How to invoice as a sole trader

What must a sole trader’s invoice include?

The same core items as any UK invoice, plus two extras that apply to sole traders specifically. The core list from GOV.UK is a unique number, your name, address and contact information, the customer’s name and address, a description of what you are charging for, the supply date, the invoice date, the amounts, VAT if applicable and the total owed. As a sole trader you must also show your own name alongside any business name you trade under, and an address where legal documents can be delivered. A PO box is not enough for that last item; use your home or business address.

How should I number invoices?

One unbroken sequence. HMRC expects to be able to follow your invoices from the first to the last without gaps, because a gap looks like income that was invoiced and not declared. A prefix is fine (INV-0001, or 2026-001 for a yearly sequence) as long as the numbers inside it run in order. If an invoice is wrong, do not delete it: issue a credit note and a new invoice, so the sequence stays intact and your customer’s records match yours.

Do I charge VAT as a sole trader?

Only if you are VAT-registered, and registration is compulsory once your VAT-taxable turnover in any rolling 12 months passes £90,000. Below that you can register voluntarily, which lets you reclaim VAT on your costs but means charging 20% to customers who may not be able to reclaim it. If you are not registered, the invoice must not mention VAT at all: no VAT number, no rate, no VAT line. Our VAT threshold guide explains the rolling test, and the VAT calculator handles the arithmetic once you are registered.

What does a worked example look like?

Sam, a freelance designer who is not VAT-registered, spends 3 days on a brand identity at £350 a day and buys £60 of stock images that the client agreed to cover.

No VAT line appears because Sam is not registered. If Sam were registered, the invoice would add £222.00 of VAT at 20%, making £1,332.00, and would need Sam’s VAT number and the VAT rate against each line. Build this exact invoice in the invoice generator, which hides the VAT fields until you tick VAT-registered.

What payment terms should I set?

Put an actual date on the invoice. If you agree nothing, the Late Payment of Commercial Debts (Interest) Act gives a business customer 30 days from receiving the invoice or the goods, whichever is later, and you can charge statutory interest after that. Shorter terms are normal for small jobs: 14 days is common, and 7 days or payment on completion is reasonable for a one-day job. For bigger projects ask for a deposit and invoice in stages, so no single invoice is large enough to hurt if it is late. Write the terms on the quote as well, because terms the customer saw before agreeing are far easier to enforce.

How do I send and track invoices?

Email the PDF with a one-line message that names the invoice number, the amount and the due date. Send it to the person who pays, which in a larger company is accounts payable rather than the manager who hired you, and ask whether they need a purchase order number on it. Keep a simple log: invoice number, customer, amount, date sent, due date, date paid. A spreadsheet is enough, and our templates include one. Check the log weekly; an invoice that is a week overdue and un-chased is a signal to the customer that you are not watching.

What happens if the customer pays late?

Send a polite reminder the day after the due date, then follow the sequence in how to chase late payments. Business customers can be charged statutory interest at 8% above the Bank of England base rate, currently 11.75%, plus fixed compensation. On Sam’s £1,110.00 invoice paid 30 days late that is £10.72 of interest and £70 of compensation. The late payment interest calculator does the sum for any date range.

What records do I need to keep?

A copy of every invoice you issue and every one you receive, your bank statements and your expense receipts, for at least five years after the 31 January filing deadline of the tax year they belong to. Your invoices are the evidence behind the turnover figure on your self assessment return. If your total trading income is under the £1,000 trading allowance you may not need to file at all, but keep the invoices anyway. When you do file, the self assessment calculator shows what the year’s invoices will cost in tax and National Insurance.