UK Invoice Template

Invoicing in the UK

As a business operating in the UK, you have to register for VAT and provide compliant invoices to customers attesting to payment. Invoices can either be in electronic or paper format, but should be kept for at least 3 months at a time in correspondence with the quarterly VAT reporting a claim. Even if the invoice is an error, was canceled, or was charged back, it should still be kept for accounting purposes.

UK Invoice Requirements

UK VAT Tax Information on Invoices

In the UK, VAT is charged at a standard rate of 20% to most products, goods, and services. There are several categories of VAT coverage, including reduced-rate goods and supplies that are subject to only 5% reduced VAT rate and zero rate goods such as food or children’s supplies. However, most goods and services are taxed at the standard rate and are added to the sale of included products.

UK VAT Rates

Charging VAT in the UK on Invoices

VAT is collected at each point in the value chain of goods, with the end consumer paying the tax directly to the government. As a business, you need to charge VAT on all taxable sales (including zero-rate items). Although the customer pays at the final point of sale, you must pay this VAT to HMRC when filing your VAT return. Even if you do not charge VAT, you will be obligated to report and pay the tax when reporting.

Do I need to register for VAT in the UK when issuing an inovice?

If you’re doing business in the UK, you may be required to register an account for VAT on sales, purchases above specific limits, and production of taxable items. Specifically, if your business is not established in the UK, then you are subject to a zero VAT registration threshold and must register immediately. If your business does have a local UK establishment, the threshold for compulsory VAT registration is £85,000.
The VAT threshold for the UK established businesses is calculated by your business’s taxable turnover for a 12 month period – any period and not necessarily according to the calendar year. Taxable turnover refers to the total value of all VAT-liable sales, including zero-rated products, supplies, and services, but not including VAT-exempt items. As mentioned, businesses without a UK presence are subject to a zero VAT threshold and must register with the tax.

Reclaiming VAT in the UK

As a business, if you incur VAT related expenses related to your operations, these may be recovered by reclaiming the VAT. The VAT paid on business, purchases are referred to as input tax, while the amount of VAT that you have collected from sales is referred to as output tax. When you submit your quarterly VAT report to HMRC, the two are calibrated, if you have paid more than you have collected, you will receive a refund and if you have paid less then you will need to pay the difference.