reason for issuing invoices to customer is as a record of a sale and a payment request. The invoice could be a handwritten ticket with your name and the amount of money owed, it really does not matter. When you register for VAT, this all changes and it is important you understand what’s required on a VAT invoice.  

Make sure you include everything you should  

It is common for small businesses to leave out vital information in their invoices, particularly as the business grows, becomes VAT registered or a limited company, meaning more information is required.  

Looking at VAT-registered businesses in particular, the VAT invoice must include:  

• your business name  
• business address  
• VAT registration number   
• the date  
• a description of the goods or services you’ve supplied  
• and the total amount payable - split by VAT rates  

Failure to include these items on your invoice, could stop your customers from being able to claim back the VAT you charge them.  

If your invoice totals more than £250, you must also include the following items on your invoices:  

• Sequential invoice number  
• Customer name and address  
• Date of supply  
• Description of each item  
• Quantity of each item  
• Unit price  
• VAT rate and VAT amount for each item  
• Total invoice amount, excluding VAT  
• Total VAT amount  

Invoice templates within online software like QuickBooks and Xero will meet all these requirements, making it easier for businesses to get it right first time. If you are not sure how to create these speak to your accountant who will be familiar with the software and be able to support you.  

Use sequential numbering to keep on track  

Other rules for VAT invoicing include the use of sequential invoice numbers. Having sequential numbers on your invoices helps you keep track of them. Doing so will also make your bookkeeping easier to check.  

If you need to find information from a few years ago, having a numbering system will save you time. There are many ways you can personalise your numbering, including using a customer identifier and the financial year. 

You should encourage your customers to use the invoice number as a payment reference, so that you can match payments to invoices with ease. While online software can match invoices to payments, if there are multiple transactions for the same amount, it is important to choose the right one, so you have a correct list of who still owes you. 

Having an accurate and up to date list means you can chase the right customer for the right amount. Most bookkeeping software lets you send and automate payment reminders to customers. This can help you get paid faster and avoid any confusion.  

Show VAT line by line  

If your business sells different types of goods, you need to show the VAT rate for each item on the invoice.  

These types include: 

• Standard rate 
• Reduced rate 
• Zero rate 
• Exempt goods  

You should also include the amount for each line. This allows customers to double check each item. By setting up products and services in your bookkeeping software, you can automatically assign VAT rates to product lines. This way, the VAT invoice will include these rates and calculate the VAT amount correctly.  

Improve your branding with a professional invoice template  

Using electronic invoicing will give your business a professional look, and by using an online bookkeeping software, you can create your own VAT invoice template which includes your logo and branding. This VAT invoice template helps you give customers the details they need for their VAT records. It also ensures your records are correct and makes it easier to complete your VAT return.  

It’s important for your business' financial health to invoice your customers promptly. It gives customers a great impression that you are professional, and the sooner you invoice - the sooner you get paid. If your business takes you out, think about installing a bookkeeping app on your phone. This way, you can quote or invoice while you are still with your customer.  

Businesses don’t need a full branding process to appear professional. A simple logo and specific text colours and fonts can help market your business. You could also use this branding in any advertising in local magazines or on the side of your van if you use one for your business. 

For businesses that lack funds for marketing, creating your own logo can be easy and affordable. A local builder can gain business through word of mouth and recommendations. However, actively marketing your business will increase your income and bring in more work. 

Last updated 5 Mar 2025 | First published 5 Mar 2025

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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