Wondering how VAT is actually applied on invoices? Read on...

📌 First things first — you can only charge VAT if you’re VAT registered.

If you're not, don't go sticking VAT on your invoices. That’s a fast track to trouble with HMRC.

Once you are VAT registered, here’s how it works:

You charge VAT on top of your price

Say you charge £1,000 for your service.

With VAT (currently 20%), your invoice total becomes:

👉 £1,000 + £200 VAT = £1,200 total

That extra £200? It’s not yours. You’re collecting it on behalf of HMRC — so make sure you don’t spend it.

Your invoice must show:

✅ Your business name and VAT number

✅ A breakdown of what you're selling

✅ The VAT rate (e.g. 20%)

✅ The total amount of VAT charged

✅ The grand total (including VAT)

This is what makes the invoice VAT compliant — so your clients (especially other VAT registered businesses) can reclaim the VAT on their end.

🔄 Got clients outside the UK?

It gets spicy. Some services might be zero-rated or outside the scope of UK VAT.

This is where you’ll want expert advice to avoid mischarging — and HMRC penalties.

📥 Still confused or not sure if you're charging VAT correctly?

We help clients set this up properly from day one — including invoice templates, the right software, and what to do with that money when it hits your account.

Schedule a free consultation today and we'll help get your money matters in order.

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