Credit note template UK (2026): what to include, VAT rules and how to issue one
Credit note template UK (2026): what to include, VAT rules and how to issue one
By InvoiceAdept Team12 March 2026Updated 31 August 202614 min read
You sent the invoice. The customer paid. Then something changed: a returned part, a cancelled stage, a price reduction you agreed on site, or a deposit you are refunding because the job never started. The document that fixes the paper trail is a credit note — not an edited PDF of the original invoice.
This replaces a thinner version of the same slug. That older page mixed the statutory 14-day window for VAT credit notes with a “Pro tip” to issue within 30 days, skipped the original invoice date on the template, blurred credit notes with refunds, implied software “MTD submissions”, and treated “keep 6 years” as a single rule. Those points are corrected below against the regulations and GOV.UK.
InvoiceAdept is invoicing software from Tech Me Today Ltd, Companies House 15917255, ICO ZB944663. Free is five invoices a month. Pro is £7.99. Pro+ is £12.99 and is the CIS plan. Digital credit-note records help with Making Tax Digital record-keeping. InvoiceAdept does not submit VAT returns, CIS300, or Income Tax Self Assessment quarterly updates to HMRC. Worked figures are illustrative, not a price list. This is general information for UK trades, not tax or legal advice.
In short
Never delete or rewrite a sent invoice. Issue a numbered credit note that links to the original invoice’s number and date, states the reason, and shows the net decrease and VAT in sterling.
If you are VAT-registered and the consideration for a supply decreases (Regulation 38), VAT Regulations 1995 Reg 15C requires a credit note within 14 days of that decrease. HMRC’s manual VATSC06635 says the decrease usually occurs when you make the refund (or offset against money they still owe you) — that is when the 14-day clock starts.
GOV.UK keeping VAT records is explicit: keep credit and debit notes; keep copies of sales invoices even if cancelled or issued by mistake; settle returns by a replacement invoice or a credit/debit note; and keep VAT records for at least 6 years (10 years if you used VAT OSS/MOSS). Self-employed Income Tax records are a different clock — generally 5 years after the 31 January filing deadline for the tax year.
Raise the credit note in software so the original invoice stays untouched. Free is five documents a month on InvoiceAdept; Pro removes that cap. Pricing.
What a credit note is — and when UK trades need one
A credit note is a numbered accounting document that reduces (or cancels) amounts previously invoiced. It is the mirror of an invoice: invoice says “you owe us X”; credit note says “we credit you Y against invoice Z”.
Common trade situations:
Situation | Usual document | Why |
|---|---|---|
Customer returns unused materials you billed | Credit note for those lines | Original invoice stays; stock and VAT adjust |
You agreed a discount after the invoice went out | Credit note for the reduction | Do not edit the sent invoice |
Deposit refunded because the job was cancelled | Credit note (and then the money movement) | Links the refund to the deposit invoice |
Overcharge / wrong rate spotted after send | Credit note for the error | Keeps an audit trail HMRC can follow |
Snagging credit against final account | Credit note or a clear credit line on final — prefer a separate CN if VAT already accounted | Avoids rewriting history |
Invoice issued by mistake / wrong customer | Credit note to cancel, then a correct new invoice | GOV.UK: keep the mistaken invoice copy anyway |
It is not a quote, a goodwill gesture without paperwork, or a WhatsApp “don’t worry about that £200”. If VAT was on the original invoice, the paper trail has to match what you put on the VAT return.
Sister pages: how to invoice a UK client as a tradesperson, deposit invoice template UK, domestic reverse charge invoice UK, MTD invoicing for UK trades.
Never edit or delete a sent invoice
Once an invoice has left your system — emailed, WhatsApped, or handed over — treat it as fixed. Changing the PDF later creates two versions of “the truth”: the one the customer paid against, and the one sitting in your folder. That is how VAT periods and disputes go wrong.
GOV.UK — keeping VAT records says you must keep copies of all sales invoices, even if they were cancelled or issued by mistake. The fix for a wrong invoice is not the bin. It is:
Leave the original invoice as issued.
Issue a credit note that cancels or reduces it.
If you still need to bill the right amount to the right person, raise a new invoice with a new number.
“Issued by mistake” is not a licence to erase history. Keep the mistaken copy, credit it, invoice correctly.
Full Reg 15C / HMRC checklist (VAT-registered)
Regulation 15C of the VAT Regulations 1995 sets out what a VAT credit note must contain when you adjust for a decrease in consideration. GOV.UK’s keeping-records page restates the practical list: same core information as the VAT invoice, the reason, the total credited excluding VAT, and the number and date of the original VAT invoice.
Mandatory particulars (Reg 15C)
Field | Why it matters |
|---|---|
Your name, address and VAT registration number | Identifies the supplier |
Customer’s name and address | Identifies who receives the credit |
Identifying number of the credit note | Sequential CN- series; unique |
Date of issue of the credit note | When you issued the document |
Number and date of the original VAT invoice | Reg 15C(6)(e) — both, not number alone |
Description of goods or services | What is being credited |
Amount of the decrease in consideration, excluding VAT | Net credit |
Rate and amount of VAT credited, in sterling | VAT adjustment in £ |
Reason for the credit (GOV.UK / good practice aligned with HMRC) | Returns, price reduction, cancellation, error |
If the original supply was at more than one VAT rate, show the breakdown clearly so the customer (and your return) can match rates.
When a VAT credit note is required vs optional
HMRC VATSC06635 draws useful lines:
For a Regulation 38 decrease (consideration falls after you accounted for output tax), you generally need a credit note that meets Reg 15C if a VAT invoice was required for the original supply.
If no VAT invoice was required for the original supply (for example many retail supplies to private individuals), a credit note for VAT purposes is usually only needed if a VAT-registered customer requests one.
You can mark a commercial credit document “This is not a credit note for VAT” when there is no VAT adjustment — useful when you are refunding something that never carried VAT, or adjusting a non-VAT matter.
Non-VAT-registered sole traders still benefit from numbered credit notes for Income Tax records and disputes. The statutory Reg 15C package is a VAT-registered obligation when the conditions apply.
Many UK tradespeople also find it helpful to review Conservatory invoice template UK at this stage.
Copy-paste credit note template (with original invoice number and date)
Use this as a field list. Delete lines that do not apply. Do not leave “N/A” hanging on a domestic job.
CREDIT NOTE
Credit note number: CN-0042
Date of issue: 15 March 2026
Supplier: [Legal name], [address]
VAT number: GB XXX XXXX XX (only if VAT-registered)
Company number / registered office: (if limited company)
Customer: [Legal name], [address]
Site / job / PO ref: [if any]
Original invoice number: INV-1187
Original invoice date: 2 March 2026
Reason for credit: Partial return of unused copper fittings billed on INV-1187 /
Agreed price reduction after snagging /
Full cancellation of deposit invoice INV-1187 — job not started
Description Qty Net £ VAT rate VAT £
Unused 15mm fittings as INV-1187 1 250.00 20% 50.00
Net amount credited (excl. VAT): £250.00
VAT credited: £50.00
Total credited (inc. VAT): £300.00
Settlement: Refund by BACS to original payer / Offset against INV-1190 balanceThe two lines most templates miss — and Reg 15C needs — are original invoice number and original invoice date. Put both on every VAT credit note.
You can raise invoices and credit notes in InvoiceAdept so the original stays locked. Free: five a month. Pro £7.99. Pro+ £12.99 with CIS lines. Pricing.
Numbering: use a CN- series
Credit notes need their own unique identifying numbers. Do not reuse an invoice number. Do not leave gaps you cannot explain.
A clean pattern for trades:
Document | Series example | Notes |
|---|---|---|
Sales invoices | INV-1001, INV-1002… | Sequential; never reuse |
Credit notes | CN-0001, CN-0002… | Separate sequence |
Deposit invoices | Still INV-… | Label the document DEPOSIT; do not invent a third mystery series unless your accountant wants it |
Link every credit note back to one (or more) original invoice numbers and dates. If one credit spans two invoices, list both.
The 14-day rule — when the clock starts
Reg 15C expects the credit note within 14 days of the decrease in consideration. That is not “14 days from when you felt like tidying the paperwork”, and it is not a 30-day soft tip.
Per VATSC06635:
For many price reductions and refunds, the decrease occurs when the supplier makes the refund.
An offset against an outstanding liability the customer already owes you can also count as the decrease.
The 14-day period for issuing the credit note runs from that decrease.
Practical sequence for a VAT-registered plumber who agrees to refund £300 including VAT for unused fittings the customer returned:
Agree the reduction in writing (WhatsApp is writing; a short email is better for contractors).
Make the refund or offset it against money still owed.
Issue the Reg 15C credit note within 14 days of that refund/offset.
Keep the credit note with your VAT records.
There is no “Pro tip: 30 days” in the regulations. If you need longer, that is a conversation with your accountant / HMRC process — not a blog shortcut.
Credit note vs refund vs account credit / offset
These three get mashed together. Separate the document, the money, and the VAT event.
What it is | What it does to VAT (high level) | Timing | |
|---|---|---|---|
Credit note | The VAT / accounting document that records a decrease against a prior invoice | Supports a reduction of output tax when Reg 38 applies and particulars are met | Issue within 14 days of the decrease (Reg 15C) |
Refund | Real money leaving your account back to the customer | Often is the decrease HMRC looks at — clock starts when you refund | When you pay them |
Offset / account credit | You reduce what they still owe on another invoice instead of paying cash | Can count as the decrease if it extinguishes liability | When you apply the offset |
“Sorry, ignore that invoice” in chat | Not a document | Does not fix VAT records | Never enough on its own |
Corrected vs the old thin post: a refund is not “no VAT adjustment”. For VAT Reg 38 decreases, HMRC’s position is that a real-world refund (or qualifying offset) is typically needed before the decrease counts. The credit note is how you evidence and particularise that decrease. Money movement and paperwork travel together; neither replaces the other.
GOV.UK returns and exchanges (same keeping-records page): settle by issuing a replacement invoice or a credit/debit note, record it in your accounts, and keep the original notes.
Worked VAT example: £1,000 + £200 → partial credit
Illustrative only. You are VAT-registered. Standard rate 20%.
Original invoice INV-1187 dated 2 March 2026
Net | VAT | Gross | |
|---|---|---|---|
Labour and materials as quoted | £1,000.00 | £200.00 | £1,200.00 |
Customer returns unused materials worth £250 net. You agree to credit those lines and refund £300.
Credit note CN-0042 dated 15 March 2026 (within 14 days of the refund on 12 March)
Net | VAT | Gross | |
|---|---|---|---|
Credit: unused materials per INV-1187 | £250.00 | £50.00 | £300.00 |
After the credit
Net | VAT | Gross | |
|---|---|---|---|
Net position on this job | £750.00 | £150.00 | £900.00 |
On the VAT return for the period that includes the decrease, your output tax for this supply is reduced by £50 (the VAT on the credit), subject to the normal Reg 38 / accounting rules your accountant applies. InvoiceAdept stores INV-1187 and CN-0042 as digital records. It does not file the VAT return for you.
If instead you cancel the whole invoice (job never happened, full refund):
Net | VAT | Gross | |
|---|---|---|---|
Full credit against INV-1187 | £1,000.00 | £200.00 | £1,200.00 |
Same rules: original invoice kept, credit note issued, refund or offset made, 14-day clock respected.
If you are sorting this alongside other compliance work, read VAT invoice requirements UK 2026.
How a credit note hits the VAT return (high level)
This is orientation, not a filing instruction.
Under standard VAT accounting, you normally account for output tax when you issue the VAT invoice (or earlier tax point rules apply).
If consideration later decreases, Regulation 38 allows an adjustment — evidenced in practice by a proper credit note and the refund/offset.
The VAT on the credit reduces output tax in the period of the decrease (as your scheme and accountant determine).
Cash accounting: timing still follows when money moves; do not invent a shortcut that ignores the refund.
If you used domestic reverse charge on the original invoice, keep the credit note consistent with that treatment — show the VAT figures the same way the original showed them, and do not suddenly “charge” VAT on a credit that was reverse-charged. Practical reverse-charge invoicing: domestic reverse charge invoice UK. For CIS labour deductions on the original, keep the credit note narrative consistent with what was withheld; do not invent a separate CIS “credit law” in the PDF — ask your accountant if the CIS300 period needs a correction.
Non-VAT-registered sole traders
If you are below the VAT registration threshold of £90,000 taxable turnover (GOV.UK VAT registration thresholds) and not voluntarily registered:
You do not charge VAT, so there is no Reg 15C VAT credit note obligation in the VAT sense.
You should still issue a clear credit note (or written credit) against the original invoice number and date for bookkeeping, customer disputes, and Income Tax records.
Do not add fake VAT lines “for completeness”.
Track turnover carefully: refunds and credits affect what you actually earned.
Good practice still looks like the template above, without the VAT columns.
CIS and reverse charge — keep the credit consistent
Keep this practical.
If the original invoice showed CIS deductions on labour, the credit note should identify the same job and make clear which lines are being credited (labour vs materials). Your customer’s CIS paperwork and your own records need to tell the same story. InvoiceAdept Pro+ supports CIS lines on invoices; it does not file CIS300.
If the original invoice used domestic reverse charge wording, the credit note should not suddenly demand VAT in cash. Mirror the reverse-charge presentation.
Do not use a credit note to “fix” a reverse-charge mistake by editing history — credit the wrong invoice, issue a correct new one if needed, and speak to your accountant about the return.
How long to keep credit notes and invoices
Two different clocks. Do not collapse them into one slogan.
Record type | How long | Source |
|---|---|---|
VAT records (including invoices, credit notes, debit notes) | At least 6 years | |
VAT OSS / MOSS records (if you used those schemes) | 10 years | Same GOV.UK page |
Self-employed Income Tax records | Generally 5 years after the 31 January deadline following the tax year |
If you are VAT-registered, keep VAT documents for at least the VAT six years even when the Income Tax clock would have allowed a shorter period for other papers. Credit notes are listed explicitly among the VAT records you must keep. Keep cancelled and mistaken sales invoices too.
Digital copies in software count as records if they are complete and readable. That is record-keeping, not filing.
Related: see How to chase late invoice payments UK for practical next steps.
Making Tax Digital: records yes, InvoiceAdept filing no
MTD for VAT (and, for many, MTD for Income Tax) expects digital links and digital records. Storing invoices and credit notes in invoicing software helps you meet the records side.
InvoiceAdept:
Keeps digital records of invoices and credit notes you raise.
Does not submit your VAT return to HMRC.
Does not submit ITSA quarterly updates.
Does not file CIS300.
Older copy that said credit notes are “included in MTD submissions” or that using the app makes you “MTD-compliant” in a filing sense was overclaiming. Compliance is your records plus compatible filing software / accountant process where required. More context: InvoiceAdept MTD invoicing for UK trades.
Common mistakes
Mistake | Fix |
|---|---|
Editing the original invoice PDF after send | Leave it; issue a credit note |
Credit note without original invoice date | Add number and date (Reg 15C) |
Waiting ~30 days “as a tip” | Reg 15C is 14 days from the decrease |
Refund with no credit note (VAT job) | Document + money; both |
Credit note with no refund/offset when Reg 38 needs a decrease | Make the refund or offset, then CN within 14 days |
Deleting a mistaken invoice | Keep it; credit it; re-invoice correctly |
“Keep everything 6 years” only | Split VAT 6y vs self-employed 5y-after-31-Jan |
Implying your invoicing app filed the VAT return | Records ≠ filing |
Wrong customer / wrong VAT rate on the CN | Match the original supply; correct with another CN if needed |
Reverse-charge original, cash-VAT credit | Keep treatment consistent |
Frequently asked questions
What is a credit note in the UK?
A credit note is a numbered document that reduces or cancels amounts on a previous invoice. For VAT-registered businesses adjusting consideration, it must meet Reg 15C particulars, including the original invoice number and date.
How soon must I issue a VAT credit note?
Within 14 days of the decrease in consideration. HMRC VATSC06635 treats the decrease as usually occurring when you refund (or offset). There is no statutory 30-day “pro tip”.
Do I need the original invoice date on the credit note?
Yes, for a VAT credit note under Reg 15C — identifying number and date of the original VAT invoice.
Is a credit note the same as a refund?
No. The credit note is the accounting/VAT document. The refund (or offset) is the money movement. For many VAT decreases, HMRC expects a real refund or offset before the decrease counts; then the credit note particularises it.
Can I just delete an invoice I sent by mistake?
No. GOV.UK says keep copies of sales invoices even if cancelled or issued by mistake. Credit the mistake, then invoice correctly if needed.
How long should I keep credit notes?
As VAT records, at least 6 years (10 years for OSS/MOSS). Separately, self-employed Income Tax records are generally kept for 5 years after the 31 January deadline of the relevant tax year. VAT-registered trades should keep VAT docs for at least the six-year VAT period.
Do non-VAT-registered tradespeople need credit notes?
Not under Reg 15C, but numbered credits against original invoices are still good practice for records and disputes. Do not invent VAT on them. Threshold is £90,000.
Does InvoiceAdept file my VAT return or MTD updates?
No. It stores digital invoice and credit-note records. Filing VAT returns or ITSA updates is separate — your accountant or compatible MTD filing software.
What if the original invoice had CIS or reverse charge?
Keep the credit note consistent with the original treatment. Identify labour/materials clearly for CIS. Do not switch a reverse-charge supply into a cash VAT credit without advice.
What must a UK VAT credit note include?
Supplier and customer details, your VAT number, credit note number and date, original invoice number and date, description, net amount credited excluding VAT, VAT rate and amount in sterling, and the reason — aligned with Reg 15C and GOV.UK keeping VAT records.
Worth pairing this with our guide to Air conditioning invoice template UK.
Honest next step
If you need to reverse or reduce a sent invoice this week: leave the invoice alone, refund or offset what you agreed, and issue a credit note within 14 days with the original invoice number and date on the face.
Raise it in InvoiceAdept if you want the original locked and the credit stored as a digital record. Free: five invoices a month. Pro £7.99. Pro+ £12.99 (CIS). We keep records. We do not file your VAT return, CIS300, or MTD updates to HMRC.
Related guides: how to invoice a client UK, deposit invoice template, domestic reverse charge, MTD for trades.
About this guide
Written for UK trades using InvoiceAdept. Sources cited: VAT Regulations 1995 Reg 15C; HMRC VATSC06635; GOV.UK keeping VAT records; GOV.UK self-employed record retention; VAT registration threshold £90,000. General information only — not tax, legal, or accounting advice. Check live GOV.UK pages and your accountant before you rely on a figure for a live return.
Ready to get started?
InvoiceAdept helps UK tradespeople send invoices, track payments, and stay compliant — all from one place.
No credit card required
Ready to get started?
InvoiceAdept helps UK tradespeople send invoices, track payments, and stay compliant — all from one place.
Start for freeNo credit card required