Free Construction Invoice Template — What to Include

Q: What must a construction invoice include by law in the UK?

A legally compliant construction invoice in the UK must include a unique invoice number, the date of issue, your business name and address, the customer's name and address, a description of the work carried out, the amount due, and payment terms. If you are VAT registered, you must also include your VAT registration number, the VAT rate applied, the net amount, the VAT amount, and the gross total. If operating under CIS, you should include your UTR number and the contractor's details.

Q: How do CIS deductions work on construction invoices?

Under the Construction Industry Scheme, contractors must deduct tax from payments to subcontractors before paying them. If you are registered with HMRC for CIS, the standard deduction rate is twenty per cent of the labour element of the invoice. If you are not registered, the deduction rate is thirty per cent. Materials are not subject to CIS deductions provided they are clearly separated on the invoice. CIS deductions are credited against your tax liability at the end of the tax year, so you can reclaim any overpayment through your self-assessment tax return.

Q: Should I charge VAT on construction invoices?

You must charge VAT on construction invoices if your taxable turnover exceeds the VAT threshold, which is ninety thousand pounds in 2026. If you are VAT registered, you must charge VAT at the standard rate of twenty per cent on most construction work. Some work on residential properties may qualify for the reduced rate of five per cent, such as converting a non-residential building into a dwelling. New build residential properties are zero-rated for VAT purposes. If your turnover is below the threshold, you cannot charge VAT unless you voluntarily register.

Q: What is retention on a construction invoice?

Retention is an amount withheld from each interim payment as security for the completion and quality of the work. The standard retention rate in the UK construction industry is five per cent, reducing to two point five per cent after practical completion. The first half of the retention is typically released at practical completion and the remainder at the end of the defects liability period, usually six to twelve months later. Retention should be clearly shown on each invoice as a separate line item.

Q: How should I structure staged payments on construction invoices?

Staged payments should be tied to specific milestones in the project, not arbitrary dates. A common structure for a building project is twenty-five per cent deposit on commencement, twenty-five per cent at completion of first fix, twenty-five per cent at completion of second fix, and the final twenty-five per cent on practical completion. Each stage payment should be invoiced separately with a clear description of the work completed at that stage. This approach protects both parties and maintains positive cash flow throughout the project.

Q: How long should I give customers to pay a construction invoice?

Standard payment terms in the UK construction industry are thirty days from the date of invoice for commercial and contractor work. For domestic customers, fourteen to thirty days is typical. For smaller jobs, payment on completion is perfectly reasonable. Whatever terms you choose, state them clearly on every invoice and follow up promptly if payment is late. Under the Late Payment of Commercial Debts Act, you are entitled to charge interest at eight per cent above the Bank of England base rate on overdue invoices, plus a fixed compensation amount.

Getting paid should be the simplest part of the job. You do the work, you send the invoice, you get paid. But for many builders and construction tradespeople, invoicing is a source of confusion, delays, and disputes. Incomplete invoices get queried. Invoices without proper CIS details get rejected. Invoices without clear payment terms get pushed to the back of the pile.

This guide covers everything you need to include in a construction invoice, how to handle CIS deductions, retention, staged payments, and VAT. There is also a practical example invoice you can use as a template. Whether you are invoicing domestic customers or working as a subcontractor for a main contractor, this will help you get it right.

Legal Requirements for Construction Invoices

A construction invoice is a legal document. Getting the basics wrong does not just look unprofessional — it can delay payment, create tax complications, and even result in penalties from HMRC. Here is what the law requires.

Mandatory Information

Every construction invoice must include the following.

Unique invoice number: a sequential number that identifies this specific invoice. HMRC requires invoices to be numbered sequentially for record-keeping purposes
Date of issue: the date the invoice is sent
Your business details: trading name, address, phone number, and email. If you are a limited company, include your registered company name, company number, and registered office address
Customer details: the name and address of the person or business you are invoicing
Description of work: a clear description of the work carried out or the stage completed
Amount due: the total amount payable
Payment terms: when payment is due and how to pay

VAT Requirements

If you are VAT registered, your invoice must also include your VAT registration number, the VAT rate applied to each line item, the net amount (excluding VAT), the VAT amount, and the gross total (including VAT). Our free VAT calculator makes it easy to check these figures before sending. You must issue a VAT invoice within thirty days of the date of supply or the date of payment, whichever is earlier.

Most construction work is standard-rated at twenty per cent. However, some work qualifies for the reduced rate of five per cent — such as converting a non-residential building into a dwelling, renovating a property that has been empty for two or more years, or installing energy-saving materials. New build residential properties are zero-rated, meaning you charge VAT at zero per cent but can still reclaim input VAT on your purchases.

CIS Requirements

If you are a subcontractor working under the Construction Industry Scheme, your invoice should include your Unique Taxpayer Reference (UTR) number, your National Insurance number, whether you are registered or unregistered for CIS, a clear separation of labour and materials (since CIS deductions only apply to the labour element), and the gross amount, CIS deduction amount, and net payment amount.

Understanding CIS Deductions

The Construction Industry Scheme is a tax deduction scheme that applies when a contractor pays a subcontractor for construction work. Understanding how it works is essential for getting your invoicing right.

How CIS Works

When a contractor pays a subcontractor, they must deduct tax from the payment and pass it to HMRC. The deduction rate depends on your CIS registration status.

Registered subcontractor: twenty per cent deduction on the labour element
Unregistered subcontractor: thirty per cent deduction on the labour element
Gross payment status: zero per cent deduction (you receive the full amount)

CIS deductions only apply to the labour portion of your invoice. Materials are exempt, which is why it is critical to separate labour and materials clearly on every invoice. If you lump everything together as a single figure, the contractor will deduct CIS from the total, and you will lose money unnecessarily.

Showing CIS on Your Invoice

Here is how to present CIS deductions correctly on an invoice.

Labour: five thousand pounds
Materials: two thousand pounds
Gross total: seven thousand pounds
CIS deduction at twenty per cent on labour: one thousand pounds
Net payment due: six thousand pounds

The contractor issues you a payment and deduction statement. Keep these statements — you will need them for your self-assessment tax return to reclaim the CIS deductions. For more on CIS, see our guide on the CIS scheme explained for subcontractors.

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Retention on Construction Invoices

Retention is a standard practice in the UK construction industry where a percentage of each payment is withheld as security for the quality and completion of the work. Understanding retention is important for accurate invoicing and cash flow management.

How Retention Works

The standard retention rate is five per cent of each interim payment. This retention is held by the contractor (or client on domestic projects) as a guarantee that the work will be completed to the required standard. Half of the total retention — reducing the effective rate to two point five per cent — is typically released at practical completion. The remaining half is released at the end of the defects liability period, which is usually six to twelve months after practical completion.

Showing Retention on Invoices

Retention should be shown as a separate line on each invoice. For example, on a ten thousand pound interim invoice, the retention deduction would be five hundred pounds, leaving a net payment of nine thousand five hundred pounds. This makes the running total of retention clear and helps both parties track what is held and when it is due for release.

Retention Release Invoices

When retention is due for release, you should issue a separate invoice specifically for the retention amount. This should reference the original invoices from which the retention was withheld, the total retention held, and the amount now being released. This creates a clear paper trail and makes it harder for the paying party to delay or dispute the release.

Staged Payment Invoices

For larger construction projects, staged payments are essential for maintaining positive cash flow. Here is how to structure and invoice staged payments effectively.

Typical Stage Payment Structure

The payment stages should align with the physical progress of the work. Our payment schedule calculator can help you map out stage payments based on the total contract value. A common structure for a building project is as follows.

Stage one — Deposit: twenty-five per cent on acceptance of the quote and before work commences. This covers initial material purchases and mobilisation costs
Stage two — Foundations and structure: twenty-five per cent on completion of foundations, substructure, and main structural work
Stage three — First fix: twenty-five per cent on completion of first fix plumbing, electrics, and carpentry
Stage four — Completion: the final twenty-five per cent on practical completion and customer sign-off

For very large projects, more stages may be appropriate — perhaps six or eight — with smaller percentages at each stage. The key principle is that each payment should broadly correspond to the value of work completed at that point.

Application for Payment

On commercial construction projects, the payment process is governed by the Housing Grants, Construction and Regeneration Act 1996 (as amended). This requires that the contract provides a mechanism for interim payments at intervals of not more than one month. The subcontractor submits an application for payment, and the contractor must issue a payment notice within five days stating the amount they will pay. If the contractor intends to pay less than the applied amount, they must issue a pay less notice before the prescribed period.

Understanding these requirements is important because they give you legal protections. If the contractor fails to issue a payment notice or pay less notice within the required timeframe, the amount in your application becomes due in full.

Example Construction Invoice

Here is a practical example of a construction invoice for a stage payment on a kitchen extension project, including CIS and retention.

Invoice header:

Smith Building Services
45 Oak Lane, Manchester M4 1AB
Tel: 07700 900123 | Email: info@smithbuilding.co.uk
UTR: 12345 67890

Invoice to:

ABC Construction Ltd
Unit 3, Industrial Estate, Manchester M1 2CD

Invoice details:

Invoice number: SBS-2026-047
Invoice date: 28 February 2026
Project: Kitchen extension, 12 Elm Street, Manchester
Stage: Stage two — Foundations and structural work complete

Breakdown:

Labour — Groundwork, foundations, blockwork to DPC, structural steels: six thousand pounds
Materials — Concrete, blocks, steel, DPC, cavity insulation: three thousand two hundred pounds
Subtotal: nine thousand two hundred pounds
Retention at five per cent: minus four hundred and sixty pounds
Net before CIS: eight thousand seven hundred and forty pounds
CIS deduction at twenty per cent on labour (six thousand pounds): minus one thousand two hundred pounds
Net payment due: seven thousand five hundred and forty pounds

Payment terms: fourteen days from date of invoice. Bank transfer to sort code 12-34-56, account 12345678.

Tips for Getting Paid Faster

A correctly formatted invoice is the foundation, but there are practical steps you can take to speed up payment.

Invoice immediately. Send your invoice on the day the work is completed or the stage is reached. Every day you delay sending the invoice is a day added to your payment timeline. Do not wait until the end of the week or month.

Make payment easy. Include your bank details clearly on every invoice. Offer bank transfer as the primary payment method. The fewer obstacles between the customer and paying you, the faster you get paid.

Chase promptly. If payment is not received by the due date, follow up immediately. A polite phone call or email the day after the due date signals that you take payment seriously. The longer you leave it, the harder it becomes to collect. Read our full guide on how to deal with late-paying customers.

Use numbered invoices. Sequential invoice numbers make it easy for customers to reference and process your invoices. They also help you track what is outstanding and follow up on specific invoices by number. Our free invoice generator handles numbering, CIS calculations, and VAT automatically.

Keep records. Maintain a simple spreadsheet or use invoicing software to track every invoice — date sent, amount, due date, date paid. This gives you an instant view of your outstanding invoices and helps you identify patterns with slow-paying customers.

Frequently Asked Questions

What must a construction invoice include by law in the UK?

A legally compliant construction invoice must include a unique invoice number, date of issue, your business name and address, the customer's name and address, a description of the work, the amount due, and payment terms. If VAT registered, you must also include your VAT number, VAT rate, net amount, VAT amount, and gross total. For CIS work, include your UTR number and separate labour from materials.

How do CIS deductions work on construction invoices?

Under CIS, contractors deduct tax from payments to subcontractors. Registered subcontractors have twenty per cent deducted from the labour element. Unregistered subcontractors face thirty per cent deductions. Materials are exempt from CIS deductions, so always separate labour and materials on your invoice. CIS deductions are credited against your tax liability and can be reclaimed through your self-assessment return.

Should I charge VAT on construction invoices?

You must charge VAT if your taxable turnover exceeds ninety thousand pounds. Most construction work is standard-rated at twenty per cent. Some residential conversion work qualifies for the reduced rate of five per cent. New build residential properties are zero-rated. If your turnover is below the threshold, you cannot charge VAT unless you voluntarily register.

What is retention on a construction invoice?

Retention is a percentage (typically five per cent) withheld from each payment as security for completion and quality. Half is released at practical completion, and the remainder at the end of the defects liability period (usually six to twelve months later). Retention should be shown as a separate line on each invoice.

How should I structure staged payments on construction invoices?

Staged payments should be tied to project milestones. A typical structure is twenty-five per cent deposit on commencement, twenty-five per cent at foundations or structural completion, twenty-five per cent at first fix completion, and twenty-five per cent on practical completion. Each stage should be invoiced separately with a clear description of the work completed.

How long should I give customers to pay a construction invoice?

Standard payment terms are thirty days for commercial work and fourteen to thirty days for domestic customers. For small jobs, payment on completion is reasonable. State your terms clearly on every invoice and follow up promptly on overdue payments. Under the Late Payment of Commercial Debts Act, you can charge interest at eight per cent above base rate on overdue invoices.