How to invoice
as a sole trader

As a sole trader you and your business are the same legal person, and your invoices reflect that. The rules are simple, but three things trip people up: which name to use, whether to charge VAT, and how invoices fit the records HMRC expects you to keep.

Your name, and your business name

GOV.UK requires every sole trader's invoice to show your name and any business name you use. You can trade as "Jo Smith" or as "Jo Smith trading as Smith Joinery"; either way your own name must appear. If you use a business name, you must also give an address where legal documents can be delivered to you. That can be your business premises rather than your home, as long as documents sent there will reach you.

A business name must not look like a limited company's: do not add "Ltd" or "Limited" unless you have incorporated.

Everything else on the invoice

The rest follows the checklist for any invoice: a unique invoice number, the customer's name and address, a clear description, the supply date, the invoice date, the amounts and the total owed. The guide on what a UK invoice must include has the full list, and the invoice number generator sets up a numbering format.

VAT: usually none

Most sole traders are not VAT registered, and an unregistered business must not charge VAT or show a VAT number. You must register once your taxable turnover goes over the VAT registration threshold in any rolling 12 months, and you can register voluntarily below it. The guide do I charge VAT on my invoice walks through the decision.

Payment terms

Decide your terms before the work starts and put them on the invoice as a date, not just a number of days. Many sole traders ask for 7 or 14 days. If you never agreed a date with a business customer, the law treats payment as late 30 days after they receive the invoice or the work, whichever is later. The invoice due date calculator turns any term into a date.

Where the money goes

A sole trader can take payment into a personal account, though GOV.UK suggests checking with your bank which type of account you can use for business transactions. A separate account makes it far easier to match payments to invoices and to see your business income at a glance. The guide on bank accounts for invoicing covers the choice.

Invoices and your tax records

Your invoices are part of the business records you must keep: all sales and income, alongside your expenses. Keep them for at least 5 years after the 31 January submission deadline of the tax year they relate to. The guide on how long to keep invoices has the detail.

How an unpaid invoice affects your tax depends on your accounting basis. Under the cash basis, which most sole traders now use, income counts when it arrives, so an invoice paid in May counts in May. Under accruals, it counts when the work is done. The sole trader tax calculator shows what your profit means for your tax bill.

Making Tax Digital

If your qualifying income puts you in Making Tax Digital for Income Tax, you keep digital records and send quarterly updates from compatible software. Invoicing from the same software keeps your income records complete without copying anything across.

A sole trader invoice, start to finish

Agree the price and payment terms before you start. Finish the work and write the invoice the same day. Send it as a PDF to the person who pays, with the due date in the email. Record it, and record the payment when it arrives. Chase politely the day after the due date if nothing has come. Done that way, invoicing takes minutes and your records build themselves.

The sole trader's invoicing year

Invoicing is not a one-off task; it runs through your whole tax year, and each stage feeds the next. The table shows how the pieces fit.

Registering before your first invoices

You can invoice before you register with HMRC, but you must register for Self Assessment by 5 October after the end of the tax year you started, once your trading income goes over the £1,000 trading allowance. The guide on invoicing before registering as self-employed covers the first months.

Cash basis or accruals: what your invoices mean for tax

Most sole traders now use the cash basis. Under it, income counts in the tax year you receive it. An invoice you send in March but are paid for in April counts in the new tax year. Under the traditional accruals basis, income counts when you earn it, so the same invoice would count in March whether or not it had been paid. Your choice changes which year your invoices land in, not how much tax you pay overall. Whichever you use, your list of invoices is the backbone of the income figure on your return. The sole trader tax calculator turns that figure into an estimated tax bill.

Getting paid: a sole trader's toolkit

Small businesses have the same legal rights as big ones when a business customer pays late:

• Statutory interest at 8% over the Bank of England base rate, from the day after the due date. The late payment interest calculator works it out.
• Fixed compensation of £40, £70 or £100 depending on the debt.
• A letter before action, then a court claim if needed; see small claims for an unpaid invoice.

For household customers, the Late Payment Act does not apply, so take a deposit for larger jobs and agree payment on completion.

Invoicing different kinds of customer

For construction work, see CIS invoice requirements. For corrections, see how to correct an invoice, and for payment terms in depth, invoice payment terms.

Common questions from sole traders

Can I invoice from my personal name only? Yes. A business name is optional. If you do use one, add your own name too, and an address for legal documents.

Do I need an accountant to send invoices? No. Invoicing is something you can do yourself with a template or invoicing software. An accountant helps with the tax return, not with sending invoices.

What if a customer wants a receipt as well? An invoice asks for payment; a receipt confirms it. Send a receipt or mark the invoice paid if the customer asks for proof of payment. See invoice vs receipt.

Can I backdate an invoice? Date an invoice on the day you issue it, and show the earlier supply date separately. Dating an invoice earlier than the day you actually raised it misstates your records, and for a VAT-registered business the invoice date and tax point matter for which VAT return the sale belongs to.

What if my customer is also a sole trader? Treat them as a business customer. The Late Payment Act applies, and if they are an individual rather than a company, the debt claims pre-action protocol applies before any court claim, which means a formal letter and 30 days to reply.

Invoicing well is cheap insurance

The habits in this guide take minutes: the right name at the top, a new number every time, the due date as a date, the invoice sent the day the job ends, and a copy kept. They pay back every time a customer pays on time, every time a query is settled by the description, and every time HMRC asks to see your records and you can hand them over in order.