Invoicing

An invoice is a bill. You send an invoice when you work for someone and are self employed. Most employers will not pay you unless you send an invoice.

When to send an invoice

When you agree to work with an employer you should negotiate a contract. The contract should say when you get paid. If you are working on a short-term project, you might agree to get paid once at the end of the job. If the project lasts a few weeks or months you might agree to get paid in instalments.

For example, our usual payment terms are:

  • 80% of the fee paid at the start of the project
  • 20% of the fee paid at the end of the project

Employers need an invoice from you to make a payment if you are self employed. They will use your invoice in their annual report to Her Majesty’s Revenue and Customs (HMRC, the tax office) to work out their tax. They might also need it to report to a public funder on what they have spent money on.

If you are on Universal Credit, try to negotiate monthly payments for long projects. This will help to keep your Universal Credit payments more regular.

What you should put in your invoice

An invoice will often get sent to someone working in a finance department for payment. They will not know you or the work you have done. Include all the information you think they need to understand the payment. If you forget something they can contact you for more details. The information you need to provide might change depending on the project. But there are some things to include on every invoice.

Invoices should include:

  • An invoice number. This is a reference number you make up. People who pay you will put the invoice number on their payment. It will help you know when you get paid.
  • The date you send the invoice.
  • A description of the work you did or the name of project you worked on.
  • The dates you worked.
  • Your National Insurance number and UTR
  • How to pay you. Some people like to get a cheque. Many more prefer the money to get paid into their bank account. If you want to get paid like this, include your bank account details.
  • Your contact details. Include your full name as it appears on your bank account. Add your business address, which might be your home address. It’s a good idea to add your telephone number and email in case they have a question.
  • When payment is due. It is standard to get paid within 30 days of sending an invoice. It’s better to say on the invoice when they have to make the payment.

Depending on your circumstances you might also include:

IR35: checking you are self employed

Some people used to register themselves as a company to avoid paying income tax while working freelance. Companies can pay tax-free dividends to directors instead of a taxed salary. Employers now have to check if people should get paid as self employed workers. The IR35 process helps HMRC stop tax avoidance.

IR35 checks your employment status. It makes sure the employer isn’t trying to hide a worker ‘off the books’. When you are employed a company has to pay National Insurance contributions. If you are self employed they do not.

The employer will make these checks and ask you questions if they need to. You do not have to do anything to make these checks yourself. The checks might take up to 2 weeks. This might delay your first invoice payment.

Most of the checks under IR35 will refer to your contract of work. The employer will get in trouble from HMRC if you do not have a contract they can refer to.

Much more information on IR35 is available. It is good to be aware of the process but you do not have to know it in detail.

What to do if your payment is late

You can charge interest on unpaid invoices. It’s agood idea to mention this on your invoice to encourage timely payment. If your employer does not pay your invoice within your payment terms you can send a new invoice. Your new invoice will have some interest added. You can use this example to work out how much interest you can charge.

More information on late invoices and getting paid is on Creative Boom.


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