IT Contractor Invoice Template — UK Guide
Everything you need to invoice correctly as an IT contractor in the UK — whether you operate through a limited company, are inside or outside IR35, or are just starting out as a sole trader.
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Limited company vs sole trader invoicing
The structure you trade through changes what goes on your invoice and what HMRC expects from you.
Limited company
Most common for ITYour invoice is issued by the company, not you personally. The company name, registered address, and Companies House number must appear on every invoice. If VAT registered, your VAT number is also required. You can pay yourself a combination of salary and dividends.
Acme Dev Ltd · Co. No. 12345678 · VAT No. GB123456789
Sole trader
Simpler setupYou invoice in your own name (or a trading name). No Companies House number is required. All profit is treated as personal income and taxed via Self Assessment. Lower admin overhead, but typically less tax-efficient above moderate earnings.
Jane Smith · trading as JS Tech Solutions
Umbrella company
Inside IR35You are an employee of the umbrella company. The umbrella invoices the agency; you receive a payslip. You do not issue your own invoices. The umbrella deducts PAYE tax and NICs before paying you. Common when all or most of your work is inside IR35.
Umbrella Co Ltd invoices agency — you receive payslip
CIS (Construction Industry Scheme)
IT in constructionIT contractors working on-site at construction or engineering projects may be caught by CIS rules. If so, the contractor deducts 20% (or 30% if you are not registered) from your labour element before paying. Register with HMRC to get the lower deduction rate.
Labour: £2,000 · CIS deduction (20%): −£400 · Net paid: £1,600
What to include on an IT contractor invoice
Missing fields are the most common reason agency accounts teams bounce invoices back. Get these right on the first send.
Invoice number
A sequential reference — e.g. INV-001. Your client's accounts payable team will use this to match payment and raise a purchase order.
Your limited company name and registered address
Use your company's full legal name as registered at Companies House, not your own name. Include the registered office address.
Companies House number
Required on all UK limited company invoices. Found on your certificate of incorporation or via the Companies House register.
VAT registration number (if registered)
Mandatory on every invoice if your company is VAT registered. Format: GB followed by 9 digits. Include your VAT rate and the VAT amount as a separate line.
Client's legal entity name and address
Bill the correct legal entity — often the end client, agency, or managed service provider (MSP), depending on your contract chain.
Purchase order (PO) number
Agencies and large enterprise clients almost always require a PO number. Without it, your invoice will sit in a queue. Confirm the PO number before work starts.
Invoice date and payment due date
IT contractors typically work to 14 or 30-day terms. State both dates explicitly. Many agencies operate on 30-day terms but will agree 14 days if you ask.
Description of services
Be specific: role, engagement period, and any relevant contract or SOW reference. "Software development services — Senior Developer — w/e 14 Mar 2025, Contract Ref: XYZ-456" is far better than "Development work".
Number of days / hours and day rate
Break out days (or hours) and your agreed rate separately. This allows the client to cross-reference against timesheets and avoids queries.
Subtotal, VAT, and total
Show each figure on a separate line. If you are on the VAT flat rate scheme, you still charge the client at the standard rate (20%) — the difference is yours to keep.
Bank details
UK sort code and account number. If billing an overseas client, add IBAN and BIC/SWIFT. Many contractors use a dedicated business account to keep company finances separate.
Day rate invoice examples
Three realistic UK IT contractor invoice examples covering common scenarios.
Senior full-stack developer — agency contract
Outside IR35 contract via a recruitment agency. Billing the agency (not the end client) on net 30 terms. VAT registered at standard rate.
DevOps / cloud engineer — direct client
Outside IR35, billing the end client directly. Flat rate VAT scheme (16.5% for IT sector). Client is charged 20% VAT; contractor retains the 3.5% margin.
Junior developer — sole trader, no VAT
Below the £90,000 VAT threshold. Sole trader invoicing directly. No VAT charged. 14-day payment terms agreed with client.
IR35 and invoicing — what changes?
IR35 determines how your income is taxed, not whether you send an invoice. But it does change who invoices whom and what you receive.
Outside IR35
- Your limited company invoices the agency or end client for the gross contract rate
- The fee-payer pays your company in full — no tax deduction at source
- You pay yourself salary + dividends from the company; tax is handled through Self Assessment and Corporation Tax
Inside IR35
- If working via your own limited company: the fee-payer deducts PAYE and NICs from payments to your company before transferring funds
- If working via an umbrella company: the umbrella invoices the agency; you do not send invoices — you receive a payslip instead
- In either case, dividends from the company are no longer a tax-efficient option for income derived from inside IR35 contracts
Payment terms for IT contractors
Unlike many freelance sectors, IT contracts are typically large-value and recur weekly or monthly. That makes payment terms a significant cash-flow lever — and worth negotiating firmly.
Direct client
14 days
Ideal. Achievable with most SME end clients if you ask at contract stage.
Recruitment agency
30 days
Standard for most agencies. Push for 14 days — many will agree.
MSP / large agency
45–60 days
Common with tier-1 agencies. Factor into your day rate negotiation.
Late payment clause for contractor invoices
“Payment is due within [14/30] days of invoice date. In accordance with the Late Payment of Commercial Debts (Interest) Act 1998, interest will be charged at 8% above the Bank of England base rate on any overdue amount, together with reasonable debt recovery costs.”
Frequently asked questions
How does IR35 affect how I invoice as an IT contractor?
IR35 affects your tax status, not your invoicing mechanics directly. If you are outside IR35, your limited company invoices the agency or end client as normal, and you extract income through salary and dividends. If you are inside IR35, the fee-payer (agency or end client) deducts income tax and NICs before paying your company — but your company still issues invoices for the gross contract rate. If you work through an umbrella company (typically when inside IR35), it is the umbrella that invoices the agency; you receive a payslip from the umbrella, not an invoice template.
Should an IT contractor use a limited company or sole trader structure?
Most IT contractors operating outside IR35 use a limited company because it is more tax-efficient at day rates above roughly £30,000 per year: you can combine a small salary with dividends to minimise NIC exposure. Sole trader status is simpler and carries no Companies House obligations, but you pay income tax and Class 4 NICs on all profits. If IR35 has caught most of your contracts, the tax advantage of a limited company narrows significantly and you should take professional advice.
What is the VAT flat rate scheme and is it worth it for IT contractors?
The VAT flat rate scheme (FRS) lets small businesses pay a fixed percentage of their gross (VAT-inclusive) turnover to HMRC, rather than accounting for VAT on every purchase and sale. IT contractors typically fall into the "computer and IT consultancy or data processing" category, which carries a 14.5% flat rate (or 16.5% if you are a "limited cost business" — which most contractors are, since they have few VAT-able purchases). At 16.5%, the scheme offers minimal benefit over standard VAT accounting and may even be slightly worse. You should model both options or ask your accountant before joining.
What payment terms should IT contractors put on their invoices?
Large agencies typically default to 30-day payment terms, but many will agree to 14 days — especially if you ask at contract negotiation stage rather than after signing. Some MSPs (managed service providers) operate on 45 or even 60-day cycles; push back on these, as they create cash flow problems. Specify the payment due date explicitly on every invoice (e.g. "Payment due: 28 March 2025") rather than just stating "Net 30" — it removes ambiguity and gives you grounds to chase immediately after the due date.
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