Invoice & Job Profit Calculator

Working out what a job actually earned starts with the invoice total excluding VAT, since VAT is collected on HMRC's behalf and never was your income. From that, take off direct materials, meaning the goods, raw materials and supplies genuinely consumed in fulfilling the order. Then take off direct labour, which covers the wages or subcontractor fees attributable to this job along with the employer NI and pension sitting on those wages. Those employer costs belong in the labour figure rather than being swept into overheads.

Overheads then need a share allocating to the job. Rent, utilities, insurance, software, vehicle costs and administrative salaries all support the work without belonging to any single order, and the usual ways of spreading them are a percentage of direct labour hours, a flat rate per job, or a proportion based on revenue. Whatever survives that is the net job profit. On a £5,000 invoice with £1,500 of subcontractor cost, £500 of materials and £300 of allocated overhead, total costs of £2,300 leave £2,700 of profit, a margin of 54%.

Two measures then describe the same job in different terms. Profit margin divides net profit by the invoice total and multiplies by 100, showing what share of revenue you keep. Markup divides net profit by total costs, showing the premium charged above what the work cost to deliver. A 25% markup is the same job as a 20% margin, which is why quoting on markup and reporting on margin catches people out. Typical UK figures vary enormously by trade, with software and SaaS work running at 70% to 90%, consultancy at 50% to 75%, retail at 25% to 35%, construction at 15% to 25% and food service at 5% to 15%. Tracked invoice by invoice, the pattern shows which clients and services are worth repeating.

A compliant UK invoice in 2026 carries the word Invoice, a unique sequential number and the date issued, along with your name, address and contact details and the customer's name and address. It needs a description of what was supplied, quantities and unit prices, and the total amount. Where you are VAT-registered it also needs the VAT rate, the VAT amount and your VAT registration number. Payment terms of 30 days are the usual default, though smaller businesses often set 7 to 14 days to protect their cash flow.

VAT registration, compulsory above £90k of turnover, changes the shape of the invoice. Registered businesses charge 20% on standard-rated work, or 5% where the reduced rate applies and 0% on zero-rated supplies, and the VAT is shown separately from the net figure, so £100 of work plus £20 of VAT gives a gross total of £120. Businesses that are not registered charge no VAT and show no VAT number. Services to business customers abroad are generally outside the scope of UK VAT, with the customer accounting for any VAT under the reverse charge, and exported goods are zero-rated. Services to consumers overseas can still carry UK VAT depending on the type of service, which VAT Notice 741A sets out. The calculator lets you pick 20%, 5%, 0% or not registered for the invoice total.

Late payment has statutory backing behind it. Under the Late Payment of Commercial Debts (Interest) Act 1998 you can charge interest at 8% above the Bank of England base rate, 3.75% since December 2025, giving a combined 11.75%, running from the day after the invoice fell due. Fixed compensation of £40 to £100 for each overdue invoice sits on top of that interest. Both run from the day after the agreed due date, and the default 30-day period applies only where no payment date was agreed.

A handful of errors turn up again and again. Leaving off the VAT number when one is required, applying the 5% reduced rate where it does not belong, numbering invoices inconsistently and omitting payment terms are the common ones. Confusion between cash basis and accrual accounting is another: since 6 April 2024 the cash basis has been the default for sole traders and partnerships, with no turnover limit, and accruals accounting is something you opt into. Invoices in a foreign currency are accepted by HMRC provided the GBP equivalent is shown on submission. Late reporting under Making Tax Digital catches VAT-registered businesses out, and penalties for non-compliance start at £200 and run past £3,000.