Contractor invoice

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Introduction

When you bill a client for your work as a UK contractor, what details should your self-employed independent contractor invoices include? Indeed, when you run your own company or business, what should you consider regarding how to invoice as a contractor? When invoicing, there are specific UK invoice requirements (UK) to fulfil when sending these to clients or customers. Therefore, getting the correct IT contractor invoice details is essential after you form your own UK company. In this guide, we’ll research contractor invoicing and discover which details to include and the contractor billing process. What’s more, we’ll discover the invoicing requirements (UK), how to invoice a client correctly and what else to consider for invoicing software for contractors. Furthermore, when you create an invoice for contract work, we’ll review the correct legal details to include and what to show as payment terms for contractors.

Whether you’re a sole trader or you trade through and run your own company, you’ll create UK contractor bills for the work you do for your client or customer. In this guide, we’ll research how to bill your client as a contractor and what needs to be on an invoice (UK). We’ll also consider an independent contractor invoice template (UK).

Many UK contractors investigate where and how to obtain free invoice templates. As a result, it’s ideal to have a UK contractor invoice template that they can use to bill their client. Therefore, this guide will give an example of how this might look. Indeed, you can view our example invoice (UK) as it shows how to make an invoice (UK). In summary, once you’ve completed some work, you can create and send your sole trader or company invoice to the client before receiving payment.

Initial thoughts on raising invoices as a contractor

First thoughts

As a UK business owner, you must know how to write an invoice as an independent contractor and how invoicing for contractors works. Indeed, this is a key part of your contracting routine when you run your business. As you perform your work for your company, you can bill for your work periodically. This will usually be every week or every month, depending on what is agreed upon with your client. When you know your contractor invoicing cycle for your current client, you should know how to bill them.

When we look at how to invoice a company for contract work, you bill for your contractor hours worked and perhaps even expenses incurred. However, there’s a certain process to follow when you do this. Therefore, let’s now take the time to investigate how to invoice as an independent contractor. In addition, let’s consider what should be on an invoice and how to do this correctly.

Other initial thoughts for UK contractor billing

Contractor self-billing agencies

Please note that it’s common for some agencies and end clients to self-bill for your time as a limited company contractor. Furthermore, in this scenario. your company isn’t required to create a contractor invoice for your work. However, as part of this contractor self-billing process, you’ll complete timesheets showing your contractor details and the time you’ve worked. Once complete, you’ll send these on to the accounts department of your agency or client. In addition, you’ll complete this process on a weekly or monthly basis, depending on what agreement you have in place.

If your client isn’t operating the self-bill system, it’s key to note you must raise a professional contractor bill when you charge your client. Therefore, when you do this, you’ll create an invoice for contract work and include the relevant details on the contract invoice to your client. Please read on to find out how to do this in more detail.

The current invoice date rules (UK)

When we investigate what to put on an invoice and how to bill as a contractor, it’s important to comply with current laws. You can find the details required for limited company contractor invoices online, but please read on to discover more. Therefore, please include the relevant information when you bill your clients as a UK contractor.

What’s more, when you raise a bill for your contract work, there are extra details to include if you’re registered for VAT (as most contractors are). When you register for VAT, you must create your future bills, including VAT. Furthermore, when we consider how to do an invoice (UK) and what to put on an invoice, our VAT guide is a good read. It explains what to expect when your business is registered for VAT and how the UK VAT rules work.

Please read our guide on tax tips for limited company contractors. Indeed, this covers all sorts of areas to consider when contracting in the UK. In addition, it includes many top tips on saving tax when you run your own business. To summarise, this guide covers many different but relevant aspects when you’re contracting in the UK. Moreover, it explains how to operate tax efficiently and maximise your pay as a UK contractor. 

What must an invoice include for UK business? 

When UK contracting, what should be on a contractor invoice?

Let’s now consider what an invoice should include when you create this. Indeed, it’s important to get the details right before you send your contractor bill to your customer or client. You don’t want to create and send a bill to your client and later discover you missed some crucial details. Indeed, there are specific details your invoices should display when you issue these. Therefore, let’s look at how to create an invoice as an independent contractor. In summary, when you charge for your work, the correct and complete details should always be shown.

What are the legal requirements for a contract work invoice? 

When we consider what a professional contractor invoice should include, let’s look at the legal requirements for invoices. Basically, your contract invoices are legal documents; therefore, it’s key that they contain the correct information. Furthermore, certain details on your UK invoice for contractor work are legally required. Thus, billing a client as part of your contractor requirements should contain all your relevant business information. In other words, it’ll show your contact details, such as company name, address, phone number, and email address. In addition, it should include how your client can make payments to your company. What’s more, you should send your contractor work invoice with bank details included. Indeed, if you don’t show this, it could delay payments to your company.

A company invoice is a document, and the legal requirements in respect of a UK invoice for independent contractor are:

  • The word “Invoice” is displayed.
  • Your business’ full name and address.
  • Your customers’ full name and address.
  • The date of the bill.
  • The payment due date.
  • A unique bill number.
  • The description of the services or products sold.
  • The quantity and price of each service/product.

Moreover, you must show the total value you’re charging on your bill. If you’re registered for VAT, you should charge VAT and clearly show this on your contractor invoices. Please see later in this guide how to set your contractor bill out regarding adding VAT.

Contractor billing/format 

Let’s now look at a contractor billing format when you create an invoice for contract work. Therefore, when you issue an invoice to a company, let’s research what that’ll include from a contractor limited company that is VAT registered. After we’ve explained the invoice format (UK), we’ll look at a sample invoice for contract work next.

What is on an invoice for contractors?

The first few items in the UK contractor bill format below are in no particular order. However, when we consider how to bill as a contractor (UK) as a UK VAT-registered company, the details you should include on your VAT invoice are as follows.

The details to include on a contractor invoice:

1 The word `invoice.’ You could show the words `professional invoice’ if you charge for your professional time.
2 There should be a unique bill number on the invoice. These numbers should be sequential; the first professional invoice could be number 001, the second could be number 002, etc. Therefore, if you use a unique identification number approach, this is a logical method. It’s also a straightforward referencing system.
3 The tax point, i.e. the date of the bill and time of supply. You’ll raise a bill after you make a sale or complete some work. Therefore, the date should be after this. Indeed, this will be the `supply’ date.
4 Your full company business details, including the full company name as it appears on your Certificate of Incorporation. The official business address and contact information should also be shown.
5 Your VAT registration number if your business is VAT registered. You can show the VAT number at the top or bottom of your bills.
6 The official details of your client. This includes their full name and address.
7 A clear description of your products or services, e.g., 35 hours at an `x’ hourly rate. The charges should also include any expenses you’re to recharge.
8 The date or dates when you provided the goods or service.
9 The due date for payment of the bill.
10 The amount(s) you’re charging for your services.
11 The VAT amount, if relevant. To clarify, this is 20% of the service cost.
12 The total cost of goods or services is the final sum of charges plus VAT and the total amount due from your customer.

Example invoice for a UK contractor

Let’s now look at an invoice sample and see what to show on an invoice for hours worked and any expenses you recharge. As part of this, we’ll set out what a bill from your limited company to your client should look like, using an example invoice for contract work. Therefore, shown below is a basic independent contractor invoice example (UK):

Consulting fees -5 x £400.00 2,000.00
Expenses 200.00
2,200.00
VAT @ 20% 440.00
Gross total 2,640.00

This UK invoice example for contract work shows your fees and expenses added together to make £2,200. Next, in this contractor’s invoice example, we charge VAT at 20% on the sum of your work and expenses. As a result, this reaches a total of £2,640 due from your client. When you’re a UK contractor, the company invoice template (UK) above outlines the basic details of displaying your charges and expenses (and VAT) to your client.

What other areas are to consider when invoicing as a contractor?

Do you recharge expenses as part of your billing? 

When we investigate limited company invoices for independent contractors, you may be able to recharge expenses. However, this is based on you agreeing to this with your customer or client in advance. What’s more, if this is the case in your contractor billing invoice, you must add these after the tenth step in the table of details to include in your invoicing routine. Therefore, you’ll do this as part of your contractor billing to your client or customer, and we cover how to do this in our contract invoice template table above.

The expenses you charge should also be `netted down’ before you add them to your contractor invoice. `Netting down’ means removing the VAT from any VAT-inclusive costs.  Moreover, most costs include VAT; however, some do not. There is also the fact that there is no VAT on goods or services from a supplier who isn’t registered for VAT. Please see our other guide, which covers recharging expenses. In short, this explains how the `netting down’ process works and contains some more UK contractor limited company invoice templates. Once the costs are netted down correctly and VAT is subsequently charged, you’ll arrive at the total amount owed to your company.

Should you include the payment terms? 

When we research what an invoice needs to include, it’s advisable to show a contractor’s payment terms on the bill. Indeed, when invoices show the payment terms for independent contractors, that’ll help ensure contractor payments are received on time. What’s more, it’s good to mention your company will appreciate quick and prompt payment.

Per HMRC guidance, unless you agree on a payment date, the customer must pay you within 30 days of receiving your bill for the goods or services. In addition, you have the right to charge interest for late payments, but you can choose not to. Therefore, the law assumes a standard thirty-day payment period exists. That’s if no other payment terms are stated. 

Do you put your bank details on an invoice?

Should you include your bank details when examining how to invoice as a contractor? Indeed, when we consider what to include in an invoice, this is your choice. However, it’s advisable to show your accepted payment methods and how your client can send the payment to you. When you do this, it can help ensure you are paid on time. Therefore, you can include your business bank account’s sort code and account number. Furthermore, if you prefer a bank transfer, please include a request for electronic payment. 

How to issue an invoice & how do you send this on to your client?

In this guide, we’ve considered how to create a contractor invoice and what details must be on an invoice for a contractor. Indeed, nowadays, many independent contractor billing software applications enable you to create an invoice online (UK). Therefore, many UK contractors will utilise this as a more efficient way to make a UK contractor’s invoices. Consequently, you can look to use some independent contractor invoicing software. Indeed, such invoice software for contractors’ programs will include Word, Excel, PowerPoint, and many others. However, to give it a more professional look, you could convert your document to PDF format.

There are specific software packages when invoicing as a contractor. Indeed, it’s good to use an invoicing platform for contractors. Moreover, many modern digital platforms, such as FreeAgent, contain a billing function. As a result, a billing platform for contractors allows you to create these within the software. Consequently, this can save you time, which is a plus point. In addition, such a billing system for contractors will allow you to track these to see any unpaid ones. Therefore, you can chase up any outstanding bills and monitor them with your online system, which will be easier.

When you send a contracting invoice to your client or customer, you can do so through regular post. However, nowadays, it’s much quicker and less costly to send this via e-mail. Once again, many software programs like FreeAgent allow you to e-mail this straight to the client from within the software. 

Final thoughts

Finally, when we consider how to bill as a contractor, an online system for your company’s record-keeping will let you generate your contractor invoicing. What’s more, if it does, the billing software for the contractors’ system will show all the correct details for your small business. Furthermore, it’ll do all the calculations for you. Indeed, that’ll include your chargeable contractor hours. Moreover, it’ll include any expenses and your payment terms. In addition, the online system will work out the VAT too.

When you have an online system, this may allow you to email the invoice directly to the client. This will be a time saver as it lets you track outstanding bills online and see which ones are late or overdue.

If you’re dealing with a customer or client for the first time, it’s wise to take down details of their accounts department. However, should the need arise, it’s wise to follow through and ensure you receive the payment in due course.

As a final note, regarding how an invoice should look, we’ve shown a contract invoice example above. If you have a VAT inspection in the future, a VAT officer will review your methods and processes to ensure you’re following the correct procedures, However, if you require a free blank contractor invoice template for your billing, please send a message on the contact form at the bottom of the home page. We’ll gladly provide you with a free independent contractor invoice template.

Link to Contractor Advice UK group on

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Published On: April 6th, 2024 / Categories: First timer guide, Invoicing /

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