Self-Billing Agreements UK: What Tradespeople Need to Know

A self-billing agreement is a written deal under which your customer writes the invoice for your work, sends you a copy and pays against it. In the UK it only works as a VAT arrangement if you and the customer are both VAT registered, and you stay responsible for the VAT on every invoice they raise. If a customer offers you one, you can say yes, but only with a signed agreement in place first and your own job records kept so you can check every invoice against what you actually did. That is where we come in: TradeTally keeps your quotes, invoices, receipts and per-job profit in one place on your phone, so a customer’s invoice never has to be taken on trust.

TL;DR

Self-billing means the customer issues the invoice on your behalf, under a written agreement made before the first invoice.
For VAT purposes both of you must be VAT registered. HMRC approval is not needed, but the conditions are.
Each self-billed invoice must carry the label “SELF-BILLING”, your name, address and VAT number, and all the usual full VAT invoice details.
You do not issue your own invoice for the same supplies, and you account for the VAT shown as your output tax.
Keep the agreement and your own job records. Agreements are normally reviewed at least once a year.

What a self-billing agreement actually is
Who can use one, and who cannot
What the agreement must contain
What a self-billed invoice must show
Checking a customer’s invoice against your own records
Records to keep
How long an agreement lasts, and when to renew
Benefits and risks for a sole trader
What to do if a customer proposes self-billing
Perspective: why your own records matter most
Keep every job’s paperwork in one place
FAQ
Sources

What a self-billing agreement actually is

HMRC describes self-billing as a commercial arrangement in which the customer prepares the supplier’s invoice and forwards a copy to the supplier, normally with payment. The flow is the reverse of what you are used to. Normally you finish the job, write the invoice and chase the money. Under self-billing the customer works out what is due, produces the invoice in your name and pays you.

Three things follow from that:

The customer holds the pen. They produce the document that counts as your VAT invoice.
You agree not to issue a second invoice for the supplies the agreement covers.
The VAT is still yours. You account for the VAT shown on the self-billed invoice as your output tax, not as input tax.

Self-billing is most common where the customer is best placed to work out the quantity and value of what was supplied. HMRC’s own manual notes it is used where the customer determines the value after supply, including settling an agent’s commission. For a tradesperson that might be a larger contractor or managing agent that measures completed work, or a platform that prices jobs after the event.

Who can use one, and who cannot

For VAT self-billing, both the customer and the supplier must be VAT registered. You do not need HMRC’s permission, but you both must agree and meet the conditions.

Two points matter to a sole trader:

You are not obliged to say yes. HMRC’s guidance says any trader can use self-billing if the legal conditions are met, and that a trader should not be forced into it by a trading partner, although commercial pressure does exist. If a main contractor makes it a condition of the work, that is a commercial conversation, so read the terms before you sign.
If you are not VAT registered, the VAT version does not apply to you. A customer must not issue self-billed VAT invoices for a supplier who is not registered for VAT. Many sole traders sit below the VAT threshold, and for them an invoice from the customer cannot carry VAT.

If you deregister for VAT while an agreement is running, the payment arrangement can carry on, but the customer can no longer issue VAT invoices and the arrangement is no longer covered by the VAT regulations. You should tell the customer straight away in writing.

Self-billing is not the same as CIS

Tradespeople often mix the two up, because in both cases the money arrives with a statement from the customer. They are separate systems. Under the Construction Industry Scheme a contractor deducts tax from your payment and gives you a payment and deduction statement. Self-billing is a VAT invoicing arrangement. You can in principle have both on the same job, which means the paperwork needs to line up. Our CIS explained guide walks through the deductions, and the CIS deduction calculator lets you check the figure a contractor has taken.

Self-billing and CIS serve different purposes

If you work in domestic construction services, the VAT domestic reverse charge can also change who accounts for the VAT. See our guide to the VAT domestic reverse charge and invoice wording before agreeing how invoices are raised on a job.

What the agreement must contain

The agreement has to be in place before the first self-billed invoice, and it must be written, on paper or electronically, and binding on both parties. You can use HMRC’s example wording or equivalent terms. As a minimum it should record:

your consent to the customer raising invoices for your supplies;
your promise not to issue your own VAT invoices for those supplies;
your acceptance of the customer’s invoices as valid;
a start date and an expiry date;
that each side will tell the other if their VAT registration status changes;
who is responsible if invoicing is outsourced to a third party.

Pro tip: add to your copy a clear description of which jobs or which contract the agreement covers. If you also do private jobs for the same customer, you do not want confusion over whether those fall under the agreement.

Before you sign

Read the expiry date, the scope and how payment timing is described. The agreement itself will not tell you when you will be paid or how disputes over valuation are handled, so ask for payment terms in the underlying contract. A calm email before work starts is far cheaper than a disagreement after.

What a self-billed invoice must show

A self-billed invoice is still a VAT invoice, so it needs everything a normal full VAT invoice needs. It must also show your name, address and VAT number, and carry the label “SELF-BILLING”, which is a legal requirement. HMRC advises adding a line saying the VAT shown is your output tax due to HMRC, so that the position is clear to both sides.

Compare what you receive with the standard list in our guide to UK invoice requirements for tradespeople. Typical things to check on every one:

Check	Why it matters
Your VAT number and trading name are right	The invoice supports your VAT return and the customer’s reclaim
“SELF-BILLING” appears on the document	It is required wording
Description, date of supply and quantities match your job	Your record of the job is the benchmark
VAT rate is correct for the work	You carry the liability if it is wrong
Net, VAT and gross totals add up	Errors flow straight into your return

The VAT rate is your risk

The customer writes the invoice, but you remain responsible for the VAT. HMRC’s guidance lists the risks as incorrect VAT liability, system errors, and denied input tax claims or penalties. A Tax Adviser article from May 2025 makes the same point from the professional side: suppliers remain responsible for applying the correct VAT rate, even though they did not prepare the document. If a customer applies the standard rate to work that should be zero-rated or reverse-charged, or the reverse, the output tax in your return will be wrong.

That is why a habit of checking each invoice on arrival matters. Compare it with your quote, your materials receipts and your hours, and raise any mismatch in writing quickly.

Checking a customer’s invoice against your own records

When you invoice yourself, your numbers and the customer’s numbers are the same document. Under self-billing they are two documents that should agree. The easiest way to prove they do is to keep a clean, job-by-job record of your own.

A simple routine, whichever system you use:

Quote first. Keep the agreed price and scope for the job.
Log costs as you go. Photograph receipts on the day, before they fade or vanish into the van footwell.
Log time and mileage. These support your side of the story if the valuation is disputed.
Match the self-billed invoice to the job when it arrives, line by line.
Raise discrepancies in writing the same day, quoting the job and the line.

This is the routine TradeTally is built around. You can create a quote, capture expenses and receipts from your phone, track mileage and time, and see live profit for each job. When a self-billed invoice lands, you already know what the job should have paid, so a short payment shows up at once.

If you are also chasing money, you may need to charge interest on a late invoice. Whether you issue the invoice or the customer does, late payment rules are worth knowing before a payment slips.

Records to keep

HMRC’s record-keeping guidance says a VAT trader must keep any self-billing agreement it is party to. Customers must also keep the name, address and VAT registration number of each self-billed supplier. As the supplier, keep:

the signed agreement and every renewal;
every self-billed invoice you receive;
your own job file: quote, receipts, time and mileage;
evidence of payments received;
any emails querying or correcting an invoice.

For how long and in what form, see our Self Assessment records checklist and the guide to how long to keep receipts. Self-billed income is still your income, so it goes into your Self Assessment alongside the rest. TradeTally produces tax-ready records, including an SA103F export, and straightforward exports you can hand to an accountant.

How long an agreement lasts, and when to renew

An agreement lasts for its stated period, or until the linked business contract ends. HMRC’s guidance says that before expiry both sides should review VAT registration and consent, agree a new period, and stop self-billing if the renewal is not documented. A change in status or a transfer of the business can require a fresh agreement.

Practical points for your diary:

Note the expiry date in your calendar at least a month ahead.
If you change from sole trader to limited company, treat it as a new supplier and ask for a new agreement.
If your VAT registration number changes, tell the customer in writing and ask for confirmation.
If the renewal is not signed, stop accepting self-billed invoices and issue your own.

The customer’s biggest risk is missing a supplier’s deregistration or new VAT entity, which can invalidate their input tax recovery. A prompt written notice from you protects both of you and keeps the relationship straightforward.

Benefits and risks for a sole trader

The upside is real. The customer takes on the invoicing, their purchase documents are uniform, and where the customer is the one measuring the work it can save a round of back and forth. The Tax Adviser notes it can save administration and speed up payment.

Set against that, you give up control of the document. The points to manage are:

Accuracy. You answer for the VAT on an invoice you did not write.
Setup and upkeep. The agreement needs reviewing and renewing.
Dependence. If the customer’s system has an error, it repeats on every invoice until someone spots it.

All of these are handled by good records and a quick check on every invoice. Where a customer does not use self-billing, your own branded invoices remain the simplest route: you decide the wording, the due date and the VAT treatment, and you send it the day the job finishes. Our sole trader invoicing guide covers that routine for trades.

What to do if a customer proposes self-billing

Follow this order:

Confirm VAT status on both sides. Ask for their VAT number and check yours is current.
Ask for the draft agreement in writing and read the scope, dates and notification duties.
Agree payment terms in the contract itself.
Sign before the first invoice. Not after.
Set up your job file so every self-billed invoice can be matched.
Diarise the expiry and review date.
Tell your accountant, so your VAT return treats the invoices as output tax.

If you are unsure how it affects your VAT position, speak to your accountant before signing. For anything about the legal wording of a VAT agreement, HMRC’s own guidance is the reference.

Perspective: why your own records matter most

We built TradeTally because the paperwork after a day on site is where tradespeople lose money and sleep. Self-billing is a good example. The idea is simple, but the moment someone else writes your invoice, the only thing standing between you and a wrong figure is your own record of the job.

That is why we put quotes, receipts, mileage, time and live job profit in one place. If you know what a job should have made, you spot a short payment or a wrong VAT line in seconds, not at the end of the quarter.

Our advice is the same whichever way you are invoiced: write down the price before you start, photograph the receipt the same day, and keep everything tied to the job. Do that, and a self-billed invoice is just one more document to tick off.

Simon

Keep every job’s paperwork in one place

TradeTally is a UK web and mobile app for sole tradespeople. It covers branded invoicing, quotes, a live profit dashboard, expense and receipt tracking, mileage and time tracking, CIS deduction handling and MTD-ready record-keeping, with exports for Self Assessment and your accountant. The Starter plan is £0 per month, and Professional is £12 per month or £120 per year. You can start on the TradeTally home page or see the full details on the pricing page.

Builders working under CIS can also see how CIS invoice software handles deductions.

FAQ

Do I need HMRC approval for a self-billing agreement?

No. For VAT self-billing you do not need approval from HMRC. You and your customer must both be VAT registered, agree the arrangement and meet the conditions in HMRC’s self-billing notice, including a written agreement made before the first invoice.

Can a sole trader who is not VAT registered use self-billing?

Not for VAT invoices. A customer must not issue self-billed VAT invoices for a supplier who is not VAT registered. You can still agree how a customer pays you, but the VAT self-billing rules apply only when both sides are registered.

How long does a self-billing agreement last?

It lasts for the period stated in the agreement, or until the linked business contract ends. Many are set for around 12 months. Before it expires, review VAT registration and consent and agree a new period in writing, or stop self-billing.

Do I still account for the VAT if my customer writes the invoice?

Yes. You account for the VAT shown on a self-billed invoice as your output tax, and you keep the agreement on file. HMRC’s guidance also says the customer must keep copies of agreements and your name, address and VAT number.