Invoicing Guide for UK Trade Businesses — What to Include, How to Get Paid and Late Payment Law (2026)

The 13 Mandatory Items on Every UK Invoice

HMRC sets out what a valid invoice must contain. Miss any of these on a commercial invoice and you risk the client disputing the debt or HMRC disallowing the transaction. Every invoice you raise must include:

1. Your business name — the legal name you trade under or your registered company name.
2. Your business address — a physical address, not just a PO box.
3. A unique invoice number — sequential and never duplicated (more on this below).
4. The invoice date — the date you raised the document, not the date work was completed.
5. The supply date (tax point) — when the goods or services were delivered. This can be the same as the invoice date.
6. Customer name — the individual or trading name of the business you are billing.
7. Customer address — the billing address for the client.
8. A clear description of the work — vague descriptions like “works carried out” are not acceptable. Specify what was done, where, and for which property.
9. Quantity and unit price — list labour hours at day rate, and materials itemised separately.
10. Net total — the amount before VAT.
11. VAT number — required if you are VAT-registered. If you are not VAT-registered, omit this.
12. VAT amount charged — required if VAT-registered. State the rate (20%, 5%, or 0%) and the pound amount.
13. Gross total — the amount the customer owes including VAT.

You should also include your payment terms and bank details on every invoice, though these are not strictly a legal requirement — they are simply essential if you want to get paid.

VAT Invoices vs Non-VAT Invoices

If your taxable turnover exceeds the VAT registration threshold (£90,000 in 2025/26) you must register for VAT and issue VAT invoices. A VAT invoice must show your VAT registration number, the VAT rate applied, the VAT amount in pounds, and the VAT-inclusive total.

If you are not VAT-registered, your invoice must not show any VAT number or VAT amount. Charging VAT when you are not registered is a criminal offence.

There are two types of VAT invoice for registered businesses:

• Full VAT invoice — required for most business-to-business transactions and for any invoice over £250 to any customer.
• Simplified VAT invoice — permitted for retail supplies under £250. Shows the gross total and the VAT rate but does not need to itemise the net and VAT separately.

Most trade invoices should use the full VAT invoice format regardless of value — it removes any ambiguity and allows VAT-registered customers to reclaim their input tax without question.

Invoice Numbering: Sequential and Gap-Free

HMRC requires invoice numbers to be unique and sequential. That means each new invoice gets the next number in the series — you cannot skip numbers, reuse numbers, or reset the sequence mid-year. A common format is INV-0001, INV-0002, and so on, or a year-prefixed format like 2026-001 that rolls over each tax year.

Why does this matter? During a VAT inspection or Self Assessment enquiry, HMRC may ask to see all invoices for a period. Gaps in the numbering sequence are a red flag — they suggest income may have been recorded off the books. Consistent sequential numbering demonstrates transparency and makes it easy to cross-reference invoices against bank deposits.

If you need to cancel an invoice, issue a credit note referencing the original invoice number rather than deleting or reissuing it with the same number.

Payment Terms: How to State Them Clearly

Your payment terms should appear prominently on every invoice — not buried in small print at the bottom. Be explicit. “Payment due within 30 days” is clearer and more enforceable than “30-day terms.”

State the exact due date, not just the term: “Payment due by 22 June 2026 (30 days from invoice date).” This removes any ambiguity about when the clock starts.

Late Payment Law: What You Are Entitled to Charge

The Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right to charge interest on overdue invoices in business-to-business transactions. You do not need the customer to have agreed to this in advance — it is automatic once the debt is overdue.

• Interest rate: 8% above the Bank of England base rate, calculated daily on the outstanding amount. With the base rate at 4.25% in mid-2026, that is 12.25% per annum.
• Debt recovery costs: You can also claim a fixed compensation amount — £40 for debts under £1,000, £70 for debts between £1,000 and £10,000, and £100 for debts over £10,000.
• Reasonable recovery costs: If your actual costs of chasing the debt (solicitor's letters, debt collection agency fees) exceed the fixed amounts, you can claim those instead.

Note: this Act applies only to business-to-business debts. For residential customers (consumers), the Consumer Credit Act and standard contract law apply, but the principle of charging interest on overdue payments can still be included in your terms if agreed upfront.

Always mention your right to charge statutory interest in your invoice terms — even a single line stating “Late payments may be subject to interest under the Late Payment of Commercial Debts Act 1998” sets the expectation from the outset.

Getting Paid Faster: Practical Tactics

The fastest route to payment is making it as easy as possible for the customer to pay you. Every invoice should include:

• Sort code and account number for BACS transfer — most business customers pay by bank transfer and will not chase up your bank details if they are not on the invoice.
• Your business name exactly as it appears on your bank account — this prevents the payment being held by the bank's Confirmation of Payee check.
• A payment reference — ask customers to use your invoice number as the reference so you can match payments without guesswork.
• A QR code linking to a payment page — services like GoCardless, Stripe, or SumUp let you generate a payment link. Customers on site can scan and pay immediately. Studies consistently show QR codes on invoices reduce average payment time by several days.

Send the invoice the same day the job finishes — ideally before you leave site. The job is fresh in the customer's mind, they are satisfied with the work, and there is no gap for second thoughts. Mobile invoicing apps (covered below) make this straightforward.

Deposit Invoices and Final Invoices: Structuring Split Payments

For larger jobs, split payments protect your cash flow and reduce risk. A typical structure is:

• Deposit invoice (25–50%): Raised before work begins. Used to cover materials and protect against the customer cancelling after you have committed resource.
• Progress invoice (optional, 25%): Raised at a defined milestone — for example, first fix complete or materials delivered to site.
• Final invoice (balance): Raised on practical completion. References the deposit invoice number so the customer can see the full payment history.

On the final invoice, show the original contract value, the deposit already paid (as a credit), and the balance now due. This prevents disputes about what has and has not been paid.

Never rely on verbal agreements for split payments. Put the deposit terms in your quote or contract so the customer has agreed in writing before any work starts.

Proforma Invoices vs Tax Invoices

A proforma invoice is a preliminary document that looks like an invoice but is not a formal request for payment and does not trigger a VAT liability. It is used to confirm the scope and price before work starts, or to allow a customer to raise a purchase order. A proforma must be clearly marked “PROFORMA” or “THIS IS NOT A VAT INVOICE.”

A tax invoice (or simply “invoice”) is the legal demand for payment and triggers your VAT accounting obligation if you are VAT-registered. Only raise a tax invoice once the work is complete or at the agreed milestone — raising one prematurely can create a VAT liability before you have received the cash.

CIS Invoices: What Subcontractors Must Show

If you work as a subcontractor under the Construction Industry Scheme (CIS), the main contractor is required to deduct tax from your labour payments before paying you. Your CIS invoice must make it clear how the deduction is calculated. Include all of the following:

The standard CIS deduction rate is 20% for registered subcontractors. Unregistered subcontractors are deducted at 30%. If you hold gross payment status, no deduction applies and you must state “Gross payment status — no CIS deduction” on your invoice.

Always show materials separately from labour on a CIS invoice. Materials are not subject to the deduction, and mixing them with labour gives the main contractor grounds to deduct on the full amount.

Invoice Software for Tradespeople: Free vs Paid

Spreadsheet invoices are fine when you are starting out, but they break down quickly as job volume grows. Dedicated software ensures sequential numbering, stores records automatically, and integrates with your accounting.

All five are Making Tax Digital (MTD) compatible, which is now mandatory for VAT-registered businesses and will extend to income tax Self Assessment from April 2026. If you are not yet on MTD-compatible software, now is the time to move.

Mobile Invoicing: Send From Site While the Job is Fresh

Every day between finishing a job and sending the invoice is a day the customer can forget how happy they were, find a reason to query the price, or simply file it mentally under “deal with later.” All the apps listed above have mobile versions. QuickBooks, Xero, and FreeAgent let you raise an invoice, attach a photo of completed work, and send it by email in under two minutes while still on site.

For cash-flow-critical businesses — particularly those running on 14-day residential terms — same-day invoicing can meaningfully shorten the average payment cycle. If your average job value is £1,500 and you run 10 jobs a month, reducing your average payment time by five days frees up roughly £2,500 in working capital at any given moment.

The Overdue Invoice Process: A Reminder Cadence That Works

Most late payments are not deliberate — they are caused by invoices being missed, lost in email, or deprioritised. A structured reminder cadence catches these before they become a dispute.

• Day 1 (due date): Send a polite reminder by email and WhatsApp. Keep it brief: “Hi [name], just a reminder that invoice INV-0142 for £680 was due today. Please let me know if you have any questions.” Include the invoice as an attachment.
• Day 7: Follow up again by email. Slightly firmer in tone: “This invoice is now 7 days overdue. Please arrange payment by [date + 3 days] to avoid a late payment charge.”
• Day 14: Phone call. Email is easy to ignore; a direct conversation is harder to avoid. Confirm a payment date and follow up with a written summary of that conversation by email the same day.
• Day 30+: Issue a formal letter before action. State the amount owed, the original due date, the statutory interest accruing, and your intention to pursue the debt through the courts if payment is not received within 7 days. Send by recorded post and email.

Small Claims Court: Recovering Invoices Under £10,000

If a customer still refuses to pay after your formal letter, Small Claims Court is your next step for invoices up to £10,000 (in England and Wales). The process is designed to be used without a solicitor and the fees are modest:

• Claims up to £300: £35 fee
• Claims £300.01 to £500: £50 fee
• Claims £500.01 to £1,000: £70 fee
• Claims £1,000.01 to £1,500: £80 fee
• Claims £1,500.01 to £3,000: £115 fee
• Claims £3,000.01 to £5,000: £205 fee
• Claims £5,000.01 to £10,000: £455 fee

You can file a claim online at gov.uk/make-court-claim-for-money. You will need the customer's full name or registered company name, their address, and a clear account of what was owed and when. If the court rules in your favour, you can recover the court fee as well as the debt and any statutory interest.

The very act of issuing a formal letter before action — which states you will file a Small Claims claim if payment is not received — causes the majority of debtors to pay. Most people and businesses do not want a county court judgment (CCJ) against them.

Factoring and Invoice Finance: When It Makes Sense

Invoice finance lets you borrow against outstanding invoices — typically 80–90% of the invoice value — and receive the cash within 24–48 hours rather than waiting 30–60 days for the customer to pay. The lender takes a fee (typically 1–3% of the invoice value) and releases the remaining balance once the customer pays.

There are two main variants:

• Invoice discounting: You retain control of collections and customers do not know you are using finance. Suited to more established businesses with a good collections track record.
• Invoice factoring: The finance company takes over collections on your behalf. The cost is slightly higher, but it removes the admin burden of chasing payments.

Invoice finance makes sense if you are regularly winning large commercial contracts with 30–60 day payment terms and struggling with cash flow as a result. It is less suitable for small residential jobs where the fee eats into already thin margins. Providers worth comparing include Bibby Financial Services, Aldermore, and Satago.

Record Keeping: How Long to Keep Invoices

HMRC requires you to keep business records — including all sales invoices, purchase invoices, and bank statements — for a minimum of 6 years from the end of the accounting period they relate to. For limited companies, the Companies Act requires records to be kept for at least 6 years from the date they were made.

In practice, keeping records for 7 years gives a comfortable buffer. Store digital copies in a cloud service (Google Drive, Dropbox, or your accounting software's own archive) and keep originals for any paper documents. If HMRC opens an enquiry into a return, you will need to produce the relevant invoices quickly — a well-organised digital archive is far easier to search than a box of paper receipts.

From April 2026, MTD for Income Tax requires quarterly digital submissions. Your accounting software will maintain the necessary digital records automatically, but you must ensure you are capturing every invoice in the system — not leaving some in a drawer or a spreadsheet.

How Trade2Base Complements Your Invoicing

Invoicing software tells you what you are owed and by whom. It does not tell you where the job came from. That matters because not all marketing sources deliver equally profitable work.

Trade2Base tracks each enquiry — whether it came from Google Ads, Checkatrade, a Google Business Profile call, a referral, or your website — and links it through to the job and the invoice. Over time, you can see:

• Which channels generate jobs that get paid quickly vs those that drag on past 30 days.
• Which lead sources produce the highest average invoice value.
• Where your cost per acquired job is lowest relative to what that job earns you.

When you know that your Google Business Profile leads pay in an average of 9 days and your Checkatrade leads average 27 days, you can make smarter decisions about where to invest your marketing budget. Invoicing and marketing attribution work together — one without the other leaves money on the table.