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Advance Payment Invoice Template

An advance payment invoice is a real invoice for part of an agreed price, issued before you deliver the goods or finish the service. It asks the customer to pay now, records the money in your books as an advance, and is followed later by a final invoice that charges the rest and shows the advance already billed. Unlike a proforma invoice, which is only a quote in invoice layout, an advance payment invoice has its own invoice number and normally counts for tax: in the UK and the EU, VAT on an advance is usually due when you issue the invoice or receive the money, whichever is first. This editable HTML template has fields for the quote or contract reference, total contract value, advance percentage and amount, tax on the advance, amount due now and the balance still to be invoiced. Fill it in your browser, then print it or save it as PDF.

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Download the HTML file to edit its fields, then print or save as PDF. Totals are entered manually.

What This Template Includes

  • Document title: Advance payment invoice
  • Invoice number
  • Invoice date
  • Due date for the advance
  • Quote, order or contract reference
  • Description of the goods or services the advance is for
  • Total contract value before tax
  • Advance percentage and amount
  • Tax rate and tax on the advance
  • Amount due now
  • Balance still to be invoiced
  • Refund or cancellation terms for the advance
  • Payment instructions

How to Create Your Advance Payment Invoice

  1. 01

    Describe your work

    Type a plain English description of the services you provided, the client, and the amount.

  2. 02

    AI generates your invoice

    InvoiceQuickly's AI drafts the client, line items, dates, and totals for you to review before saving.

  3. 03

    Review, download, and send

    Check every detail, download the PDF, or use Pro to email the PDF directly to your client.

Recommended Payment Terms

Make the advance due before you commit money or time: 'due on receipt' or 7 days is common, and work starts once the advance clears. Put the percentage and what happens to it in writing: whether it is refundable, partly refundable after materials are ordered, or kept if the customer cancels. Then state when the balance will be invoiced (on delivery, on completion or at a named milestone) and the terms for that final invoice, for example net 14 from completion.

Need help writing payment terms? Read our guide to invoice payment terms for best practices and templates.

Tax Information

In the UK, HMRC's guidance on instalments and deposits says the tax point for an advance payment is the date you issue a VAT invoice for it or the date you receive it, whichever happens first, and VAT on the advance goes on the return for the period containing that tax point. Paying the balance creates a further tax point. Across the EU, the VAT Directive (2006/112/EC) makes VAT chargeable on receipt of a payment on account, on the amount received (Article 65), and Article 220 requires an invoice for payments on account received from business customers. Most deposits are treated as advance payments; security deposits for returnable hire goods are an exception. Sales tax timing in the US is set by each state. A template is only a layout: add your VAT or tax registration number and any other details your tax authority requires. InvoiceQuickly copies saved business and client tax IDs to new invoice PDFs on its PDF, so enter yours in the notes or terms.

Industry context (2026)

Advance billing is most common where the supplier commits money before delivery: made-to-measure goods, building and fit-out work, events, manufacturing runs and large software or design projects. The tax rules that matter are about timing rather than layout. HMRC's guide 'VAT: instalments, deposits, credit sales' (GOV.UK) sets the tax point for an advance at the earlier of the VAT invoice or the payment, and treats payment of the balance before delivery as a further tax point. In EU member states, Article 65 of the VAT Directive makes VAT chargeable on receipt of a payment on account, and Article 220 requires an invoice for payments on account from business customers, with Article 226 asking the invoice to show the payment date where it differs from the invoice date. Many accounting systems hold an advance received as a liability until the goods or services are delivered, which is one more reason to keep the advance and final invoices clearly linked.

Worked example

Ashdown Joinery, a UK VAT-registered workshop, quotes £12,000 plus VAT for a fitted kitchen and asks for 40% in advance. On 1 September 2026 it issues advance payment invoice INV-0201: kitchen contract value £12,000.00; advance 40% £4,800.00; VAT at 20% on the advance £960.00; amount due now £5,760.00, due on receipt; balance still to be invoiced £7,200.00 plus VAT. The customer pays on 5 September. Because the invoice was issued before the money arrived, the VAT tax point for the advance is 1 September, so the £960.00 goes on the VAT return covering that date. The kitchen is fitted on 20 October 2026 and Ashdown issues final invoice INV-0238: contract value £12,000.00; less advance invoice INV-0201 dated 1 September, £4,800.00; balance £7,200.00; VAT at 20% on the balance £1,440.00; total due £8,640.00, net 14. Check: the VAT across both invoices is £960.00 + £1,440.00 = £2,400.00, which is 20% of £12,000.00, so the customer has paid VAT once on the full price and Ashdown has accounted for it at the right times.

Common mistakes to avoid

Calling a request for money a proforma

If you expect the customer to pay against the document and you will account for the money, issue a numbered advance payment invoice. A proforma has no invoice number in your sequence and can leave the tax point and your records unclear.

Charging tax on the full price twice

The final invoice should tax only the balance. Taxing the full contract value on the final invoice and also taxing the advance overcharges the customer by the tax on the advance (£960 in the worked example).

Not linking the final invoice to the advance

A final invoice that just says 'balance due' without the advance invoice number and date makes it hard for the customer's accounts team, and for you, to prove the contract was billed once in full.

Leaving refund terms unstated

If the customer cancels after you have ordered materials, an advance with no written terms becomes a dispute. Say on the invoice or in the contract what part, if any, is refundable and when.

Editing the advance invoice after it is paid

Once issued, an invoice should not be changed or deleted. If the advance is refunded or the price changes, issue a credit note or a further invoice that references the original.

Invoicing Tips

  • 1Label the document 'Advance payment invoice' and give it a number from your normal invoice sequence, so it cannot be mistaken for a quote or proforma.
  • 2Quote the agreed contract value on the advance invoice so the customer can see what percentage they are paying and what remains.
  • 3Charge tax on the advance at the rate that will apply to the supply itself, then charge tax only on the balance in the final invoice. Do not tax the full contract value twice.
  • 4On the final invoice, show the full contract value, subtract the advance with its invoice number and date, and charge the remaining balance plus tax on that balance.
  • 5If the job is cancelled and you refund the advance, issue a credit note against the advance invoice instead of deleting or editing it.
  • 6Keep the advance and balance invoices together with the signed quote or contract in your records.

Related Resources

Frequently Asked Questions

What is an advance payment invoice?

It is an invoice for part of an agreed price, issued before the goods are delivered or the service is finished. It has its own invoice number, asks for payment now, and is later followed by a final invoice for the balance that deducts the advance.

Is an advance payment invoice the same as a proforma invoice?

No. A proforma invoice is a quote laid out like an invoice, not an invoice in your sequence. In the UK, HMRC's VAT manual says a pro-forma is not acceptable evidence for reclaiming VAT and that a full VAT invoice must be issued within 30 days once payment is received or the supply is made. An advance payment invoice is that real invoice, and in the UK and EU it usually creates a VAT tax point when issued or paid, whichever comes first.

Do I charge VAT on an advance payment?

Usually yes, if the supply itself is subject to VAT. HMRC says the tax point is the earlier of issuing a VAT invoice for the advance or receiving it, and the EU VAT Directive makes VAT chargeable when a payment on account is received. Refundable security deposits for hire goods are treated differently. Check your own position with HMRC guidance, your tax authority or an adviser.

How do I show an advance on the final invoice?

List the full contract value, subtract the advance with its invoice number and date, and charge tax only on the remaining balance. In the worked example, £12,000 less the £4,800 advance leaves £7,200, plus 20% VAT of £1,440, so £8,640 is due.

What is the difference between an advance payment, a deposit and a retainer?

An advance payment is part of the price of a specific job, billed before delivery. A deposit is often used in the same way, although some deposits are refundable security, which has different tax treatment. A retainer usually reserves your time or pays for ongoing work each month rather than prepaying one job.

Can InvoiceQuickly create an advance payment invoice?

Partly. InvoiceQuickly has no deposit or advance field, and line prices cannot be negative. You can issue the advance as an ordinary invoice with a line such as 'Advance payment, 40% of quote EST-0012', then issue the final invoice for the balance and quote the advance invoice number in its description or notes. One tax percentage applies to each invoice.