How To Invoice As A Sole Trader In The UK

Creating your own business means a lot of hard work and determination. At some point, your business will move from potential and a work in progress to a real, fully functioning business with paid clients. 

This is an exciting moment – but there is one small hurdle that might stand in your way: invoicing.

If you’ve never had to create an invoice before or are looking for the best way to invoice for your business, we’re here for you. Discover the answers in this guide for how to invoice as a sole trader in the UK. 

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What is an invoice?

An invoice is a document recording the goods or services provided, the cost of these items, and terms of payment. Basically, it’s like a detailed bill that you send to clients in order to get paid. 

Invoices are more than a request for payment, though.

They also have an important purpose in maintaining your records, tracking payments, and providing legal protection by serving as proof of the agreement between buyer and seller.

If anything goes wrong, you need to make sure that you have correct and accurate invoices to back you up. 

What do I need to include on an invoice? 

There are a few different types of invoices that you can create (we’ll cover that later!) but as a bare minimum, there are some pieces of information that need to be on there. This includes: 

• A unique identification number, so you can identify each invoice that you send out in your records; 
• Your name and any business name that’s being used;
• Your contact information, including an address where legal documents can be delivered to you if you’re using a business name;
• The name and information of the client, including business information if you’re providing goods or services to a business;
• A description of what you are charging for. Make sure this is clear as possible to avoid any uncertainty down the line; 
• The supply date, i.e. the date the goods or services were provided;
• The date of the invoice; 
• The total amount being charged, including VAT amount if that’s relevant;
• The total amount owed and the date owed by.

You’ll also need to include information on how clients can pay your invoice. If you’re expecting payment by bank, this includes your bank name, account name, account number, and reference number. 

If you haven’t already, this is a good time to think about making sure you have a business bank account set up. 

What types of invoices are there?

There are different types of invoices that you can send, based on the goods/services on offer and how they are priced. For example, some sole traders will charge a set price for a completed service, others may have to charge for individual parts and labour, while others charge based on time. 

The different types of invoices are: 

1. Pro forma invoices 

A pro forma invoice is like a typical invoice in which the goods and services are listed at a set price. However, this one is sent before any goods or work are provided, with an agreement that the work will be supplied on a specific date. 

This is an invoice that you would use to make sure clients pay upfront before using your services. If you’re worried about people not paying, this type of invoice could be a good idea for you to use. 

However, some clients won’t like the idea of paying upfront for goods they haven’t received, especially if they haven’t worked with you before. If you’re just starting out as a sole trader and haven’t got any reviews yet, this one might be a hard sell. 

2. Commercial invoice

This is an invoice that’s used for customs declarations if you’re selling across borders. This document is designed to help customs authorities process your goods and correctly work out the right taxes and import duties to apply, reducing delays. 

If you’re not selling internationally, then you don’t need to worry about this one. 

3. Credit notes

Credit notes are technically a form of an invoice, but where credit is issued when someone returns goods due to damages or mistakes. It’s basically a negative invoice. Depending on what is returned and the cost, this might mean that customers completely cancel an invoice amount out, or pay a reduced rate. 

4. Timesheet invoice

A timesheet invoice is an invoice in which you are paid for your time. In it, you will list your hourly rate and the amount of time that you’ve spent on the client to create the total owed amount. 

So if you offered photo editing services at £50 an hour and spent 5 hours on a project for a client, the total amount would come to £250. 

If you work on a time basis, there are certain accounting tools that will track time for you and automatically create invoices based on this. Find out more in our review of the best accounting software for sole traders here. 

5. Retainer invoices 

A retainer invoice is a way of getting clients to pay upfront for goods or services that they will access over the coming weeks or months. 

For example, a sole trader could sign up a client onto a £500 monthly retainer. They’ll be sent this as a retainer invoice, and then all work done for this client will be deducted from the retainer.

This type of invoice tends to be used by clients that request multiple works and projects, so they can request work as and when they need it rather than pay multiple bills for each task. 

6. Recurring invoices

These are invoices that… are, well, recurring. They are set up for regular ongoing payments for goods or services like subscription fees. 

If you’re using accounting software for your invoices, you will be able to set these up automatically to avoid the manual labour of sending them out every month, quarter, or year. 

Can you use software to create invoices?

Absolutely! There are dozens of platforms that you can use to automatically create your invoices for you, saving you the time and effort of making them yourself. All you’ll have to do is use their template, fill in your information, and you’re good to send. 

If you use PayPal, you could even use their native invoice feature. However, the best place to make invoices is through accounting software, as this will be able to create time-saving templates that also integrate into your financial systems for easy bookkeeping.

With just a few clicks, you’ll be able to create and send an invoice, update your books and alter your financial projections and incomes all at once. If you use the time tracking method, some software also comes with time tracking tools to boot. 

Recommended Accounting Software To Create Invoices:

Accounting Software	Cheapest Package	Ease Of Use	Our Rating	Review	Official Site
	FREE	Outstanding	9.3	Read Review	Visit Website
	£19/mo	Excellent	9.4	Read Review	Visit Website
	£12/mo	Excellent	9.3	Read Review	Visit Website

Find the best accounting software to make invoicing and bookkeeping easy here.  

What happens if a client doesn’t pay an invoice?

The first step to making sure that a client pays is to make sure that the invoice you are providing is correct and accurate. This includes clear instructions on payment terms, including when payment is due. 

However, it’s worth noting that if you haven’t outlined any payment arrangements, you have a right to be paid within 30 days of issuing your invoice. 

If you haven’t heard from the client approaching the deadline, it’s worth sending out a friendly reminder to prompt them to make payment. 

If the deadline comes and goes and you haven’t received any money, there are a couple of options that you can take. Firstly, try to reach out to them again. Although not being paid on time isn’t good for you, it might be a genuine mistake. So let them know that they’ve missed the deadline and what they owe. 

To prevent late payments, you could add a late payment fee to the terms of your invoice. For example, if payment is late, you could charge an extra 10% for the first 10 days.

If payment still hasn’t been received, you could then choose to charge an extra 20%. If clients see this in writing, they’ll be less inclined to take chances with late payment. 

​​If you still have not received any payment, or if a client is refusing to pay, then you can escalate this matter. These are some of the options you can take if you’re owed money: 

• Mediation. This is where you are assigned an impartial 3rd party to step in and negotiate between both sides to see if you can come to an agreement. This is the easiest and less expensive method to use, so it’s always worth a try. 
• Court action. If your client is uncooperative, you can take them to court by making a claim for the unpaid balance. If this balance is under £100,000 you can make a claim on the GOV.UK website. Otherwise, this will have to go through a country court. 
• Statuary demand. This is a written warning from a creditor, where it threatens the client with starting court proceedings to make them bankrupt if they don’t pay the outstanding balance. Once this demand has been sent, the client has 21 days to pay or reach a new agreement with you. 

If further action is needed, you could apply to bankrupt your client or liquidate them, depending on the amount owed. If you’re worried about unpaid invoices, find out more about why a client might not pay and what can be done about it in our guide to unpaid invoices here. 

Invoicing as a sole trader in the UK 

In our guide, ‘how to invoice as a sole trader in the UK’, we covered what invoices are and the different types of invoices that you might want to send depending on the goods and services that you offer as a sole trader. 

Which method you go for, make sure that you always include the right information, such as a detailed description of the cost, payment information, and terms. But if you’re looking for quick and easy ways to invoice, doing it through your accounting software is the best method that you can do. 

Creating invoices through your accounting software will also help keep your records accurate and up to date, as well as work out the right amount of tax to pay each year.

If you need a little more help on your taxes, make sure to check out our accounting help section, including helpful guides like what expenses you are able to claim as a sole trader.

Accounting Software	Cheapest Package	Ease Of Use	Our Rating	Review	Official Site
	FREE	Outstanding	9.3	Read Review	Visit Website
	£19/mo	Excellent	9.4	Read Review	Visit Website
	£12/mo	Excellent	9.3	Read Review	Visit Website