"Can you reissue this? Our system won't accept it." If you've ever had an invoice bounced back by a customer's accounts team — or watched HMRC query a VAT claim because a supplier's paperwork was wrong — you already know that an invoice is more than a request for money. It's a legal document, and UK law is surprisingly specific about what has to be on it.
The good news: the rules are simple once you've seen them laid out. Here's the complete checklist — what every invoice must include, the extra requirements for VAT invoices, the differences between sole traders and limited companies, and the mistakes that quietly delay payment.
What Every UK Invoice Must Include
Whether or not you're VAT registered, every invoice you issue needs:
- The word "invoice" — clearly marked, so it can't be mistaken for a quote or statement.
- A unique identification number — sequential is best (INV-0042, INV-0043...). Gaps and duplicates are the first thing an auditor asks about.
- Your business name, address and contact information — enough for the customer to reach you with a query.
- The customer's name and address — the business you're billing, not just a first name.
- A clear description of the goods or services — "Consultancy" invites questions; "Website redesign — homepage and checkout, per proposal dated 3 July" gets approved.
- The supply date — when the goods or services were actually provided, if different from the invoice date.
- The invoice date — the clock for payment terms usually starts here.
- The amount(s) being charged — itemised where there's more than one line.
- The total amount owed — and the VAT amount, if you're VAT registered.
That's the legal floor. In practice you should also add your payment terms and bank details — more on those below — because a legally valid invoice that's missing the sort code still doesn't get paid.
Sole Trader? Two Extra Rules
If you trade under a business name — say, "Bright Spark Electrical" — your invoices must also show:
- Your own name, alongside the trading name ("Jane Smith, trading as Bright Spark Electrical")
- An address where legal documents can be served — usually your business address
This isn't bureaucratic decoration. If a dispute ends up in court, the invoice needs to identify the actual legal person behind the trading name.
Limited Company? Use Your Full Registered Name
Limited companies must show the full company name exactly as it appears on the certificate of incorporation — including the "Ltd" or "Limited". It's also standard practice (and required on business letters under the Companies Act) to include your registered number, country of registration, and registered office address, so almost every properly set-up company puts them in the invoice footer.
One quirk worth knowing: if you choose to put directors' names on your invoices, you must name all of them. Naming one and not the others isn't allowed. Simplest fix — name none.
VAT Invoices: The Stricter Tier
Once you're VAT registered, most of your invoices need to be full VAT invoices, and the requirements step up. On top of everything above, a full VAT invoice must show:
- Your VAT registration number
- The tax point (time of supply), if it differs from the invoice date
- For each line: the unit price excluding VAT, the quantity, and the VAT rate applied
- The total amount excluding VAT
- The total VAT amount, in sterling
- The rate of any cash or settlement discount offered
Two deadlines matter here. You must normally issue a VAT invoice within 30 days of the supply (or of payment, if you were paid in advance). And your customer generally needs a valid VAT invoice to reclaim the input VAT — which is exactly why big customers' accounts teams bounce non-compliant invoices back. A missing VAT number on your invoice is a real cash problem for them.
Not sure what the VAT on a given amount should be, or need to work backwards from a gross figure? Our free VAT calculator does both.
Simplified VAT Invoices (Sales of £250 or Less)
For retail supplies of £250 or less including VAT, you can issue a simplified VAT invoice showing just: your name, address and VAT number; the time of supply; a description of the goods or services; the VAT rate per item; and the total including VAT. This is what most till receipts from VAT-registered shops actually are.
Modified VAT Invoices (Retail Sales Over £250)
For retail supplies over £250, and only if your customer agrees, you can issue a modified invoice showing VAT-inclusive line values — as long as the invoice still shows the VAT total and the VAT-exclusive total separately.
In the Construction Industry? Show the CIS Split
If you're a subcontractor paid under the Construction Industry Scheme, your invoices should clearly separate labour from materials. The contractor's CIS deduction (20% for registered subcontractors, 30% if unregistered) applies to the labour element only — so an invoice that lumps everything together usually means too much tax deducted at source. Our CIS calculator shows exactly what should be deducted from a given invoice, and our CIS refund guide explains how to get overpaid tax back.
Payment Terms: The Part the Law Leaves to You (Mostly)
The law doesn't force you to offer any particular payment terms — but it does set defaults if you stay silent. Under UK late payment legislation, if no terms are agreed, payment is due 30 days after the customer receives your invoice (or the goods/services, if later). After that, you're automatically entitled to:
- Statutory interest at 8% above the Bank of England base rate
- Fixed compensation of £40, £70 or £100 per invoice, depending on the debt's size
So state your terms explicitly on every invoice — "Payment due within 14 days of invoice date" — along with your bank details, and let the statutory regime be your backstop rather than your default. If you're already owed money, our free late payment interest calculator works out what you can claim, and our guide to chasing unpaid invoices has copy-and-paste templates for the whole escalation ladder.
How Long Do You Have to Keep Invoices?
- Limited companies: at least 6 years from the end of the financial year
- VAT-registered businesses: 6 years of VAT records, including invoices issued and received
- Sole traders: at least 5 years after the 31 January filing deadline for the relevant tax year
And with Making Tax Digital for Income Tax now live for sole traders and landlords earning over £50,000, "a shoebox of paper" no longer counts — records need to be digital. Scanned or digitally captured invoices are fine; HMRC doesn't require paper originals as long as the digital copy is complete and legible.
The Mistakes That Get Invoices Paid Late
After processing thousands of supplier invoices through our own systems, the same handful of errors come up constantly:
- Missing or wrong PO number — for larger customers this is the #1 cause of invoices sitting in a queue
- Wrong legal entity — billing "Acme" when the contract is with "Acme Group Holdings Ltd"
- No due date — "net 30" buried in small print, or nothing at all
- Duplicate invoice numbers — which make suppliers look disorganised and trip duplicate-detection systems (here's how we catch duplicate bills in Xero)
- Missing VAT number on a VAT invoice — instant bounce-back from any customer who wants their input VAT
Every one of these is a five-second fix at creation time and a two-week delay if it's caught in your customer's approvals queue.
The Other Side of the Ledger
Everything above is about the invoices you send. But if you run a business — or a bookkeeping practice — you're also drowning in the invoices you receive, and every one of them has to be checked and keyed into your accounts. That's where the real time goes: our invoice cost calculator puts a number on it, and for most small practices it's genuinely uncomfortable.
Our AI Invoice Importer reads supplier invoices — PDFs, scans, photos — extracts every field covered in this guide, and posts them straight into Xero as draft bills. It checks the arithmetic, flags duplicates, and never mis-keys a VAT number at 5pm on a Friday.
The Bottom Line
A compliant invoice is a checklist, not a judgement call: identify both parties properly, describe the work clearly, number it uniquely, date it, show the VAT correctly if you're registered, and state your terms. Get the checklist right once — in your template — and every invoice after that is automatically both legal and easy to pay.
Drakon Systems builds free tools for UK accountants, bookkeepers, and small business owners. From VAT calculations to CIS deductions to AI-powered invoice processing — we're here to save you time and money.