HMRC Compliant Invoices in the UK: Key Requirements for Tradespeople Under Making Tax Digital

Every invoice you raise is a legal document. Getting it right is not just about professionalism — it is about meeting HMRC’s requirements, protecting yourself in any dispute, and maintaining the digital records required under Making Tax Digital.

This guide sets out exactly what must appear on a UK invoice, the additional requirements for VAT-registered tradespeople, and how MTD affects your invoicing obligations.

What Every UK Business Invoice Must Contain

Whether you are VAT-registered or not, a standard UK business invoice must include:

Mandatory Information for All Invoices

The word “Invoice” clearly displayed
A unique invoice number (sequential numbering is best practice)
Your business name (as registered if applicable, or your trading name)
Your business address (a postal address where you can be contacted)
Your client’s name or business name
Your client’s address (the address for billing)
The date of the invoice
A description of the goods or services supplied — specific enough that the transaction is clearly identifiable
The quantity and unit price if applicable
The total amount owed in the currency being charged

This applies to all invoices regardless of whether you are VAT-registered. For sole traders, your business name may simply be your own name if you trade under it.

Additional Requirements for VAT Invoices

If you are VAT-registered, your invoices must meet additional requirements to be valid VAT invoices. A client who is also VAT-registered needs a valid VAT invoice to reclaim the VAT element.

A full VAT invoice must additionally include:

Your VAT registration number (format: GB followed by 9 digits)
The date of the supply (if different from the invoice date)
The VAT rate charged for each item (e.g., 20%, 5%, or 0%)
The net amount (excluding VAT) for each line item
The total VAT amount charged for the invoice
The gross total (including VAT)

For a job with items at different VAT rates, each rate must be clearly shown separately along with the VAT amount for each.

Simplified VAT Invoices

For sales under £250 (including VAT), you may issue a simplified VAT invoice which requires less detail. However, for commercial work between businesses, a full VAT invoice is almost always appropriate.

Credit Notes

If you need to correct a VAT invoice, issue a credit note with:

The word “Credit Note”
The original invoice number being credited
The reason for the credit
The amount being credited (and VAT amount if applicable)

Making Tax Digital and Invoice Records

Under Making Tax Digital for ITSA, every invoice you raise must be maintained as a digital record. This means:

The information from each invoice must be stored in your MTD-compatible software
Records must be kept for at least five years from the 31 January filing deadline for the relevant tax year
Paper invoices alone are not acceptable — there must be a digital record

This does not mean you cannot issue paper invoices to clients who prefer them. It means you must also maintain a digital copy or record of that transaction.

For most tradespeople using a mobile invoicing app, this is automatic — every invoice raised through the app is automatically retained as a digital record.

Common Invoice Errors Tradespeople Make

Not Including a Business Address

Many sole traders put only a mobile number on their invoices without any postal address. HMRC requires a business address on all invoices. This can be your home address if you work from home.

Missing or Duplicate Invoice Numbers

Sequential, unique invoice numbering is a legal requirement. Gaps in sequences are allowed, but duplicate numbers are not. Using dated references (e.g., 2026-0047) is acceptable and makes records easier to review.

Vague Descriptions

“Labour” or “Work completed” is not an adequate invoice description. A compliant description should clearly identify what was done: “Install new bathroom radiator including materials, pipework, and testing at [address].”

Not Including VAT Registration Number

VAT-registered tradespeople sometimes forget to include their VAT number, making the invoice invalid for the client’s VAT reclaim. Check your invoicing template includes this as a standard field.

Wrong VAT Rate

Tradespeople working in domestic property construction and renovation need to be aware that some work qualifies for the 5% reduced rate (e.g., certain energy-saving installations) or even zero-rate (e.g., new build residential). Charging 20% VAT on reduced-rate work is an overcharge to your client and a compliance error.

Not Separating Labour and Materials

While not strictly required, separating labour costs from materials on the invoice provides clarity, demonstrates value, and makes it easier to apply the correct VAT rate where different rates apply to different elements.

CIS (Construction Industry Scheme) Invoices

Tradespeople working as subcontractors under the Construction Industry Scheme have additional invoice requirements:

Your HMRC Unique Taxpayer Reference (UTR)
Your National Insurance number (for individual subcontractors)
Your CIS registration status
The gross amount, CIS deduction, and net amount (if the main contractor is making a CIS deduction)

Main contractors are required to verify subcontractors with HMRC and deduct CIS tax at the appropriate rate from payments.

Best Practices for Compliant Invoicing

Use professional invoicing software: Apps like Invoice Guru automatically include all required fields, calculate VAT correctly, and maintain your digital records in compliance with MTD requirements.

Keep a copy of every invoice: Your software should automatically retain copies of all invoices issued.

Number sequentially from day one: Start your invoice numbering system consistently and maintain it.

Send invoices promptly: Prompt invoicing not only helps cash flow — it also means the details of the job are fresh when you write the description.

Store client VAT numbers: If your clients are VAT-registered, store their VAT numbers and include them on invoices when required.

Penalties for Non-Compliant VAT Invoices

HMRC can issue penalties for persistent invoice errors. More practically, non-compliant invoices can result in:

Your client refusing to pay until you issue a corrected invoice
Your VAT-registered clients being unable to reclaim input VAT
HMRC rejecting your VAT reclaims during an inspection
Difficulties in any tax enquiry where your record-keeping is questioned

Getting invoicing right from the start is far simpler than correcting problems later. InvoiceGuru automates these compliance aspects — ensuring the correct fields are always present, VAT calculations are always accurate, and your digital records meet MTD requirements from day one.