A UK VAT invoice has to show a unique sequential number, the date of the work (the time of supply), your name, address and VAT number, the client's name and address, a description of what you did, and for each line the quantity, unit price, VAT rate and amount before VAT, then the totals with the VAT figure in sterling. You have to send it within 30 days of doing the work, and you only need one when you're VAT registered and billing another VAT-registered business.
That's the checklist, and HMRC's own notice covers it well. What it doesn't do is walk through the four invoices an agency actually sends: the monthly retainer, the 50% deposit, the client in New York, and the UK client who wants to pay in euros. Those are where invoices go wrong, so most of this article is about them.
This is a guide to the rules as HMRC publishes them, checked on 12 November 2026. It isn't tax advice for your business, and if you're unsure how a particular contract is treated, your accountant is the person to ask.
Do you need a VAT invoice at all?
Only VAT-registered businesses issue VAT invoices. You must register once your taxable turnover over the last 12 months goes over £90,000, or as soon as you expect to go over it in the next 30 days. You can also register voluntarily below that, which some agencies do because their clients are all VAT registered and can reclaim it anyway.
Once registered, HMRC's record-keeping notice says you must issue a VAT invoice when you supply standard or reduced rate services to another VAT-registered person. Most agency work is standard rated at 20%.
If you aren't registered, you still owe your clients a proper invoice. Gov.uk lists what every invoice needs: a unique identification number, your business name, address and contact details, the client's company name and address, a clear description of what you're charging for, the supply date, the invoice date, the amounts, and the total owed. A limited company has to use its full registered name, and if you list any directors' names you have to list all of them. What you can't do is add VAT to an invoice when you aren't registered.
What a full VAT invoice must show
Section 4.1 of VAT Notice 700/21 lists the details for a full VAT invoice. In plain terms:
| Field | What it means on an agency invoice |
|---|---|
| Sequential number | Unique, from one or more series. "ACME-2026-014" is fine if ACME's series has no gaps |
| Time of supply | The date the work was done or the period it covers, which is your tax point |
| Date of issue | Only needed if it differs from the time of supply |
| Your name, address and VAT number | All three, every time |
| Client's name and address | The legal entity you contracted with, not the person who briefed you |
| Description | Enough to identify the service. "Website build, phase 2: templates and CMS" rather than "Services" |
| Quantity or extent | Hours, days, or "1" for a fixed fee |
| Unit price | Your hourly or day rate, or the fixed fee |
| VAT rate per line | 20% for most agency work |
| Amount excluding VAT per line | Quantity times unit price |
| Total excluding VAT | The subtotal |
| Cash discount rate | Only if you offer one for early payment |
| Total VAT in sterling | Even if the rest of the invoice is in another currency |
There are two shorter formats. A simplified invoice is allowed when the charge is £250 or less including VAT, and a modified invoice shows VAT-inclusive values for larger amounts. Both exist mainly for retail, and an agency billing business clients should send full invoices. A client who wants to reclaim the VAT you charged will ask for one anyway.
You must issue the VAT invoice within 30 days of the supply, and keep a copy of every one you issue.
The monthly retainer
A retainer is what HMRC calls a continuous supply of services: you work through the month and bill on a regular cycle. The tax point isn't the end of the month. For continuous supplies, gov.uk says a tax point is created every time you issue a VAT invoice or receive a payment, whichever happens first.
That matters if you bill in advance, which is the right call for your cash flow. Say you invoice a £6,000 November retainer on 1 November:
Retainer, November 2026 (capped at 50 hours) £6,000.00
VAT at 20% £1,200.00
Total £7,200.00
The tax point is 1 November, so the £1,200 of VAT belongs in the VAT return covering 1 November, whether or not the client has paid. If the client takes 45 days to pay and your quarter ends in between, you hand HMRC VAT you haven't collected yet.
Some suppliers avoid this by sending a request for payment instead of a VAT invoice, then issuing the VAT invoice when the money arrives. HMRC's internal manual says a request for payment doesn't create a tax point as long as it isn't a VAT invoice, and suppliers usually mark it "This is not a VAT invoice." Talk to your accountant before you set this up, because it changes your paperwork and depends on which VAT accounting scheme you use.
Put the period and the cap on the retainer line. "Retainer, November 2026, up to 50 hours" is a better description than "Monthly retainer" for HMRC, and it's also the line that stops month nine of a retainer quietly losing money, because every invoice restates what the fee buys.
The deposit
Fixed-fee projects often start with a deposit. For advance payments, gov.uk says the tax point is the earlier of the date you issue a VAT invoice for it, or the date you receive it. The balance gets its own tax point later, when you invoice it or get paid.
A hypothetical £24,000 website build, 50% up front:
| Invoice | Net | VAT 20% | Total | Tax point |
|---|---|---|---|---|
| Deposit, on signature | £12,000 | £2,400 | £14,400 | Date of invoice or payment, whichever is first |
| Balance, on launch | £12,000 | £2,400 | £14,400 | Date of invoice or payment, whichever is first |
| Project total | £24,000 | £4,800 | £28,800 |
Describe the deposit so it can't be mistaken for anything else: "Deposit, 50% of fixed fee for website build per proposal 2026-031." When the balance invoice goes out, show the full fee, the deposit already invoiced, and the balance due, so the client's finance team can match both payments to one project. If the project runs over and you agree extra work, that's a separate line or invoice with its own description, which is easier when the change request was written down before the work started.
Hourly and day-rate work
Time-and-materials invoices satisfy the "quantity and unit price" fields naturally: 37.5 hours at £95 is both. The two things to get right are the period and the description.
Put the dates the hours were worked on the invoice, not only the invoice date. "Development, 1–31 October 2026: 37.5 hours at £95" gives HMRC the time of supply and gives the client what they need to check the hours. If you split by role or rate, use one line per rate, because each line needs its own quantity and unit price.
Keep the timesheet behind it. HMRC doesn't need it on the invoice, but your client will ask the first time the hours look high, and an invoice you can back up line by line gets paid faster than one you have to defend from memory.
Clients outside the UK
This is where agency invoices most often carry VAT they shouldn't. Under VAT Notice 741A, the general rule for business-to-business services is that the supply is made where the customer belongs. Design, development, marketing and consulting sold to a business in the US, Germany or the UAE are supplied in the customer's country, so they're outside the scope of UK VAT, and you shouldn't charge UK VAT on them.
Three practical points follow from the notice.
You need evidence the customer is a business. For EU customers, HMRC calls a VAT number the best evidence. Where there isn't one, commercial documents showing the customer is in business will do. Keep that evidence with the client's records. If a customer can't show they're in business, the supply is treated as business-to-consumer, and the default rule for that is the place where you belong, meaning UK VAT applies.
The UK reverse charge isn't involved. Section 5.3 says the reverse charge doesn't apply to services supplied in another country, because they're outside the scope of UK VAT altogether. The client may have to account for tax under their own country's rules, and the notice tells you to consider those, but that's the client's local position, not a UK VAT line on your invoice.
HMRC doesn't prescribe wording. The notice asks for descriptions that aren't generic. Many agencies add a short note, something like "Supply of services outside the scope of UK VAT, customer belongs in the Netherlands", so the client's finance team knows why there's no VAT line and doesn't send it back.
A hypothetical month for a 6-person agency with a mix of clients:
| Client | Where they belong | Business? | UK VAT on the invoice |
|---|---|---|---|
| Brighton retailer, monthly retainer | UK | Yes | 20% |
| Amsterdam SaaS company, product design | Netherlands | Yes, VAT number on file | None, outside the scope |
| New York startup, development | US | Yes, company documents on file | None, outside the scope |
| Founder in Dublin paying personally for a portfolio site | Ireland | No | Check the B2C rules before invoicing |
The last row is the one to slow down on. Section 12 of the notice lists some services supplied to consumers outside the UK that are also treated as supplied where the customer belongs, and whether yours is one of them depends on the work. Ask before you send it.
Invoicing in dollars or euros
You can invoice in any currency. For a UK supply, the notice says the total VAT must be shown in sterling. A Manchester client who's agreed to pay you in euros gets an invoice in euros with an extra line showing the VAT in pounds. Agree with your accountant which exchange rate you use for the conversion and use the same one every time.
For a US client invoiced in dollars, there's no UK VAT, so there's nothing to convert. You'll still want to record the sterling value of the invoice and of the payment when it lands, because the two rarely match after bank fees and exchange movement, and the gap is real money off your margin.
A template you can copy
A full VAT invoice for a UK client, laid out in the order HMRC lists the fields. Change the bracketed parts and keep the structure.
[Your Agency Ltd]
[Registered address]
VAT registration number: GB [123 4567 89]
Company number: [01234567], registered in [England and Wales]
INVOICE [ACME-2026-014]
Date of issue: [12 November 2026]
Time of supply: [1–31 October 2026]
Bill to:
[Client Company Ltd]
[Client address]
Description Qty Unit price VAT Net
Design, October 2026: brand system updates 18 h £95.00 20% £1,710.00
Development, October 2026: landing pages 22 h £95.00 20% £2,090.00
Total excluding VAT £3,800.00
VAT at 20% £760.00
Total due £4,560.00
Payment due: [12 December 2026], 30 days from invoice
Bank: [account name, sort code, account number]
The company number and place of registration aren't on HMRC's invoice list. Gov.uk requires them on business letters, order forms and websites, and putting them on the invoice saves a client asking which entity they're paying.
For an overseas business client, drop the VAT column, show the total in the agreed currency, add the client's VAT or company number, and add your note about the supply being outside the scope of UK VAT.
Payment terms and late payment
If you don't agree terms, the law treats a business payment as late 30 days after the client gets the invoice or after you deliver the work, whichever is later. Once it's late you can charge statutory interest at 8% plus the Bank of England base rate and a fixed debt recovery sum of £40 on debts under £1,000, £70 from £1,000 to £9,999.99, and £100 at £10,000 or more.
Few agencies charge it, because the client relationship is worth more than the interest. Putting the terms on the invoice still helps. A due date as a date, not "net 30", is harder to lose track of on both sides, and a reminder a week before it's due, sent while it's still friendly, does more than any interest clause.
Mistakes that get invoices sent back
- Billing the wrong entity. The person who briefed you works for "Acme Group"; the contract is with "Acme Digital Ltd". The invoice has to match the contract.
- A generic description. "Services" or "Monthly fee" doesn't identify the supply.
- VAT on an overseas business client. Usually the client's finance team catches it and asks for a corrected invoice, which costs you a payment cycle.
- No time of supply. An invoice dated 12 November for October's work needs to say it's for October.
- A broken number sequence. Deleting a draft that already had a number leaves a gap. Cancel it with a credit note instead and keep the sequence whole.
- The VAT total missing in sterling on a UK invoice in another currency.
Doing this in your invoicing tool
If you're VAT registered and your accountant already works in an accounting package that handles your VAT returns, invoicing from there is usually the simplest route. FreeAgent's own guide says its invoice templates include the required VAT information, and the invoice and the VAT return then live in the same system.
Where Suprwork fits is earlier in the chain, getting the invoice out on time and with the right lines. Invoicing in Suprwork drafts a retainer's invoice when it's due, can draft an invoice for an hourly project from the time logged against it in Work, and lets you invoice clients in their own currency. The PDF shows your company name, the invoice number, issue and due dates, the client's name and address, line items with quantity and unit price, one tax rate, and the totals. It doesn't yet have separate fields for your address and VAT registration number, or a sterling VAT line on foreign-currency invoices, so if you're VAT registered you'd add those in the invoice notes, which print on the PDF, or keep issuing VAT invoices from your accounting package. It doesn't file VAT returns or take payments.
Sources
- Invoices: what they must include, GOV.UK
- Record keeping (VAT Notice 700/21), HMRC
- VAT place of supply of services (VAT Notice 741A), HMRC
- VAT on instalments, deposits and continuous supplies, GOV.UK
- VATTOS9165: continuous supplies, requests for payment, HMRC internal manual
- VAT registration and VAT rates, GOV.UK
- Late commercial payments: interest and debt recovery, GOV.UK
- Limited company signs, stationery and promotional material, GOV.UK