Free contractor invoice template
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INVOICE
| Description | Qty | Price | Amount |
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Who you invoice depends on your arrangement
Contractors sit in one of three positions, and each invoices differently:
- Your own limited company, outside IR35. Your company invoices the client or agency for the full fee. You then extract it as salary and dividends.
- Inside IR35. The fee is treated as employment income. Tax and National Insurance are deducted before the money reaches your company, so what arrives is much less than the invoice.
- Through an umbrella company. The umbrella invoices the client and employs you. You submit timesheets rather than invoices.
Since April 2021, for medium and large private-sector clients the client determines your IR35 status, not you. You should receive a Status Determination Statement. If you have not been given one, ask — you are entitled to it and to the reasoning behind it.
What to put on the invoice
Beyond the usual details, contractors should show the period covered, the day or hourly rate, and the number of days or hours. Agencies reconcile against timesheets, and an invoice that does not match the approved timesheet is the most common reason for a delayed payment.
Include your purchase order number if there is one. Many agencies will not process an invoice without it, and will not tell you that until you chase.
Expenses
Recharged expenses should be itemised separately from your fee. If you are VAT registered, VAT is generally charged on the recharged amount as part of your overall supply — not simply passed through at the rate you were charged.
Getting paid on time
Agency payment terms are often 30 days from a self-billing run rather than from your invoice date, which can mean seven weeks in practice. Check whether the agency self-bills before you plan around your own invoice dates. Where you invoice directly, the statutory late payment rules apply and give you a right to interest and compensation.
Common questions
Who decides my IR35 status?
For medium and large private-sector clients, and all public-sector ones, the client decides and must give you a Status Determination Statement. Only for small private-sector clients does the responsibility remain with your own company.
Do I invoice if I am inside IR35?
Usually yes, but tax and National Insurance are deducted before payment reaches your company, so the amount received is well below the invoice value.
Do umbrella contractors invoice?
No. The umbrella company employs you and invoices the client. You submit timesheets and are paid through PAYE.
What is self-billing?
An arrangement where the agency raises the invoice on your behalf from approved timesheets. Payment terms then run from their billing run, not from any invoice you send.