Do I charge VAT
on my invoice?

Whether VAT goes on an invoice is decided in a fixed order. First, are you registered? If not, the answer is always no. If you are, the rate, the kind of supply and the customer decide what the invoice shows.

Question 1: are you VAT registered?

Only VAT-registered businesses charge VAT. If you are not registered, your invoices must not show VAT or a VAT number, whatever your customer expects. Most sole traders are not registered.

You must register when your VAT taxable turnover goes over the registration threshold of £90,000 in any rolling 12-month period, or when you expect it to go over in the next 30 days alone. You can also register voluntarily below the threshold, which some businesses do because their VAT-registered customers can reclaim the VAT anyway. The VAT registration calculator checks where you stand and compares the standard and flat rate schemes.

Question 2: what rate applies?

If you are registered, most goods and services are standard rated at 20%. Some take the reduced rate of 5%, such as children's car seats and home energy. Others are zero rated, such as most food and children's clothes: still taxable, but at 0%. The VAT calculator adds or removes VAT at each rate.

Question 3: is the supply exempt or outside VAT?

Some supplies are exempt from VAT, such as postage stamps and most financial and property transactions. Exempt supplies carry no VAT even when a registered business makes them. Others are outside the scope of UK VAT, which is common for services to business customers abroad because of the place of supply rules.

Question 4: is it construction work under CIS?

For building and construction services, the domestic reverse charge can apply. If you are VAT registered and supply standard or reduced rated construction services to a VAT and CIS registered customer who is not an end user, the customer accounts for the VAT instead of paying it to you. Your invoice shows the VAT but does not charge it. The reverse charge checker walks through HMRC's conditions, and the guide on reverse charge invoice wording shows what to write.

Question 5: who is the customer?

The customer affects the invoice, not usually the VAT. A VAT-registered customer needs a full VAT invoice to reclaim the VAT, and for a supply of £250 or less you can issue a simplified VAT invoice if the customer agrees. A consumer pays the VAT-inclusive price and cannot reclaim anything. For customers abroad, see invoicing in a foreign currency and check the place of supply.

Getting it wrong

If you charged VAT while unregistered, credit the invoice and reissue it without VAT, refunding the customer. If you are registered and left VAT off a taxable supply, you still owe the VAT: either credit and reissue the invoice with VAT added, or treat the price as VAT-inclusive and account for the VAT fraction, which at 20% is one sixth. The guide on how to correct an invoice covers credit notes.

What a VAT invoice needs

A VAT invoice adds your VAT registration number, the tax point, the rate and VAT amount for each item and the total VAT in sterling to the usual invoice details. See VAT invoice for the definition and what a UK invoice must include for the full list.

From April 2029

Every VAT invoice will have to be issued as an e-invoice from April 2029. If you are not VAT registered, that mandate does not apply to you. The e-invoicing guides explain what is known so far.

The decision in one table

Mixed invoices

An invoice can carry lines at different rates. A registered bookshop selling a zero-rated book and a standard-rated pen on one invoice shows each line with its own rate, and the VAT for each rate separately. What you cannot do is apply one rate to the whole invoice for convenience. Where goods and services form a single supply, one rate normally applies to the whole; the construction reverse charge, where materials follow the service, is an example of that principle.

Registering: the practical side

Crossing the threshold is not the only reason to register, and registering is more than a number on your invoices.

The VAT registration calculator compares the standard and flat rate schemes on your turnover, which often decides whether voluntary registration is worth it.

Working out the figures

Adding VAT is the net price times 1.2 at the standard rate. Taking VAT out of a VAT-inclusive price means dividing by 1.2, which leaves one sixth of the price as VAT. Taking 20% off a gross price removes too much. The VAT calculator does both, to the penny.

Watching the threshold

The threshold test looks back over any rolling 12 months, not the tax year. At the end of every month, add up your VAT taxable turnover for the last 12 months. If it is over £90,000, you must register within 30 days of the end of that month, and your registration takes effect from the first day of the second month after it. There is a second, forward-looking test too: if you expect your taxable turnover in the next 30 days alone to go over the threshold, you must register straight away. A large contract can trigger that on its own.

Exempt sales do not count towards the threshold, but zero-rated sales do. Registering late does not avoid the VAT: HMRC can backdate your registration to the date you should have registered, leaving you owing VAT on sales you invoiced without it.

A worked example

A self-employed electrician turns over £96,000 in the 12 months to the end of May, crossing the £90,000 threshold, and registers for VAT effective from 1 July. An invoice dated 28 June for a £2,000 rewire carries no VAT. An invoice dated 3 July for a £2,000 rewire for a household carries £400 VAT, total £2,400. The electrician's commercial customers, who are VAT registered, reclaim that VAT; the households cannot. The electrician updates the invoice template with the VAT number and checks whether any work for construction contractors now falls under the reverse charge using the reverse charge checker.

Common questions

Can I show "VAT: £0" if I am not registered? Leave VAT off altogether. A VAT line, even at zero, can make the invoice look like a VAT invoice. See invoicing without a VAT number.

My customer wants a VAT invoice but I am not registered. You cannot issue one. Explain that you are not VAT registered; there is no VAT for them to reclaim.

Does a zero-rated invoice count as a VAT invoice? An invoice for zero-rated supplies only is not a VAT invoice, according to VAT Notice 700, though it still records a taxable supply.

What about CIS deductions? They are separate from VAT. The contractor deducts CIS from your labour whatever your VAT position; see CIS invoice requirements.

VAT and the rest of your invoice

VAT changes a few lines on the invoice, not the whole thing. Everything a UK invoice needs, the number, both parties' details, the description, dates and totals, stays the same; a VAT invoice adds your VAT number, the tax point, the rate and VAT for each line, and the total VAT in sterling. The guide on what a UK invoice must include sets out both lists side by side, and how to write an invoice shows a finished example. If you invoice overseas, invoicing in a foreign currency explains why the VAT total must still be in pounds, and if you work in construction, reverse charge invoice wording shows the one case where VAT is shown but not charged.