What to put on an invoice, and what to do when it is paid late

These rules apply across the UK. Only the court process for claiming a debt differs by nation.

What to put on every invoice

Keep a copy of every invoice you issue. You must keep records of your business income for Self Assessment.

If you trade under a business name

Leaving your name or address for service off an invoice without reasonable excuse is a criminal offence.

It can also cost you a debt claim. If you were in breach when you made the contract, the court must dismiss your claim to enforce it if the customer shows the breach cost them a claim against you or caused them financial loss. The court can let the claim continue if it decides that is just and equitable.

If you are VAT-registered

You must issue a VAT invoice for a taxable sale to another VAT-registered business. It shows more than a non-VAT invoice, including your VAT registration number, the time of supply, and the rate and amount of VAT. Low-value sales can use a shorter form.

Numbering

Number your invoices in sequence, such as INV-0042 then INV-0043. A VAT invoice must carry a sequential number based on one or more series. A simplified VAT invoice needs no number.

Payment terms and the due date

No law requires payment terms on an invoice. Agree a payment day with the customer in writing before you start work, and state it on the invoice with how to pay.

If you agree no day, a default period applies. It runs from the later of finishing the work and the customer receiving the invoice, so a late invoice delays your interest.

When a business customer pays late

The Late Payment of Commercial Debts (Interest) Act 1998 adds interest and a fixed sum to a late invoice. It applies when you and the customer both act in the course of a business, and a public authority counts as a business. It does not apply to consumers. You do not need to write these rights into your contract.

A contract term can replace statutory interest only if it gives a substantial remedy for late payment.

Work out what you are owed

Interest is simple, not compound. Multiply the debt by the annual rate, divide by 365, then multiply by the number of days late.

Chase the payment

Announced changes

The government plans to make e-invoicing compulsory for VAT invoices. A bill before Parliament would also cap payment terms. Neither changes your invoices or your late payment rights today.

Where to get help

If a larger customer will not pay and you have tried to resolve it, ask the Small Business Commissioner.