How do I invoice my client correctly in the UK?

Question

I am currently a student with no registered business.

However, lately I have received, out of nowhere, a flurry of people wanting websites and web apps. As such, I'm quite happy to facilitate their needs in exchange for payment.

The problem I've now got is the people want invoices for tax return purposes and I don't know where to start.

I'm not VAT registered so does that mean I only charge for my hours * standard rate and not add 20% for VAT?

Or is the 20% for their return out of the aforementioned total?

I know I sound completely clueless here but well, that's about the scale of things.

Any help would be appreciated.

Answer 1

I am currently a student with no registered business etc

You are required to register (link) with hmrc as self-employed in this case - and while you are at it (assuming profits are below the threshold) register as exempt from Class 2 National Insurance.

Failure to register will result in a fine if (when?) you get tagged...

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What is required on a UK invoice is kindly explained by the Government itself (link) which includes the following provisions (copied/pasted for completeness):

You must clearly display the word ‘invoice’ on the document. You must also include:

• a unique identification number
• your company name, address and contact information
• the company name and address of the customer you are invoicing
• a clear description of what you are charging for
• the date the goods or service were provided (supply date)
• the date of the invoice
• the amount(s) being charged
• VAT amount if applicable
• the total amount owed

If you’re a sole trader, the invoice must also include:

• the trader’s name or any business name being used
• an address where any legal documents can be delivered to you if you are using a business name

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I'm not VAT registered so does that mean I only charge for my hours * standard rate and not add 20% for VAT?

If you are not registered for VAT, then VAT is irrelevant... you do not add it to your invoice - although this does mean you cannot reclaim any VAT you are charged on your purchases.

So your invoice value is (as you say) hours x rate.

If you do become VAT registered, VAT would be chargeable on future invoices (not retrospectively) as an additional 20% of the invoice value.

Answer 2

If you are UK based and not VAT registered then you cannot add VAT to your service charges. You should generate an invoice that just contains details of how to pay you (bank details, paypal, etc) along with either a breakdown of your charges or a total cost, depending upon how you're charging the client.

It can be as simple as a plain word doc to get you up and running. Just be sure to include a unique invoice number for both of your records. If you make it sequential you'll keep track of them more easily. If you don't start from 1 then it won't look as if you're just starting out, which will add to your air of professionalism. My first invoice was numbered 2701001 because I started freelancing on January 27th.

Answer 3

From GOV.UK:

You must register for VAT with HM Revenue and Customs (HMRC) if it goes over the current registration threshold in a rolling 12-month period. This isn’t a fixed period like the tax year or the calendar year - it could be any period, eg the start of June to the end of May.

The current threshold is £82,000. It usually goes up on 1 April each year. There are different thresholds for buying and selling from other EU countries.

I'd recommend using the GOV.UK website for VAT registration since it's an official resource and pretty much answers all your questions.