A UK credit note reduces or cancels all or part of an issued invoice. It must identify the original invoice, describe what is credited and show the amount and VAT being reversed.
Use this 2026 credit note template for trade invoices, refunds, pricing errors and cancelled work.
This is general information, not tax advice. VAT-registered businesses should follow HMRC’s credit-note rules and keep both documents.
Credit note template UK
[Your legal business name]
[Address, company number and VAT number]
Client: [Legal name and address]
Credit note number: [Unique reference]
Credit note date: [Date in 2026]
Original invoice: [Number and date]
Reason: [Cancelled line, overcharge, return, refund or correction]
| Description | Net credit | VAT rate | VAT credit | Gross credit |
|---|---|---|---|---|
| [Line being reversed] | -£[ ] | [ ] | -£[ ] | -£[ ] |
| Total credit | -£[ ] | -£[ ] | -£[ ] |
Result: [Amount still due / amount to refund / invoice fully cancelled]
Full credit note example
An invoice for £1,200 including £200 VAT was issued to the wrong legal client and must be cancelled.
| Item | Amount |
|---|---|
| Original net invoice | £1,000 |
| VAT at 20% | £200 |
| Original total | £1,200 |
| Full credit | -£1,200 |
| Balance on original invoice | £0 |
Issue the correct new invoice separately. Do not overwrite the old document and reuse its number.
Partial credit note example
A client was charged for 10 fittings but received 8. Two fittings at £30 each plus VAT are credited.
| Item | Amount |
|---|---|
| Net credit | -£60 |
| VAT credit at 20% | -£12 |
| Gross credit | -£72 |
If the original invoice was £600, the outstanding balance becomes £528 before considering payments already received.
When to issue a credit note
Use one when an issued invoice needs a documented reduction, including:
- cancelled work
- returned goods
- duplicate charge
- overstatement of quantity
- agreed price reduction
- VAT or client correction requiring reversal
- deposit refund or cancellation adjustment
A draft invoice can usually be corrected before issue. An issued invoice should keep its history.
Credit note versus refund
A credit note changes the client’s account. A refund moves money back to the client.
If an invoice has been paid, you may need both:
- issue the credit note
- record the resulting client credit
- send the refund
- record the refund against the credit
Do not mark the original payment as if it never happened.
Credit note versus void invoice
A void records that an invoice should no longer be collected, but the correct accounting treatment depends on the document state and system.
Use a credit note where a tax or accounting record needs an explicit reversal. Keep the original invoice number and credit note reference linked.
VAT credit notes
A VAT credit note must carry the details HMRC requires, including the original invoice’s number and date, what is credited, and the VAT rate and amount credited. Use the same tax logic as the supply being corrected.
For reverse-charge construction work, the credit note should reverse the relevant net value and reverse-charge VAT information without inventing a cash VAT refund from the supplier.
CIS invoice corrections
If a CIS invoice’s labour or materials figure changes, the gross supply, deduction base, CIS deduction and net amount may all need recalculation.
Do not issue a credit for only the net bank amount without showing the gross correction. The CIS invoice template shows the full chain.
Correcting the client name
An invoice to the wrong legal entity can affect VAT, purchase-order approval and payment. Cancel it through the proper credit process and issue a new invoice to the correct entity.
Do not edit the PDF and leave the accounting record unchanged.
Credit-note email
Subject: Credit note [number] for invoice [number]
Hi [name],
Credit note [number] is attached against invoice [number]. It corrects [reason] and reduces the account by £[amount].
The remaining balance is £[amount] / A refund of £[amount] will be processed by [date].
Regards,
[your name]
The email explains the outcome; the credit note contains the formal calculation.
Client statement after a credit
A statement should show the original invoice, credit note, payment and balance as separate entries. Do not replace the invoice row with a smaller total.
This keeps the account traceable when the client or accountant checks it later.
Credit note checklist for 2026
- Is the credit-note number unique?
- Does it name the correct client?
- Is the original invoice referenced?
- Is the reason specific?
- Are net, VAT and gross credits correct?
- Is the remaining balance or refund clear?
- Are CIS and reverse-charge figures adjusted properly?
- Are both documents retained?
Sendinvo’s credit notes are issued against the original invoice and take its client, currency and VAT rate; against a reverse-charge invoice they charge no VAT. Credit the invoice in full, to the penny, or pick the lines and quantities to credit, each with its share of any discount. A credit note can never take more than the invoice has left to credit. It takes the next CN number when it is sent, reduces what the invoice shows outstanding, and the reminders then chase only what is left. A sent credit note is never deleted: void it and the invoice’s balance goes back. Record any refund separately.