The UK is on the cusp of a major transformation in how businesses issue VAT invoices. In the 2025 Budget, the government committed to requiring all VAT invoices to be issued electronically from 1 April 2029 for all business-to-business (B2B) and business to government transactions. This announcement marks one of the most significant changes to UK invoicing and tax-compliance rules in decades.
The government plans to engage in stakeholder engagement starting in January 2026 to help ensure that businesses have clarity on the policy direction, opportunities to contribute to policy design, and that the final guidance and standards can be published well ahead of the mandate taking effect.
They plan to work closely with the software sector, including Making Tax Digital (MTD) providers, to ensure that the regime supports the development of a diverse and competitive market offer which provides a range of e-invoicing solutions.
The government has announced plans to publish a detailed implementation roadmap at the 2026 Budget to set out technical standards and guidance.
What is e-invoicing?
E-invoicing refers to the digital exchange of invoice data directly between buyers' and suppliers' financial systems, even when those systems differ. This process enables invoices to be automatically integrated into the buyer's system, reducing the need for manual processing and improving efficiency.
Under the new regime, paper invoices, PDFs sent by email, or images/scanned invoices will no longer qualify as valid VAT invoices. Instead, e-invoices will need to be issued in structured, standardised formats and exchanged digitally.
The government is expected to provide more clarity on how business-to-consumer (B2C) invoices and retail receipts will be treated.
Whilst e-invoicing is already being used by some businesses in the UK, uptake is relatively low, and lack of clear standards has resulted in a fragmented market, reducing the benefits of using e-invoicing.
Why is the UK moving to e-invoicing?
The government claim that adopting e-invoicing helps businesses to operate more efficiently, reduce the number of late payments received, and reduce the number of errors that businesses make in their tax returns.
The government launched a consultation on plans for the rollout of electronic invoicing in February 2025. The 12-week consultation was jointly conducted by HMRC and the Department of Business and Trade (DBT) and considered whether e-invoicing should be made mandatory for businesses in the UK.
In July 2025, the government also announced the toughest crackdown on late payments in a generation, as part of its plan for small and medium-sized businesses. Industry research indicated that the use of e-invoicing will help provide a reduction in late payments of 20% upon adoption, equating to an annual saving of £11,300 for small firms.
Do any other countries use e-invoicing?
The technology has been in use globally for over 2 decades, with an increasing number of countries, including Italy, Brazil and Chile mandating its use for certain types of transactions. Across Europe, the shift to structured digital invoicing is accelerating far more quickly than in the UK. Under the EU's forthcoming VAT in the Digital Age (ViDA) reforms, all cross-border B2B transactions within the EU will have to use e-invoices by 2030. However, many individual Member States are moving ahead of this deadline with their own domestic rules.
The pace of change varies by country, for example, Italy has had mandatory B2B e-invoicing since 2019, Germany is phasing in mandatory e-invoicing for B2B transactions starting January 1 2025, and both Belgium and Denmark are expected to start bringing in mandatory B2B e-invoicing from 2026.
Summary
As e-invoicing is being phased in or is already in place in key European markets, including Germany, France, Poland, Belgium and Romania, and with the EU cross-border mandate due by 2030, businesses can no longer afford to postpone their preparations.
Several software providers already provide e-invoicing services in the UK and increased international adoption means that there are more products are being introduced to market.
If you export to the EU, or are considering upgrading your invoicing and reporting systems, it is crucial that you factor e-invoicing into your business planning now. Our expert team can help you select suitable technology solutions, and ensuring compliance with minimal disruption.
Author
Zyaad Peertum
Associate Director – VAT & Bookkeeping
How can we help?
Based in Cardiff, Hodge Bakshi is a leading firm of Chartered Accountants and Chartered Tax Advisers with over 40 years' experience serving businesses and individuals across South Wales and the UK.
As regulatory frameworks continue to expand across Europe and the EU cross-border mandate approaches, many organisations are unsure how these changes will affect their operations, compliance obligations and internal systems. Our team can help you understand the practical implications of upcoming e-invoicing requirements and ensure your business is ready for the new reporting and data-exchange standards.