How to correct
an invoice

Mistakes on invoices are common: a wrong price, a missing line, the wrong customer name, VAT charged when it should not have been. The fix is always the same principle. Leave the original in place, correct it with a new document, and keep the trail intact. That way your records, your customer's records and, for VAT, HMRC's view of both, all agree.

Why not just edit it?

Once an invoice has been sent, your customer may have entered it in their accounts, and if you are VAT registered it may already sit in your VAT records. Changing it in place leaves two versions of one number in the world. Deleting it leaves a gap in your numbering. A credit note and a new invoice avoid both problems.

Small errors that change nothing

If the error does not change any amount or legal detail, for example a typo in a description, and the customer has not yet processed the invoice, it is usually fine to agree with them that they will discard it and to send a corrected copy with the same number and date, clearly marked as a replacement. Keep both copies. When in doubt, use a credit note.

If you overcharged

Issue a credit note against the original invoice, either for the amount you overcharged or for the whole invoice. If you credit the whole invoice, then send a new invoice with the next number at the right amount. The customer pays the new invoice, or you refund or offset any overpayment.

If you undercharged

You have two options. Send a further invoice for the difference, referring to the original. Or credit the original in full and reissue it at the right amount, which gives the customer one clean invoice to pay. Some businesses send a debit note to request an extra amount; the customer still expects an invoice for it.

What a credit note shows

A credit note is a numbered document of its own. Give it its own series, for example CN-0001. For a VAT-registered business, VAT Notice 700 says a credit note is valid for VAT if it reflects a genuine mistake, overcharge or agreed reduction, gives the customer a real entitlement to a refund or offset, and clearly shows:

• its identifying number and date of issue
• your name, address and VAT registration number
• the customer's name and address
• a description of the goods or services being credited, with the quantity and amount for each
• the total credited excluding VAT
• the rate and amount of VAT credited, in sterling
• the number and date of the original VAT invoice

Where a refund is paid, the credit note must be issued within 14 days of the refund payment.

VAT charged by mistake

If you charged VAT while not registered, you cannot keep it. Credit the invoice and reissue it without VAT, refunding the VAT to the customer. If you charged the wrong rate, credit the VAT difference with a credit note showing the corrected figures. The VAT calculator works out the right figures.

Recording the correction

Record the credit note in your accounts as a reduction of income, in the period you issue it, and the new invoice as income. If the original fell in an earlier VAT period, the credit note normally adjusts the period in which it is issued. Keep the original invoice, the credit note and the replacement together, so anyone reviewing your records can follow what happened.

If you need to cancel it altogether

When the whole transaction falls away, for example the order was cancelled, credit the invoice in full and do not reissue. The guide on how to cancel an invoice covers that case.

Telling the customer

Whatever the error, send the credit note and any replacement together, with a line explaining what was wrong and what the customer should now pay. A clear note stops the customer paying both documents, or neither.

Which fix for which mistake

Credit notes and debit notes

A credit note reduces what the customer owes. A debit note is a request to increase it, or, from the buyer's side, a note asking the supplier for a credit. Suppliers in the UK usually correct undercharges with a further invoice rather than a debit note, because an invoice is what the customer's system is set up to pay. If a customer sends you a debit note, treat it as a request: check it, and if it is right, issue a credit note in reply.

Prompt payment discounts

If you offer a discount for paying early, VAT Notice 700 lets a VAT-registered business handle it in one of two ways. Either issue a credit note when the customer takes the discount, adjusting the VAT, or state the discount terms on the original invoice with a statement that the customer can only recover the VAT actually paid. HMRC recommends wording such as: "A discount of X% of the full price applies if payment is made within Y days of the invoice date. No credit note will be issued." The guide on invoice payment terms covers early payment discounts.

Corrections that change a VAT return

If the error was on an invoice already included in a VAT return, the credit note normally adjusts the VAT return for the period in which you issue it, rather than reopening the old return. Larger errors or deliberate mistakes follow different rules, set out in HMRC's guidance on correcting VAT errors. Keep the paperwork together so the adjustment is easy to trace.

A worked example

A decorator, VAT registered, invoices a café £1,200 plus £240 VAT, total £1,440, as INV-0210. The agreed price was £1,000 plus VAT. The decorator issues CN-0012 dated the next day: £200 credited, £40 VAT credited, referring to INV-0210 and its date, with the reason "overcharge: agreed price £1,000". The café now owes £1,200. Both documents are kept, and CN-0012 reduces the decorator's output VAT for the period in which it was issued.

Common questions

Can I change the date on an invoice? Not once it has been sent and recorded. Credit it and reissue with the right date if the date matters, for example for a tax point.

Does the credit note need VAT if the original did? Yes. It shows the VAT credited at the same rate as the original invoice, in sterling.

What if the customer already paid the wrong amount? Refund or offset the overpayment, and issue the credit note within 14 days of any refund. For an underpayment against a corrected invoice, chase the balance like any other: see how to chase an unpaid invoice.

Is there a tool for the VAT figures? The VAT calculator adds or removes VAT at the right rate, and the invoice number generator sets up separate invoice and credit note series.

If you are not VAT registered

The same method works, with fewer rules. You do not need a VAT-compliant credit note, but a numbered credit note that refers to the original invoice is still the clearest record that an invoice was reduced or withdrawn rather than left unpaid. It keeps your income figure right, it gives the customer something to file, and it keeps your invoice numbering free of gaps.

When the correction comes from a dispute

Sometimes an invoice is corrected because the customer challenged it. Agree the corrected amount in writing first, then issue the credit note for the agreed reduction, so the paperwork records the outcome rather than the argument. The guide on invoice disputes explains how to reach that agreement, and how to cancel an invoice covers withdrawing one completely.

Keeping the trail

File the original invoice, the credit note and any replacement together, and keep them for as long as the rest of your records: at least 5 years after the 31 January filing deadline for a sole trader, and 6 years for VAT records. The guide on how long to keep invoices has the detail. Anyone looking at your records later, including HMRC, should be able to follow what happened from those three documents alone.

The rule of thumb is simple: never change the past, add to it. Every correction is a new, dated, numbered document that points back to the one it corrects, so the full story is always on file.