VAT and GST on Invoices: A Simple Guide for Small Business
Sales tax is where a lot of new business owners freeze up. Do I charge it? How much? What has to be on the invoice? The rules differ by country, but the shape of the answer is the same everywhere — and once you see it, it’s manageable.
The universal rule: registration comes first
In almost every country, you only charge VAT or GST once you’re registered, and registration usually becomes compulsory after your turnover passes a threshold. Below it, registration is often optional. So the first question is never “how much tax?” — it’s “am I registered?” If you’re not, you generally don’t charge tax and don’t show a tax number. If you are, you add the standard rate and display your number.
The thresholds that matter
Here’s where the mandatory line sits in the main English-speaking markets:
| Country | Tax | Standard rate | Register at (turnover) |
|---|---|---|---|
| United Kingdom | VAT | 20% | £90,000 |
| Australia | GST | 10% | A$75,000 |
| Canada | GST/HST | 5%–15% | CA$30,000 |
| United States | Sales tax | Varies by state | Varies (often nexus-based) |
The US is the outlier: there’s no national sales tax, services are often exempt, and rules are set state by state — many small service businesses charge no sales tax at all.
What a compliant tax invoice must show
Once you’re registered, your invoice generally needs:
- Your tax registration number (VAT number, GST/HST number, ABN)
- The tax rate applied
- The tax amount shown separately from the subtotal
- The total including tax
In Australia the document must also say the words “Tax invoice” and show your ABN — without an ABN, the payer may have to withhold 47% of the payment. Each country’s specifics are covered on the localised tools: UK invoice generator, Canada invoice generator, and Australia invoice generator.
Show tax separately — always
Even where it’s not strictly required, always break tax out as its own line rather than burying it in the prices. It lets your client reclaim the tax if they’re registered, it makes your bookkeeping cleaner, and it removes any suspicion that you’re padding the total. A clear invoice reads:
- Subtotal: 1,000.00
- VAT (20%): 200.00
- Total: 1,200.00
Don’t charge tax you’re not registered for
A common and costly mistake: charging VAT or GST before you’ve registered. That’s not allowed — you can’t collect a tax you’re not registered to remit. If you’re under the threshold and haven’t registered, set the tax rate to 0 and leave your tax-number field blank. Our invoice generator lets you set any tax label and rate (or zero), so your invoice matches your actual status. For everything else a professional invoice needs, see what to include on an invoice.
This is general information, not tax advice — check your local tax authority or an accountant for your specific situation.