VAT Invoice Example UK

What Is a VAT Invoice?

A VAT invoice is a legal document that VAT-registered businesses must issue when supplying goods or services to another VAT-registered business. It serves two important purposes: it enables your client to reclaim the VAT you've charged, and it provides HMRC with an audit trail of VAT transactions.

As a VAT-registered freelancer, you're legally required to issue proper VAT invoices. If you make a mistake — for example, charging VAT without being registered, or omitting required information — you could face penalties from HMRC, and your client won't be able to reclaim the VAT.

VAT invoices contain more information than standard invoices. The additional requirements ensure that both buyer and seller properly account for the VAT, and that HMRC can verify the transaction if needed.

Requirements for VAT Invoices

HMRC requires specific information on VAT invoices. Missing any of these elements could make the invoice invalid:

Mandatory elements:

• A unique, sequential invoice number
• The date of issue
• The time of supply (tax point) if different from the invoice date
• Your business name, address, and VAT registration number
• Your customer's name and address
• A description of the goods or services supplied
• The quantity of goods or extent of services
• The rate of VAT charged per item
• The total amount excluding VAT
• The total VAT amount
• The total amount including VAT
• The unit price (for goods)
• Any discount offered

For VAT invoices to other VAT-registered businesses:
You should also include the customer's VAT registration number if you know it. This is essential if you're applying the reverse charge mechanism.

Simplified vs Full VAT Invoice

HMRC allows simplified VAT invoices for supplies under £250 (including VAT). This reduces the administrative burden for smaller transactions.

Simplified VAT invoices must include:

• Your business name, address, and VAT number
• The date of supply
• A description of goods or services
• The total amount including VAT
• For each VAT rate, the total amount including VAT and the rate

What's NOT required on simplified invoices:

• Customer's name and address
• Unique invoice number
• Net amounts before VAT
• Separate VAT amounts

When to use simplified invoices:
They're practical for retail situations or small one-off services. However, if your client needs to reclaim VAT, they may request a full VAT invoice even for small amounts. Always issue full invoices for business-to-business transactions over £250.

Line-by-Line Breakdown

Here's what a complete VAT invoice looks like, with each element explained:

Key elements explained:

• VAT Registration number — Must appear prominently; this is what makes it a VAT invoice
• Invoice number — Unique, sequential; never reuse numbers
• Each line shows VAT rate — Usually 20% for most services; some may be 5% or 0%
• Subtotal (Net) — Total before VAT; this is your actual income
• VAT amount — Calculated at the applicable rate; you'll pay this to HMRC
• Total Due (Gross) — What the client actually pays

Common VAT Invoice Errors

These mistakes can invalidate your VAT invoice or cause problems for you and your client:

Missing VAT registration number: Without your valid VAT number, it's not a VAT invoice. Your client cannot reclaim the VAT, and you may face HMRC penalties.

Incorrect VAT calculation: Double-check your maths. VAT should be exactly 20% of the net amount (or 5% for reduced rate items). Rounding errors can cause reconciliation problems.

Wrong VAT rate: Most services are standard-rated at 20%, but some supplies qualify for reduced rates or exemptions. Applying the wrong rate has legal consequences.

Charging VAT when not registered: If you're not VAT registered, you cannot charge VAT or issue VAT invoices. The VAT amount doesn't belong to you — it's money owed to HMRC.

Invalid invoice numbers: Numbers must be unique and sequential. Gaps in numbering can trigger HMRC queries.

Missing customer details: For full VAT invoices, you must include the customer's name and address. Without this, the invoice is incomplete.

No tax point specified: If the tax point (when VAT becomes due) differs from the invoice date, you must state this clearly.

When to Issue a VAT Invoice

Understanding the "tax point" — when VAT becomes due — determines when you should issue your VAT invoice.

Basic tax point: For services, this is when the service is completed. For goods, it's when goods are delivered.

Actual tax point: If you issue an invoice or receive payment before the basic tax point, that earlier date becomes the tax point.

The 14-day rule: If you issue an invoice within 14 days after the basic tax point, the invoice date becomes the tax point. This gives you flexibility in when you invoice.

Time limits: You must issue a VAT invoice within 30 days of the tax point. Late invoicing can result in penalties.

For most freelancers working on project-based billing, the practical approach is simple: complete the work, invoice within a few days, and the invoice date becomes your tax point. This keeps things straightforward for your VAT return.