Creating An Invoice: A Guide For Beginners

Invoicing is one of the most important aspects of running a successful business, yet it’s often the most overlooked. If you’re a sole trader who has recently opened a business or you plan on opening one in the near future, you may be wondering how to create an invoice.

This is a question that every business owner should ask themselves before providing goods and services. To help, we’ve put together this comprehensive beginner’s guide. It covers everything you need to include in a basic invoice, such as:

  • An invoice number
  • Dates
  • Payment terms
  • Your contact information
  • A description of the goods/services provided
  • A cost breakdown and total cost

Why your business should be using invoices

As you’re probably aware, an invoice is a legal document that’s used to record transactions between you (the seller) and your client (the buyer). While you’re not legally obliged to create an invoice unless you are VAT registered (we are dealing with non-vat registered business in this blog), it could help you out in difficult situations, such as when a client refuses to make a payment.

Touch wood this never happens, but if it does, certain invoices can be used as legal proof that the agreement was broken. Nowadays, there are thousands of free invoice templates for small businesses, so there’s really no reason not to start using invoices today.

What type of invoices your business should be using

There are several different types of invoices layouts that small businesses can send to their clients, though the type and style of invoice you should use will ultimately depend on your industry.

The most common type of invoice used by small businesses is widely known as a basic invoice. This type of invoice is suitable for almost every industry and includes the total price to be paid for goods or services supplied. It also typically contains details such as an invoice number and the contact information of both you and the client.

What you should include in a basic invoice

When designing an invoice for your small self-employed business, you can choose to make it as plain or as quirky as you would like. Having said that, there are specific ‘must-have’ details that you should include in every single invoice you create:

A unique invoice number

One of the most important pieces of information that you must include in every invoice you create is a unique invoice number. This number is used to easily track and file invoices, which is especially important if you ever need to send them to HMRC.

How you decide to number your invoice is ultimately up to you. While some sole traders choose to include specific reference numbers for each individual client, others simplify matters by numbering them in chronological order. However you decide to number your invoices, make sure that the unique invoice number is clear.

Relevant dates

Another important piece of information that should not be left off your invoice is the date you created it.

You may also want to include the supply date, which is essentially the date that you provided the goods or services. This is useful for both collections and your own personal accounts, as it’ll allow you to quickly refer back to previous invoices when necessary.

Payment terms

Before sending an invoice, you should have already agreed on payment terms with your client, but it’s always a good idea to note the terms on the invoice again. This will allow you to know exactly when you should be getting paid and to let your client know when they must pay you.

While ‘net 30’ is often included in the payment terms on an invoice (that is, you want to be paid within 30 days of the invoice date), your specific payment terms will differ depending on your industry and client relationship.

Your company’s name and contact information

Even if your client knows exactly who you are, there’s a strong chance that their accountant doesn’t. It’s therefore important to include your company name, address and contact information (such as an email address or phone number) on all of your invoices.

It’s recommended that you make your company name either large or bold so that it stands out at the top of your invoice, alternatively add your business logo. This will make it easier for both your client and their accountant (if applicable) to understand exactly who they need to pay.

Of course, you’ll also need to include the name of either the individual or company you’re billing, as well as their address and contact information.

A description of the goods or services

Every invoice you create should include a clear breakdown of the goods or services you intend to sell. This doesn’t need to be unnecessarily long – it simply needs to detail exactly what your customer needs to pay for. After all, if your client doesn’t know what they’re specifically being charged for, how do you expect them to pay for it?

Once you’ve included a short yet detailed description, you may choose to add the quantity of the products or the hours for the services provided.

The price of the goods or services

In addition to the quantity of each product or the service hours, you must include the cost per unit or your hourly rate for individual goods and services. If you don’t, you won’t be able to work out exactly how much you’re making and your client won’t know how much they owe.

Include the price of goods and services next to the quantity/hours. Then, work out the total amount owed. Put this total amount next to the unit price or hourly rate, and then tot up all the total amounts together for the full amount due.

The benefits of invoicing for small businesses

Time is an important asset to us all. But for small self-employed businesses, time is money.

You see, invoices are a great way to increase productivity and effectively manage your time by monitoring all of your payments. By adopting efficient online invoicing software, you’ll be able to free up time by creating and sending invoices in a matter of minutes.

GoSimpleTax provides the perfect invoice management software for small businesses: GoSimpleTax Invoicing.

Our billing solution is an easier way to record income and expenses. It can send a populated invoice to your clients if needed, and it then links seamlessly with our tax return tool. This way, you spend less time manually inputting your figures, and more time focusing on running your business.

Ready to get started? Sign up and discover the benefits! GoSimpleTax Invoicing is free to use until April 2021.

How Far Back Does A Tax Investigation Go?

How Far Back Does a Tax Investigation Go?

Often, the taxman can seem like a shadowy figure, rarely seen or heard until he suspects something isn’t quite right.

If someone is thought to be evading payments – either accidentally or purposely – a tax investigation will be launched to reclaim owed money, and culprits will be subject to HMRC tax investigation penalties for failing to follow the rules.

But why would HMRC visit me? And how far back does a tax investigation go? Here, we answer some of the key questions surrounding a visit from the taxman.

How long does a tax investigation take?

Depending on the complications and the severity of your case, a tax investigation with HMRC can last several months after receiving that first letter. The size of the business also plays a big part, too. Large businesses that are turning over higher amounts usually take much longer to resolve compared to a one-person limited company, for example.

The average time to get to a resolution for one aspect of a taxation in a small case is usually between 3 – 6 months. However, for a full-blown tax investigation, resolution times can extend to as long as 18 months.

Why would HMRC visit me?

Anybody who earns in the UK is required to pay tax. If you’re an employee, your employer will take care of all your payments for you – removing what you owe HMRC from your wages and sending it straight to the taxman (a process known as PAYE).

However, if you earn money outside of regular employment – perhaps you work for yourself, operate your own company, rent out property or make a profit from selling assets – you will need to file a Self Assessment.

The online Self Assessment tax return deadline is 31st January, and your form must be an accurate reflection of your earnings across the previous tax year. For example, earnings between 6th April 2018 and 5th April 2019 must be declared by January 31st 2020. If HMRC believe there are errors or discrepancies, they may launch an investigation into your tax return.

What’s involved in a tax investigation and how far can HMRC go back for tax?

At the start of any tax investigation, HMRC will send a letter informing you that they are looking into your tax submissions. They may do this because they’ve spotted a clerical error, eyed up some inconsistent figures, or received a tip-off from an anonymous source that you may be underpaying.

You’ll be asked to produce several documents during the investigation, including bank statements, invoices, expense receipts and quotes from third parties, all of which can help HMRC determine whether you’ve committed an offence.

So can HMRC investigate closed companies? When it comes to historic cases, HMRC also have the power to reopen previously settled tax returns if an investigation unearths puzzling results. In normal cases, the HMRC tax investigation time limit is 4 years, in which they can go back to claim money from taxpayers.

If someone has been visibly careless (submitting tax returns with mistakes), HMRC can journey back 6 years. For (alleged) deliberate tax avoidance, they can delve into 20 years’ worth of tax returns to find what they’re looking for, so if you’re thinking of closing a limited company and starting a new one, it may be best to reconsider your options.

Use GoSimpleTax software for impeccable Self Assessment returns

Tax investigations are stressful and costly, often resulting in hefty financial penalties and even convictions in worst-case scenarios.

That’s why it’s so important to be 100% accurate on your Self Assessment tax return and keep the taxman happy. If you make accurate tax return submissions, on time every year, you’re unlikely to be subject to any type of scrutiny.

GoSimpleTax software is designed to help you create HMRC-friendly tax returns that are sent to the right place at the right time. Sample our free trial today and get your forms fired off before the Self Assessment tax return deadline on 31st January 2020.

Last updated on 5th November 2019.

Need help preparing your tax return?

By downloading GoSimpleTax for iOS or Android, you can save yourself hours of valuable time and prevent the stress of completing your annual tax return.

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How GoSimpleTax Works

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Simply register for free with your full name and email address.

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Select the income you receive and follow the hints and tips for potential tax savings.

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Validate your personal information when you’re happy with the figures and submit directly to HMRC to get confirmation of your submission in just a few seconds.

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Who Is GoSimpleTax for?

Sole Traders

With GoSimpleTax by your side, your tax duties as a sole trader are made easier than ever before.

Investors

Manage your HMRC tax return on assets and investments easily with GoSimpleTax.

Uber & Taxi Drivers

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Ministers of Religion

Claim all tax exemptions available to Ministers of Religion and avoid being penalised for the avoidable.

Online Sellers

Usure about the tax return for eBay, Etsy, Gumtree, and Amazon sellers? GoSimpleTax has the answers.

Freelancers

Self-employed workers can spend more time generating income and less worrying about their tax return.

Landlords

Let GoSimpleTax do the legwork for you while you focus on building your portfolio.

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Stumbling over the tax return for overseas income? Let GoSimpleTax guide the way.

What is the income tax personal allowance for 2020?

WHAT IS A PERSONAL TAX ALLOWANCE?

Much to the disappointment of HMRC, every tax year most UK taxpayers are entitled to a UK personal allowance on their taxable income. To put it simply, most people can receive a certain amount of money before having to pay any income tax. This is what is known as a personal tax allowance.

If you’re struggling to get your head around personal tax allowances, GoSimpleTax is here to explain everything you need to know, simply and easily.

HOW MUCH IS THE STANDARD PERSONAL TAX ALLOWANCE?

The standard personal tax allowance amount is £12,500 for 2019/2020. Any income you earn after that will be taxable. The amount of tax you pay after your personal allowance is dependent on how much you earn during a tax year. For example, If your income is above £100,000, basic personal allowance is reduced by £1 for each £2 you earn over the £100,000 limit, irrespective of age.

Personal Allowance & Tax Thresholds

Personal Tax Allowance2018/20192019/2020
Tax-free personal allowance£11,850£12,500
Basic Tax Rate (20%)£1-£34,500 (after allowance)£1-£37,500 (after allowance)
Higher Tax Rate (40%)Income over £34,500Income over £37,500
Additional Tax Rate (45%)Income over £150,000Income over £150,000

If your tax affairs are a little more complex, for example, if you’re married or in a civil partnership and receive a marriage allowance, or for age-related or income-related reasons, then your personal allowance works a little differently. You could also receive tax-free allowances for:

  • your first £1,000 of income from self-employment
  • your first £1,000 of income from property you rent

HOW DO I GET MY PERSONAL ALLOWANCE?

Getting your personal allowance is simple. If you file a self-assessment tax return, you will automatically receive your tax-free personal allowance.

Is there an easier way to file?

If you need to file a tax return, GoSimpleTax is here to make things unbelievably simple. Forget about long-winded form-filling and unwelcome phone calls with HMRC. Simply enter the details of your income and expenses and we’ll create your tax return for you and submit it online directly to HMRC. 

Access GoSimpleTax and discover a new free way of filing your return (HMRC approved), know what expenses will help you lower your tax bill and keep all your records online, safe & sound. Ready to file with one click. Start your free trial today!

Do I need an accountant to do my tax return?

When you realise you have to submit a tax return, you’ll have a lot of questions. ‘When is it due?’ and ‘What do I include?’ will probably be on your list. The one at the very top of it will likely be, ‘Do I need an accountant for a watertight tax return?’.

Some people undertake the DIY method, but doing your taxes for the first time can be scary. Here, we take a look at the benefits and drawbacks of outsourcing this task to an accountant. With the advent of mobile tax software, you may want to avoid them altogether…

WHAT IS A TAX RETURN ACCOUNTANT?

An accountant does many tasks for the taxpayer, and the tax return is one of the biggest – they will file it for you on an annual basis. Other duties include:

  • Keeping on top of your books
  • Claiming expenses
  • Calculating the tax owed
  • Finding savings to reduce your tax liability

HOW MUCH DOES A TAX RETURN ACCOUNTANT COST?

As with any service, a low cost is unlikely to get you great value for money. How much you should pay for a tax return accountant will depend on the amount of work they do for you, but you can easily pay up to £500 for the service described above.

You might find that some quotes are fixed and offer you more services than you require. Additionally, the cost may differ according to the type of tax return you need, and there are specific requirements related to your circumstances too – a general self-employed tax return will be different to that of a sole trader who also has a job or rental income, for example.

DO I NEED AN ACCOUNTANT?

No – GoSimpleTax allows you to easily stay on top of your taxes without the use of an accountant. Our no-jargon tax return software helps you understand and learn how to do your own Self Assessment tax return in minutes, just like an expert.

GoSimpleTax keeps things super simple and enables you to discover tax savings you didn’t even know existed. Just ask Liam, one of our users – he was able to reduce his tax liability by claiming for homeworking costs.

Whether you have a good grasp on your tax savings or you’re clueless when it comes to tax, GoSimpleTax will make sense of everything for you. It means you’ll potentially save hundreds of pounds in accounting fees, whilst still fulfilling your tax obligations and maximising your take-home pay. 

SUBMIT YOUR SELF-EMPLOYED TAX RETURN WITH GOSIMPLETAX

Tax return software is about three things: accuracy, convenience, and zero confusion.

Our Self Assessment software gives you full visibility over your finances. You can see everything in real time and from any device, including your tax liability. It also provides you with tax-saving suggestions by revealing deductible items that will automatically save you money.

‘Do I need an accountant to do my tax return?’ Not with Self Assessment software. GoSimpleTax allows anyone to be a tax expert. Find out for yourself by signing up for our free trial. You can use it to start calculating your tax bill straight away – no credit card required.

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