What is e-invoicing? - Landlords Financial | Bookkeeping Services Manchester

The 2025 Budget on 26 November 2025 is expected to be crucial for the long-term implications for the UK economy – announcements of tax increases are expected. It is also expected to include further detail confirming HMRC's digital roll-out (particularly Making Tax Digital) plus further digital implementation in the form of e-invoicing.

E-invoicing has been in use in various forms for a number of years and, internationally, over 80 countries have e-invoicing mandates, with the EU planning an EU-wide requirement from July 2030. Within the UK, its use is voluntary for most businesses, although some larger corporations and those engaged in international trade have had to adopt e-invoicing systems. For example, e-invoicing is mandatory for transaction payments made to and from public entities (e.g. the NHS, government departments or local councils). HMRC is looking to expand and standardise such processing, eventually implementing a system whereby any business’s invoices are automatically submitted to HMRC.

The practicalities

E-invoices can be processed almost instantly, potentially leading to faster payment cycles. Under e-invoicing, invoices are usually in formats such as PDF, XML or JSON. The e-invoice is created by the supplier, the supplier’s software issues the e-invoice, the customer’s software receives and processes the e-invoice, and then the customer issues payment to the supplier. The result is a much faster, more accurate and more compliant invoicing cycle – often cutting days or even weeks from traditional payment timelines.

HMRC's plan

The government's aim is to standardise and broaden this system of e-invoicing across the private sector quoting 'improved efficiency, accuracy, and transparency' as the benefits for adoption in a recent consultation document. The consultation invited contributors to give their opinion as to what form(s) of e-invoicing model

would work, citing methods such as four-corner (supplier->software provider->buyer), centralised or data share models.

Different models

· Four-corner model: Each party (supplier and buyer) uses a certified software provider to exchange invoice data.

· Centralised model: Taxpayers transmit data to a certified third party enlisted by the tax authorities to act on their behalf. These third parties approve the submissions, time-stamping each transmission.

· Data sharing model: Taxpayers extract e-invoicing data from their accounting systems and transmit that information directly to HMRC in 'real time'. Each invoice is digitally signed and assigned a unique tax stamp before being sent to the customer.

Practical implementation

HMRC views e-invoicing as an extension of Making Tax Digital and will probably implement the system on a voluntary basis initially. Those taxpayers currently submitting VAT returns will be least affected as they must submit VAT returns digitally already. Making Tax Digital is being rolled out gradually, with those self employed and landlords whose gross income exceeds £50,000 mandated into the system (unless specifically exempt) as from April 2026 and those taxpayers with gross income exceeding £30,000 in April 2027 The intention is to expand further to those taxpayers with gross income of more than £20,000 in April 2028.

Taxpayers who deal in cash transactions will be most affected as they will be required to generate a digital invoice via a mobile app (with or without a customer's email), record the cash payment and ensure that the invoice is logged into their system, with the next step being transmission to HMRC.

Practical point

Reading the consultation, it would appear that HMRC is intending to mandate e-invoicing looking to build a data sharing feed to HMRC, believing that this will enable the tax authority to 'simplify tax reporting, reduce error and support businesses to get

their tax right’, thereby reducing what HMRC perceives as the 'tax gap'. Critics of the system fear that imposing e-invoicing mandates could create additional compliance burdens, particularly for small businesses.

What is e-invoicing? - Landlords Financial | Bookkeeping Services Manchester

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