E-invoicing is coming in 2029. Is your accounting set-up ready?

Most UK businesses create invoices as PDFs and email them. The government has confirmed that, for VAT invoices between businesses, this will eventually stop being good enough.

This isn’t a reason to panic. It’s a reason to look at how data moves through your business while you have plenty of time. Here’s what we know, what’s still to be decided, and what we’d do about it.

What has been announced

Based on the latest government announcements and commentary:

• Mandatory e-invoicing from April 2029. E-invoicing will become mandatory for VAT invoices from April 2029, for VAT-registered businesses selling to UK business customers.
• Peppol is the chosen network. Invoices will be exchanged in a structured, machine-readable format through accredited software providers rather than a government portal.
• PDFs won’t count. Invoices sent as email attachments (PDFs, Word documents, images) won’t meet the new definition of an e-invoice.
• Smaller businesses are partly outside it. Businesses that aren’t VAT-registered aren’t required to adopt it.
• Detail is still to come. A fuller roadmap covering scope and phasing is expected around the next Budget.

Please treat this as a summary, not legal or tax advice. Check HMRC’s guidance and speak to your accountant for your own situation.

Making Tax Digital is already moving

Alongside e-invoicing, Making Tax Digital for Income Tax is rolling out in stages. From April 2026 it applies to the self-employed and landlords with qualifying income above £50,000. The threshold is due to fall to £30,000 from April 2027 and £20,000 from April 2028, so more small businesses will need digital records and quarterly updates each year.

Together these point in one direction: HMRC wants your financial data to be digital, structured and connected end to end.

Why this matters even if your software “handles it”

Accounting packages such as Xero will add support for the new rules. That covers the accounts themselves. It doesn’t cover the places where your data gets into the accounts, and that is where most small businesses are weakest:

• orders re-typed from an email into an invoice;
• stock and prices kept in a separate spreadsheet;
• customer details that differ between your CRM, your shop and your accounts;
• supplier invoices keyed in by hand from PDFs.

Structured e-invoicing rewards businesses with clean, consistent data upstream, because an invoice built from accurate order data is correct at the point it’s created. Businesses that re-key everything will have to re-key into a stricter format.

A sensible readiness checklist

You don’t need a big programme. Start with these questions.

1. Are you VAT-registered, and do you invoice other businesses? If not, the mandate matters less to you, though Making Tax Digital might not.
2. Where do invoices start? Is each one created from a real order, or typed fresh?
3. How many places hold the same customer and product details? Every duplicate is a place for them to disagree.
4. How are supplier invoices handled? Reading PDFs into your accounts by hand is slow today and gets harder later.
5. What would happen if an invoice was rejected for a data error? If the answer is “we’d have to find out why by hand”, that’s worth fixing.

What we’d do now

Over the next couple of years, the highest-value moves are the same ones that save money today:

• Connect orders to invoices. When an order lands from any channel, raise the invoice automatically in Xero from the same data.
• Create one customer and product record that every system reads from.
• Automate supplier document capture, extracting data from supplier invoices straight into your accounts.
• Add alerts so errors are caught when they happen, not at month end.

None of that depends on the final technical details, which is why it’s a safe place to start. It also pays back well before 2029.

Want a view of where you stand?

A discovery sprint will map how an order currently becomes an invoice in your business, cost the manual steps and give you a prioritised plan, which you can keep whether or not we build it. If you’d like to talk it through, get in touch. Our Connect service is built for exactly this.