What is an invoice?

What an invoice means

An invoice turns a sale into a debt. Once issued, the customer owes you the amount on it and, in your books, it becomes revenue and an amount owed to you in accounts receivable. It is different from a quote, which offers a price, and from a proforma invoice, which is sent before supply and is not a demand for payment in the accounting sense.

Every UK invoice should show:

• a unique, sequential invoice number
• your business name, address and contact details (company name and registered number for a limited company)
• the customer's name and address
• the invoice date and the date of supply
• a clear description of what was supplied, with quantities and prices
• the total due and your payment terms

If you are VAT registered, a full VAT invoice must also show your VAT number and, for each line, the rate and the VAT amount, with the total VAT charged.

Example

Line	Amount
Bathroom tiling, 3 days at £320	£960.00
Tile adhesive and grout	£140.00
Subtotal	£1,100.00
VAT at 20%	£220.00
Total due within 14 days	£1,320.00

Why it matters for your business

Invoices are the evidence behind your income, and HMRC expects you to keep them for at least five years after the 31 January filing deadline (sole traders) or six years from the end of the accounting period (companies). Missing or duplicated numbers are a red flag in an enquiry.

Clear payment terms get you paid faster. Under the Late Payment of Commercial Debts Act, you can charge business customers statutory interest at 8% above the Bank of England base rate, plus a fixed compensation sum, on overdue invoices.

Mistakes are corrected with a credit note, never by editing or deleting an issued invoice. Cloud software such as Xero or QuickBooks numbers invoices automatically and sends reminders.

Simplified VAT invoices

For retail sales of £250 or less including VAT, a VAT-registered business can issue a simplified invoice. It needs fewer details: your name, address and VAT number, the date, a description, the total and the VAT rate. A full VAT invoice is required if a VAT-registered customer asks for one or the sale is above £250. Under the domestic reverse charge in construction, the invoice must say that the customer accounts for the VAT.