Invoice tax & VAT basics for freelancers
What every independent professional should know about sales tax, VAT, and cross-border invoicing — without the accounting jargon.
Tax on invoices is one of those topics that feels intimidating until you've done it twice. This guide walks through the essentials in plain English so you can issue confident, compliant invoices. (It's not legal advice — when in doubt, talk to an accountant in your jurisdiction.)
The two systems you'll meet
- Sales tax — used in the United States, applied at the point of sale by state and sometimes by city. Most freelance services are not subject to sales tax, but physical goods and some digital products are.
- Value Added Tax (VAT) — used in the EU, UK, India (as GST), and most of the world. Charged at each stage of the supply chain. If you're VAT-registered, you charge it; if not, you don't.
Do you need to charge tax?
Generally: only if you're registered for it. Most countries set a revenue threshold below which registration is optional. Once you cross that threshold, registration becomes mandatory. Common thresholds in 2026:
- UK VAT: £90,000 / year
- EU OSS scheme: €10,000 / year for cross-border B2C digital sales
- India GST: ₹20 lakh / year (services)
- US: varies by state for sales tax; no federal threshold
Cross-border invoicing
When you invoice a business in another country, the rules often shift to "reverse charge" — meaning you don't add VAT and the buyer accounts for it on their side. To do this correctly your invoice must show both your VAT number and the client's VAT number, plus a note such as "Reverse charge — VAT to be accounted for by the recipient."
What to put on the invoice
- Your tax registration number (VAT, GST, or EIN as applicable)
- The client's tax registration number for B2B cross-border work
- A clear tax line: rate, amount, and the basis it was applied to
- The currency of the transaction
Keep it simple
AetherInvoice lets you add tax as a percentage line, supports any currency, and lets you include free-text notes for reverse-charge wording. For most freelancers that's all the machinery you need — the rest is good record-keeping.