E-Invoicing: What HMRC’s Plans Mean for Your Business

E-Invoicing: What’s Coming and What It Means for Your Business

The Budget that occured on 26 November was expected to bring another round of tax changes, but one already on HMRC’s agenda is a bigger shift towards digital record-keeping. Alongside Making Tax Digital, the government is preparing to bring e-invoicing into wider use. For some businesses, this won’t change much. For others, especially those relying on handwritten invoices or cash-based workflows, it will mean adjusting how invoices are created and stored.

E-invoicing isn’t new. More than 80 countries already use it in some form, and the EU is working towards an EU-wide requirement from 2030. In the UK it’s currently voluntary for most organisations, but public bodies such as the NHS already require it. HMRC’s next step is to standardise how it works across the private sector and move, eventually to a system where invoices are submitted to HMRC automatically.

How it works

With e-invoicing, the invoice is created in a digital format (PDF, XML or JSON) and sent directly from the supplier’s accounting system to the customer’s system. The customer’s software logs it and processes it straightaway. Payments can move faster and there’s far less manual work involved. The whole point is to reduce errors, speed up processing and produce a cleaner, more consistent data trail.

What HMRC is considering

HMRC recently consulted on how this should operate and set out three possible models:

• A four-corner model, where the supplier and buyer each use a certified software provider to exchange invoice data.
• A centralised model, where business and send invoice to an approved third party that checks and time-stamps submissions.
• A data-sharing model, where invoice data goes directly from the business’s accounting system to HMRC in real time, with each invoice digitally signed before reaching the customer.

The consultation didn’t confirm with model HMRC will choose, only that it wants a system that improves efficiency, accuracy and transparency.

Link to Making Tax Digital

HMRC has said e-invoicing should be seen as an extension of Making Tax Digital rather than a separate project. The plan is to introduce it on a voluntary basis first. Businesses already keeping digital VAT records will notice the least change.

MTD is being expanded gradually:

• April 2026 – self-employed individuals and landlords with gross income over £50,000 will join
• April 2027 – those with income over £30,000 included
• April 2028 – the intention is to extend it further to those with income over £20,000

Anyone dealing mainly in cash will see the biggest impact, as they will eventually need to create digital invoices using an app, record the payment and keep the invoice in their system ready for transmission. The days of handwritten invoices and ad-hoc notes are ending.

Why HMRC wants this

The government believes e-invoicing will help close the “tax gap” by reducing mistakes and creating more consistent records. HMRC expects this standardisation to result in fewer errors in tax reporting. However, smaller businesses may face extra admin and new software costs, so the transition needs to be managed carefully.

What Businesses should do now

There is nothing to change today. No rules have been introduced and HMRC is starting voluntary adoption. But the direction of travel is clear. To prepare:

• Phase out handwritten or informal invoices
• Investigate software you are currently using or are thinking of moving to, to confirm it will support e-invoicing
• If you are still using cash transactions, consider how to move to a digital system

Preparing early will make this transition easier and most efficient. Get in touch with us if you would like to talk about what the changes mean for your situation. We’ll help you review your current set up and help you work out the next steps.