Create professional credit notes for product returns, invoice corrections, refunds, and customer credits. VAT compliant with instant PDF generation. Free preview includes sending credit notes. No credit card required.
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A credit note is a commercial document issued by a seller to a buyer, reducing the amount owed on an original invoice. It serves as evidence of a credit to the customer's account and is essential for accurate financial record-keeping and VAT compliance.
Legally recognized documentation for reducing invoice amounts and adjusting VAT records.
Allows businesses to reclaim VAT on returned goods or cancelled services.
Creates permanent record linking to original invoice for accounting and compliance.
Credits customer's account balance or issues refund depending on payment status.
This credit note has been applied to your account. Updated balance: £3,480.00
Common business scenarios requiring credit note documentation
Goods returned due to defects, damage, or customer dissatisfaction
Corrections to mistakes on original invoices
Services cancelled before or after invoicing
Post-invoice price reductions and adjustments
Credits issued for customer satisfaction
Excess payments received from customers
Complete solution for business credit documentation and VAT compliance
Automatically references original invoice for complete audit trail and compliance.
Automatic VAT recalculation for UK and international tax requirements.
Instant professional PDF creation for printing, emailing, and record keeping.
Document the specific reason for credit with clear descriptions.
Shows updated customer balance after credit application.
Integrates with accounting software to update financial records automatically.
Support for multiple currencies with exchange rate tracking.
Branded credit note templates with your logo and colors.
Cloud storage with encryption for all credit note records.
Understanding the terminology differences between regions
Key Point: Both documents serve the same purpose - reducing the amount a customer owes. The terminology difference is primarily regional. Our tool supports both formats with appropriate compliance features.
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Create Credit Note FreeFree • VAT Compliant • No credit card • HMRC Approved
An invoice requests payment from a customer (increases what they owe), while a credit note reduces or eliminates an amount owed. Think of a credit note as a "negative invoice" that decreases the customer's debt or provides a refund.
Yes, if the original invoice included VAT, the credit note must also show the VAT amount being credited. This allows both seller and buyer to adjust their VAT records correctly with HMRC. The credit note should mirror the VAT treatment of the original invoice.
There's no specific time limit, but HMRC expects credit notes to be issued "within a reasonable time" of discovering the error or processing the return. For VAT purposes, you must adjust your VAT return for the period in which the credit note was issued. Best practice is to issue credit notes promptly.
Yes, credit notes can be for partial amounts. For example, if a customer returns 3 out of 10 items, you issue a credit note for just those 3 items. You can issue multiple credit notes against a single invoice if needed.
HMRC requires: "Credit Note" clearly marked, unique sequential number, your business name and address, VAT registration number (if applicable), customer's name and address, credit note date, original invoice number and date, description of items/services, quantities, prices, VAT amounts, total credit amount, and reason for credit.
Credit notes reduce your accounts receivable (money owed to you) and decrease your revenue/sales. They also reduce your output VAT liability. In double-entry bookkeeping: debit Sales Returns/Revenue and credit Accounts Receivable. Your accounting software should handle this automatically.
Yes, VAT-registered customers must reduce their input VAT claim when they receive a credit note. If they've already reclaimed the VAT from the original invoice, they need to pay it back via their next VAT return. The credit note provides the documentation for this adjustment.
Yes, credit notes should have unique sequential numbers, separate from invoice numbers. This creates an audit trail and helps prevent fraud. Use a format like "CN-2025-0001" to clearly distinguish credit notes from invoices. Keep them in chronological order.
