VAT on Trade Invoices: A Plain Guide
This guide covers UK VAT rules specifically; if you are reading from outside the UK, check your own country's requirements instead. With that said, VAT is the topic that makes tradespeople's eyes glaze over faster than any other, so this is the short, plain version: when it applies to you, what your invoices must show once it does, and the two complications worth knowing by name.
The registration threshold
You only charge VAT once your business is VAT registered, and registration becomes compulsory when your turnover crosses a threshold measured over a rolling twelve months. That threshold is set by the government and it changes, so we are deliberately not quoting a figure here: check the current threshold on gov.uk. The practical habit that matters is watching your own turnover. Plenty of tradespeople drift over the line during a busy year without noticing, and registering late is an expensive way to find out. If you are anywhere near it, an accountant's hourly rate is cheap insurance.
What a VAT invoice must show
Once you are registered, your invoice needs everything a normal trade invoice carries, plus the VAT specifics: your VAT registration number, the rate of VAT applied, the net amount before VAT, the VAT amount itself, and the gross total. Show the VAT broken out clearly rather than folded into a single figure, because commercial customers who are themselves registered need that breakdown to reclaim it. Most domestic trade work is standard-rated, but some work, such as certain energy-saving installations or work on new builds, can attract a reduced or zero rate, so do not assume every job is the same.
The flat rate scheme
There is an alternative worth knowing exists: the VAT flat rate scheme, where instead of tracking VAT on every purchase and sale, you pay HMRC a fixed percentage of your turnover and keep the difference between that and what you charged. For some small trade businesses with low material costs it simplifies admin and can work out favourably; for materials-heavy businesses it often does not. Whether it suits your trade and your numbers is a question to research on gov.uk or put to an accountant, not something to opt into on a hunch.
The construction reverse charge
One complexity to flag by name: the domestic reverse charge for building and construction services. It changes who accounts for the VAT on certain construction services supplied between VAT-registered businesses, and it connects to the Construction Industry Scheme. If you subcontract, or supply construction services to other VAT-registered businesses, this may affect how you invoice. The full rules are beyond a short guide like this and getting them wrong is a common, costly mistake, so treat this paragraph as a signpost: look up "VAT domestic reverse charge for construction" on gov.uk, or ask your accountant, before you invoice that kind of work.
Invoices with VAT handled properly
The invoice generator lets you add your VAT number and breaks out net, VAT and gross totals automatically, so the document is right whether you are registered or not.
Open the invoice generatorVAT FAQs
What is the VAT registration threshold?
It is a rolling twelve-month turnover figure set by the government, and it changes from time to time, so we deliberately do not quote a number here. Check the current threshold on gov.uk, and keep an eye on your own turnover as you approach it, because registration is not optional once you cross it.
What must a VAT invoice show?
Everything a normal invoice shows, plus your VAT registration number, the VAT rate applied to each line, the net amount before VAT, the VAT amount itself, and the gross total. Customers who are themselves VAT registered need that breakdown to reclaim the VAT, so getting it right matters to them as well as to you.
What is the VAT flat rate scheme?
It is an alternative way of accounting for VAT where you pay HMRC a fixed percentage of your turnover rather than tracking VAT on every purchase. For some small trade businesses it simplifies the admin and can work out cheaper; for others it does not. It is worth researching on gov.uk or with an accountant before opting in.
What is the domestic reverse charge for construction?
A rule that changes who accounts for the VAT on certain construction services between VAT-registered businesses, connected to CIS. If you supply or buy construction services as a VAT-registered business, look it up by name on gov.uk or ask your accountant, because invoicing the wrong way under it is a common and costly error.