How to Invoice International Clients

Currency Considerations

Working with international clients immediately raises the question: which currency should you invoice in? There's no single right answer — it depends on your situation and the client relationship.

Invoicing in GBP (your local currency):

• Simplest approach for your accounting
• You know exactly what you'll receive
• No exchange rate risk for you
• Client bears the currency conversion cost and risk
• May be confusing for clients unfamiliar with GBP

Invoicing in the client's currency:

• Easier for your client to understand and budget
• You bear the exchange rate risk
• May help win competitive situations
• More complex for your bookkeeping
• Requires converting to GBP for UK tax purposes

Common approaches:

Many UK freelancers invoice US clients in USD, EU clients in EUR, and everyone else in GBP. This simplifies things while accommodating major markets. For one-off projects, GBP keeps life simple. For ongoing relationships, consider negotiating the currency that works for both parties.

VAT Rules for Overseas Clients

UK VAT rules for international services are complex but manageable once you understand the basics. The rules differ depending on whether your client is a business (B2B) or a consumer (B2C), and where they're located.

If you're NOT VAT registered:
No VAT is charged on any invoice, domestic or international. Your invoices to overseas clients are the same as UK invoices — no VAT, and a note that you're not VAT registered.

If you ARE VAT registered:

B2B Services (client is a business):

• To EU businesses: No VAT charged. This is technically outside the scope of UK VAT. Include the statement "Outside the scope of UK VAT" and request the client's VAT number. The client accounts for the VAT in their country under the reverse charge mechanism.
• To businesses outside the EU: No VAT charged. Same treatment — outside the scope of UK VAT.

B2C Services (client is an individual consumer):

• To EU consumers: You must charge VAT at the rate applicable in the consumer's country (not UK VAT). This creates significant complexity and may require registration in the EU's One-Stop Shop (OSS) system.
• To consumers outside the EU: Generally no VAT charged, as the supply is treated as made where the customer belongs.

Important: Keep evidence that your client is genuinely a business — their VAT number, business registration, or corporate email address. If audited by HMRC, you'll need to demonstrate this wasn't a consumer transaction.

Payment Methods for International

How your international clients pay you matters. Different methods have different costs, speeds, and currency handling.

International bank transfer (SWIFT):

• Traditional method; most clients can do this
• Fees can be high (£15-30+ per transfer, plus intermediary bank charges)
• Takes 3-5 business days typically
• Exchange rate typically poor
• You'll need to provide IBAN and BIC/SWIFT code

Wise (formerly TransferWise):

• Multi-currency account with local account details in major currencies
• US clients pay to a US "local" account; EU clients to an EU account
• Much lower fees than SWIFT
• Real mid-market exchange rate
• Fast transfers, often same day
• Highly recommended for regular international payments

PayPal:

• Easy — most clients already have accounts
• High fees (typically 2.9% + fixed fee)
• Poor exchange rates (1.5-4% above mid-market)
• Fast; money available immediately
• Best for smaller, occasional payments where convenience outweighs cost

Card payments (Stripe, Square):

• Very easy for clients
• Fees typically 2.4-2.9% + fixed
• Instant processing
• Requires payment setup on your invoices
• Good for one-off international clients

Advice: For regular international work, set up a Wise multi-currency account. It dramatically reduces fees and gives you flexibility on when to convert currencies.

Exchange Rate Handling

If you're invoicing in foreign currencies, you need a system for handling exchange rate fluctuations and recording transactions in GBP for your accounts.

At time of invoice: Record the GBP equivalent based on the exchange rate on the invoice date. HMRC uses that day's rate for tax purposes. Keep a record of which rate you used.

At time of payment: When you actually receive and convert the funds, the exchange rate will have moved. This creates either a gain or loss.

Example:
You invoice €1,000 when EUR/GBP is 0.85 (so £850 equivalent).
When paid two weeks later, you convert at 0.87 (so you receive £870).
You have a £20 exchange gain, which is taxable income.

If the rate had gone the other way — converting at 0.83 for £830 — you'd have a £20 exchange loss, which is a deductible expense.

Practical approaches:

• Convert immediately: Convert foreign currency to GBP as soon as received. Simple, but you take whatever rate is available.
• Hold in currency account: Keep foreign currency in a Wise or similar account and convert when rates are favourable. More management, but potentially better returns.
• Hedge significant amounts: For very large invoices, forward contracts can lock in exchange rates. Usually only practical for four-figure-plus amounts.

Tax Implications

Working with international clients doesn't change your fundamental UK tax obligations, but there are specifics to be aware of.

Income tax: All income is taxable in the UK, regardless of where your client is based or which currency you invoice in. Convert foreign currency invoices to GBP at the invoice date rate for your records.

VAT filing: If VAT registered, zero-rated exports and reverse-charge services should be reported in boxes 6 and 8 of your VAT return. They're not exempt — they're zero-rated, which is different. You still include them in total outputs.

Exchange gains and losses: As mentioned above, these are taxable income or deductible expenses. Keep records of amounts in both currencies and the rates used.

No double taxation treaties (usually): The UK has tax treaties with most countries preventing double taxation. Generally, you only pay UK tax on your income, not foreign tax as well. However, some countries do withhold tax on payments to foreign contractors — particularly the US. If tax is withheld, keep documentation; you can usually claim relief on your UK tax return.

Practical Tips

Make international invoicing smoother with these practical suggestions:

Be clear about payment terms: Different countries have different business cultures around payment timing. State your terms explicitly and confirm the client understands them. "Due within 30 days of invoice date" leaves no ambiguity.

Include comprehensive payment details: Provide IBAN, BIC/SWIFT code, bank name and address, and any local account details (like a US ACH routing number if you have a Wise USD account). Make it as easy as possible for clients to pay.

Specify currency clearly: Write "USD 1,500.00" not "1,500" or "$1,500" (which could be AUD, CAD, etc.). Remove any ambiguity.

Consider time zones: If you're working across time zones, be explicit about deadlines. "Due by 5pm GMT on 15 February" is clearer than "Due 15 February" which a US client might interpret as end of their day.

Build in currency buffer: If you're quoting in foreign currency but paying UK bills, build in a small buffer for exchange rate fluctuation. A project that's profitable at €1 = £0.86 might be marginal at €1 = £0.82.

Get a good accountant: International invoicing adds complexity to your accounts. Work with an accountant who understands freelance international work. The marginal cost of good advice is usually far less than the tax mistakes it prevents.

Keep detailed records: For each international invoice, record: invoice date, currency, amount in original currency, exchange rate used, GBP equivalent, date paid, conversion rate when converted, and any exchange gain/loss. This makes tax returns and audits straightforward.

International clients can be the most rewarding part of freelancing — different perspectives, interesting projects, and often better rates than the UK market. With proper systems for invoicing and payments, working across borders becomes second nature.