Figuring out tips on how to create a VAT bill is crucial for a lot of small companies.
Maybe you’ve arrange as a small enterprise or are incomes sufficient that you need to register for VAT (£90,000 per yr as of February 2025).
David Kindness is a Licensed Public Accountant (CPA) and tax skilled: “Making a VAT bill isn’t sophisticated as soon as you already know the fundamentals, however it could actually really feel overwhelming the primary few occasions. You’re primarily documenting a transaction whereas making certain all of the required info is in place to adjust to tax legal guidelines,” he mentioned.
We’ll discuss you thru what it is best to embrace, different VAT creation choices and the information that you must know for creating your bill.
How do I create a VAT bill?
Changing into VAT registered is a serious milestone for any enterprise, however it does imply together with just a few extras particulars in your bill, acknowledges Lee Murphy of The Accountancy Partnership. “In addition to offering the entire normal particulars equivalent to your title, tackle, and quantity, you’ll additionally want to offer a breakdown of how a lot VAT has been charged, what it was charged on, and what price was used on every merchandise,” he mentioned.
In case your bill contains a number of items or companies, it’s vital to point out every merchandise on a separate line. That manner you may present the breakdown of VAT charges and costs extra clearly.
Some accounting platforms have their very own methods of making these paperwork, which is pretty easy. In any other case, you might simply use a word-processing software like Microsoft Phrase. Use our template to get you began and alter the small print as that you must.
“That mentioned, the Making Tax Digital guidelines imply that VAT registered companies should preserve information electronically, so it’s nicely value contemplating on the lookout for invoicing software program – and even accounting software program which incorporates an invoicing perform,” mentioned Murphy. “Such a software program will robotically replace your information every time you create and ship an bill, after which use this info to maintain your VAT reporting updated with out a lot of additional admin (and all the additional time that takes!)”
What ought to I embrace in my VAT bill?
In response to the federal government web site, invoices should embrace:
VAT registration quantity
Distinctive identification quantity
Firm title, tackle and get in touch with information
Firm title and tackle of buyer
An in depth breakdown of what you’re charging for, damaged down by good/service
The date the products/companies have been supplied
The date of the bill
VAT due
The overall quantity owed, excluding VAT
The overall quantity of VAT
The speed of VAT being charged per merchandise (be clear if any gadgets are exempt or zero price)
Low cost on any VAT gadgets
Kindness mentioned that it is best to add the shopper’s title, tackle, and VAT quantity in the event that they’re VAT-registered. It’s particularly vital for companies working internationally as a result of this helps each events keep inside the guidelines.
“Say you’re invoicing for graphic design companies—don’t simply write ‘design work’. As a substitute, break it down into specifics like ‘brand design’ or ‘social media templates’.”
That is for a full bill. Different VAT invoices embrace:
Modified VAT
A modified VAT receipt must be used if you happen to’re charging retail provides over £250. It should embrace the entire similar info, however ought to embrace the whole quantity together with VAT.
Simplified VAT
Simplified invoices can be utilized for invoices as much as £250. Of it totals greater than £250 then it should be a full or modified bill.
A simplified bill contains all costs as VAT inclusive moderately than unique. Embody gross quantities, then whole quantities together with VAT. It doesn’t want the date of the shopper’s title and tackle both.
What else do I must know?
When coping with foreign currency echange, you need to present the VAT payable in sterling in your bill. That’s if the provision was within the UK.
Maintain an English translation of any bill written in a overseas language – and supply it inside 30 days if you happen to’re requested to by HMRC.
Be aware that while you’re changing the VAT from a overseas forex into sterling in your bill, it’s a must to use the UK market promoting price on the time of provide or HMRC’s interval charges of alternate.
In case your VAT price modifications or new guidelines come into impact, staying on high of updates will prevent from making expensive errors.
“Including a small contact like a thanks word in your bill isn’t mandatory however reveals professionalism and care,” says Kindness, staying true to his title. “It’s the type of element that helps construct good relationships with shoppers.”
Melissa Faraday, head of finance at MediaVision, mentioned:
Maintain your bill clear, skilled, and simple to learn
Save a duplicate of all invoices for tax functions. Within the UK, VAT information should be stored for at the very least six years
Make sure you adjust to all VAT rules, together with registration thresholds and proper VAT charges. In case you’re not sure, seek the advice of knowledgeable
Overview your invoices for accuracy. Ensure that all particulars are right, particularly when sending them to the best shopper
Failure to incorporate this stuff in your bill, might cease your prospects from with the ability to declare again the VAT you cost them, mentioned Catherine Heinen FCCA of TaxAssist Accountants.
“It’s actually vital to bill your prospects promptly,” mentioned her colleague Jo Nockels FCCA FMAAT, Head of Group Observe Capabilities at TaxAssist Accountants. “It provides the purchasers an ideal impression that you’re skilled and on high of your affairs, and the earlier you bill; the earlier you receives a commission. If your enterprise takes you out and about, take into account putting in instruments just like the QuickBooks On-line app in your telephone as a way to quote or bill if you are nonetheless together with your buyer.”
Learn extra
What’s the VAT threshold? – At what level does your small enterprise have to start out paying VAT? Do you have to voluntarily pay VAT? And what are reputable methods to remain underneath the VAT threshold?
Tax benefits of a restricted firm versus sole dealer – Haydn Rogan explains the tax benefits and drawbacks of standing as a restricted firm and as a sole dealer
Tax planning ideas for small companies – Ralph Hearn, companion at Wellers, shares his tax planning ideas, specializing in Company Tax, enterprise charges and Nationwide Insurance coverage
