eInvoicing in the UK: A transformative opportunity for businesses and the economy

The UK government has launched a consultation on eInvoicing, an initiative that has the potential to revolutionise how we handle invoices, and bring significant benefits to businesses and the economy. The purpose of the consultation is to gather views from a range of businesses on standardising eInvoicing and increasing its adoption across the UK. 

We encourage you to engage with the consultation (which closes on 7 May 2025). This blog will help you understand the benefits of eInvoicing to your business, and the key considerations for a government-led rollout in the UK.

What is eInvoicing?

To invoice your customers today, you might use Xero to create an invoice and email a PDF, or use a tool like Microsoft Word and post a hard copy. Regardless of the method, your customer usually has to manually enter the data into their accounting system. 

This is time-consuming, and it’s prone to errors, like entering  the wrong invoice amount, bank details or recipient information. You also probably spend valuable time chasing payments, which impacts your cash flow.

eInvoicing streamlines the process by sending an invoice directly from your accounting system to your customer’s accounting system. The invoice arrives as a pre-populated bill, ready for approval and payment. Think of it as a digital handshake, where invoice information flows seamlessly between systems.

What are the benefits for UK businesses?

• Improve your cash flow and get paid faster: eInvoicing minimises manual data entry, reducing errors and improving efficiency. Faster invoice processing can help you get paid on time, improving cash flow.
  
• Greater visibility and efficiency: eInvoicing allows you to track your invoices from creation to payment. Because the invoice goes directly into your customer’s system, it’s less likely to get lost or misdirected. If there are any mistakes, you can identify them quickly. With paper or PDF invoicing, you might not know something’s wrong until payment is overdue, potentially a month or more later.
  
• Reduce costs and increase productivity: eInvoicing significantly reduces the costs associated with manual invoicing like printing, postage, data entry, chasing invoices, and correcting errors. These savings free up valuable time for you to spend on other areas of your business.
  
• Enhance security and reduce the risk of fraud: eInvoicing is an opportunity to strengthen data security and build customer trust. Not just anyone can send an eInvoice. Both the sender’s and receiver’s details are validated and there are strict protocols to ensure invoices remain secure and financial information is protected. eInvoicing can also reduce fraud by removing the risk of PDF attachments being intercepted and tampered with. 

The opportunity for the wider economy

As small businesses gain cost and time savings, the UK’s overall productivity will lift. At the government level, simplified tax compliance and reporting through eInvoicing can free up government resources. We’ll also be able to get more valuable insights into the economy through the structured data from eInvoices.

What can we expect from the UK government’s consultation?

The government’s consultation is crucial for shaping the future of eInvoicing in the UK. Here are some key considerations for a widespread rollout of the technology. 

• Making systems compatible
  Ensuring different eInvoicing systems can talk to each other is essential for widespread adoption, so standards like PEPPOL are key. It’s also important to consider developments in the EU, such as the ViDA (VAT in the Digital Age) Directive, adopted in March 2025, which harmonises eInvoicing standards across member states. Aligning with international standards will be crucial for UK businesses trading with the EU.
  
• Whether to make it mandatory
  The consultation will explore mandating eInvoicing for certain businesses or sectors. We can learn from the approaches of countries like Brazil and Mexico who have used mandates to improve tax compliance. Italy’s mandate has demonstrated the huge cost savings and efficiency gains achievable through eInvoicing, but only with clear communication to businesses.
  
• Support for small businesses
  Providing support and resources to help small businesses is crucial to it becoming widely adopted. Singapore’s implementation highlights the benefits of a collaborative approach involving government, businesses, and technology providers working together.
  
• A phased rollout
  We’d hope to see a gradual approach to implementation considered, to allow businesses time to adapt to the change. For example, in Malaysia, the rollout of national e-invoicing occurred in phases, starting with companies that had a higher annual turnover which helped ensure a smooth transition.  

A seamless experience in Xero

Did you know you can already send and receive eInvoices in Xero? 

Xero has been investing in eInvoicing for a number of years and is the largest digital service provider of eInvoicing in Australia, New Zealand and Singapore, and the first small business cloud accounting platform in the UK to offer eInvoicing. 

We’ve seen how eInvoicing is helping small businesses in other parts of the world improve their cash flow, and we’re committed to driving its adoption in the UK.

The future is digital

eInvoicing is an exciting opportunity for you to improve efficiency, reduce costs, and enhance security in your business. By embracing this innovation and considering international developments such as the EU’s ViDA Directive, we can unlock substantial benefits for both individual businesses and the wider UK economy. 

I encourage you to learn more about eInvoicing and participate in the government consultation to help shape its future and maximise the potential benefits. 

To register to receive eInvoices in Xero, go to this help article.