Credit note: what it is and how to issue one

A credit note is the correct way to reduce an invoice you’ve already sent. It gets its own number, points back to the original, and shows the amount as a credit.

When you need a credit note

The customer returned goods, or part of an order.
You overcharged: wrong price, wrong quantity, or tax at the wrong rate.
You agreed a discount after invoicing, or cancelled work already billed.
The whole invoice was issued in error and needs cancelling.

What to put on it

The words “Credit note” and a unique credit note number (a separate series such as CN-0001 is easiest).
Date of the credit note, and the number and date of the original invoice.
Your and your customer’s details, as on the invoice.
What is being credited, quantities and amounts, and the reason.
If you charged VAT/GST, the tax being credited, shown separately.

For VAT-registered businesses in the UK, HMRC sets out credit note rules in the VAT guide (VAT Notice 700). In the EU, Council Directive 2006/112/EC Article 219 treats a document that amends an invoice as an invoice.

General information only. This page summarises official guidance so you know what to look for. It is not tax, legal or accounting advice, and rules change. Check the linked official source or a qualified adviser for your situation.

Make a credit note

The example below credits two returned lamps against invoice INV-0012. Amounts print as negatives. Tip: if the original invoice is saved in this browser, open it on the invoice generator and press “Credit note” to copy it across.

Your business name

Credit Note

No.: —
Original invoice: INV-0012
Reason: Returned goods

Credit to

Client name

Description	Qty	Unit price	Amount
Returned: 2 × desk lamp (damaged in transit)	2	$49.00	-$98.00

Notes

This credit will be refunded to your original payment method within 5 working days.

Subtotal: -$98.00
Total: -$98.00

Turn this into: Print empty rows

Preview

Questions people ask

What is a credit note?

A credit note (or credit memo) is a document a seller issues to reduce or cancel an amount already invoiced, for example after a return, an overcharge or a cancelled service.

Why not just edit or delete the original invoice?

Once an invoice has been sent, your books and your customer’s books already contain it. A credit note keeps the audit trail intact: the original stays, and the credit note reverses all or part of it with its own number and date.

Does a credit note need to reference the original invoice?

It should. HMRC’s VAT guidance expects credit notes to reference the original invoice, and the EU VAT Directive (Article 219) treats a document that amends an invoice and refers to it specifically as an invoice itself.

Credit note vs refund?

A credit note reduces what the customer owes. That credit can then be refunded as money, or offset against their next invoice.

Credit note vs debit note?

A buyer typically issues a debit note to request a credit; the seller responds with a credit note. A debit note can also be used by a seller to increase an amount invoiced.