Realizing 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 should register for VAT (£90,000 per 12 months as of February 2025).
David Kindness is a Licensed Public Accountant (CPA) and tax professional: “Making a VAT bill isn’t difficult as soon as the fundamentals, however it might probably really feel overwhelming the primary few instances. You’re basically documenting a transaction whereas guaranteeing all of the required info is in place to adjust to tax legal guidelines,” he stated.
We’ll discuss you thru what you must embody, different VAT creation choices and the data it’s essential know for creating your bill.
How do I create a VAT bill?
Turning into VAT registered is a significant milestone for any enterprise, however it does imply together with a number of extras particulars in your bill, acknowledges Lee Murphy of The Accountancy Partnership. “In addition to offering all the typical particulars resembling your identify, handle, 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 fee was used on every merchandise,” he stated.
In case your bill consists of a number of items or companies, it’s essential to indicate every merchandise on a separate line. That manner you’ll be able to present the breakdown of VAT charges and expenses 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 device like Microsoft Phrase. Use our template to get you began and alter the small print as it’s essential.
“That stated, the Making Tax Digital guidelines imply that VAT registered companies should hold information electronically, so it’s properly value contemplating on the lookout for invoicing software program – and even accounting software program which incorporates an invoicing operate,” stated Murphy. “This kind of software program will mechanically 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 number of further admin (and all the additional time that takes!)”
What ought to I embody in my VAT bill?
In keeping with the federal government web site, invoices should embody:
- VAT registration quantity
- Distinctive identification quantity
- Firm identify, handle and speak to data
- Firm identify and handle 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 entire quantity owed, excluding VAT
- The entire quantity of VAT
- The speed of VAT being charged per merchandise (be clear if any gadgets are exempt or zero fee)
- Low cost on any VAT gadgets
Kindness stated that you must add the client’s identify, handle, and VAT quantity in the event that they’re VAT-registered. It’s particularly essential 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 ‘emblem design’ or ‘social media templates’.”
That is for a full bill. Different VAT invoices embody:
Modified VAT
A modified VAT receipt must be used in the event you’re charging retail provides over £250. It should embody all the similar info, however ought to embody the overall 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 have to be a full or modified bill.
A simplified bill consists of all costs as VAT inclusive fairly than unique. Embrace gross quantities, then complete quantities together with VAT. It doesn’t want the date of the client’s identify and handle both.
What else do I must know?
When coping with foreign currency, you should 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 international language – and supply it inside 30 days in the event you’re requested to by HMRC.
Word that whenever you’re changing the VAT from a international foreign money into sterling in your bill, it’s important to use the UK market promoting fee on the time of provide or HMRC’s interval charges of change.
In case your VAT fee 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 notice in your bill isn’t needed however reveals professionalism and care,” says Kindness, staying true to his identify. “It’s the type of element that helps construct good relationships with purchasers.”
Melissa Faraday, head of finance at MediaVision, stated:
- Maintain your bill clear, skilled, and straightforward to learn
- Save a replica of all invoices for tax functions. Within the UK, VAT information have to be stored for not less than six years
- Make sure you adjust to all VAT laws, together with registration thresholds and proper VAT charges. In the event you’re uncertain, seek the advice of knowledgeable
- Assessment your invoices for accuracy. Be certain all particulars are appropriate, particularly when sending them to the correct consumer
Failure to incorporate these things in your bill, might cease your prospects from having the ability to declare again the VAT you cost them, stated Catherine Heinen FCCA of TaxAssist Accountants.
“It’s actually essential to bill your prospects promptly,” stated her colleague Jo Nockels FCCA FMAAT, Head of Group Observe Capabilities at TaxAssist Accountants. “It offers the shoppers 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 small business takes you out and about, contemplate putting in instruments just like the QuickBooks On-line app in your telephone to be able to quote or bill while you’re nonetheless together with your buyer.”
Learn extra
What’s the VAT threshold? – At what level does your small enterprise have to begin paying VAT? Must you voluntarily pay VAT? And what are official methods to remain below 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, associate at Wellers, shares his tax planning ideas, specializing in Company Tax, enterprise charges and Nationwide Insurance coverage
