What to include in an invoice in the UK
Thread poster: Regina Freitag

Regina Freitag  Identity Verified
Local time: 04:17
English to German
+ ...
Mar 27, 2008

Hello everyone,

I worked freelance in Germany for a while and now I moved to Britain, where I'm employed at a translation agency. Now I would like to do some freelance work as well and I registered with the Inland Revenue office already, both as employed (which was done by my boss) and self-employed.
But I'm not sure how to write an invoice here. Do I need to include VAT in my invoice and add the amount to the net price, or is the net price the total price? Because someone told me that VAT applies only to larger companies. But if I have to pay taxes, it seems unfair to me that I cannot include them in my invoice.
Could someone give me some advice on that, please?

Thanks a lot, Regina

[Edited at 2008-03-27 15:01]

[Edited at 2008-03-27 15:02]

[Edited at 2008-03-27 15:03]

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xxxJPW  Identity Verified
Local time: 03:17
Spanish to English
+ ...
Income Tax and VAT Mar 27, 2008

Hi there, I think you may be confusing two separate issues here.

Generally speaking, the taxes you pay to Inland Revenue are income taxes, based on what you earn (=declare). Everyone pays them. If you are employed, then your boss/company takes care of this for you. This is the "PAYE" scheme for employees. But if you are self-employed, then you must look after your own tax affairs. Of course you can be both employed AND self-employed at the same time, in which case you are under two different tax 'regimes' if you like, because the rules are different for employees and self-employed persons.

As an employee, if you are paid monthly, you are taxed monthly (through your employer's payroll scheme).

VAT is levied on goods & services (but not all) and there are many rules and exceptions etc., it just so happens that the same organisation in Britain now collects both Income Tax and VAT (Known as HM Revenue and Customs), whereas they were two separate organisations a couple of years ago. One for tax, one for VAT.

If you bill someone for work done, you will pay income tax on it, naturally, regardless of whether VAT applies or not. If you are charging VAT on top then theoretically that money isn't yours to keep, it should be passed onto the tax office. But like I say, it's complex.

Plenty of stuff has been written before about VAT in these forums - if you do a search you should come across them...and you can always phone the 'revenue and ask for advice. They have specific phone numbers for specific enquiries. But I dare say if you spoke to two different people at the same tax office, on the same day, you might well get two different answers.... What I am trying to say is this can be a complex area, even for the taxmen!

But don't get confused between VAT and Income tax. They are two different things.

If you want some advice, I'd say get in touch with your local tax office if you are not sure about anything - you have already told them you are self-employed, they must have given you leaflets, advice booklets etc. And you will be getting sound info from the horse's mouth, so to speak. They won't bite your head off either, as they certainly deal with enquiries like this all the time...

And no, I don't work for them(!), but I almost did.

I'm surprised you don't know more about drawing up an invoice, if you worked for a translation agency surely you saw some of their own invoices (and purchase orders) - you could use them as a template? And please don't be offended by that last comment.

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Charlie Bavington  Identity Verified
Local time: 03:17
French to English
VAT Mar 28, 2008

Regina Freitag wrote:

Do I need to include VAT in my invoice and add the amount to the net price, or is the net price the total price? Because someone told me that VAT applies only to larger companies.

Briefly and simplified in the extreme:

You charge VAT if you are VAT registered. Otherwise you don't.

You must register for VAT if your turnover from a particular activity is > £64,000 (I think - around that area).
However, you can register voluntarily.

However, note that translations for clients in other EU countries are outside the scope of VAT, so you would not add VAT to invoices for clients in, say, Germany whether you are registered or not.

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xxxJPW  Identity Verified
Local time: 03:17
Spanish to English
+ ...
Charlie is right... Mar 28, 2008

current threshhold for registration for VAT is £64,000

But it might go up next month with the new tax year (usually by a couple of thousand).

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Michael GREEN  Identity Verified
Local time: 04:17
English to French
Just in passing ... Mar 29, 2008

I was interested to see the comments about VAT registration thresholds in the UK : over here in France it's around £ 20,000 ...!

Another reason for so many French nationals to prefer working in the UK.

If Regina is unsure about how to present her invoice, apart from asking for advice from the Inland Revenue, there are web sites where standard templates of many kinds of form are available.

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