Many small businesses do not understand requirements for electronic invoicing and this issue is likely to become more problematic with HMRC move to compulsory e-invoices from 2028.

When the decision to require e-invoicing was announced at the autumn Budget, chancellor Rachel Reeves said it was designed to ‘modernise the tax system’, confirming from April 2029 businesses will be required to issue all VAT invoices as e-invoices.

This mandatory change was announced without much fanfare from the Treasury or HMRC, although at the time many SMEs warned it would affect them. Another concern is that the system will be rolled out universally without a staggered start for smaller businesses.

A year ago before the decision was confirmed, HMRC commissioned IFF Research to find out how widely e-invoicing was used by SMEs in order to shape their thinking.

The survey of 800 SMEs ranging from manufacturing to transport and business services, found that 25% of SMEs were ‘not at all familiar’ with the definition of an e-invoice when the research was conducted in early 2025.

Overall 69% of SMEs reported that they had not used e-invoicing before, and 91% said they had not seen any HMRC communications about e-invoicing at the time of the research in spring 2025.

Despite some not understanding the term e-invoice, many businesses may already be using e-invoicing without realising it.

The Association of Taxation Technicians (ATT) said: ‘In HMRC’s research, a notable number of respondents initially reported that they did not use e-invoicing, yet went on to describe practices that meet the definition. These responses were subsequently reclassified.’

However, it is not all bad news for HMRC, as 59% of SMEs surveyed were either very or somewhat familiar with the definition e-invoicing, and 29% reported to have used it before.

Jon Stride, chair of the ATT’s technical steering group, said: ‘Without greater clarity and engagement, there is a risk that many businesses will remain underprepared for the shift, potentially undermining the intended benefits of e-invoicing, including improved efficiency, reduced errors, and enhanced tax compliance.’

Of those who had used e-invoicing, the most popular accounting software was Sage at 46%, followed by Xero on 17%, and QuickBooks on 9%.

Overall, 5% of SMEs said they did not use any accounting software at all. For the non-software users, 9% were in the manufacturing and construction sectors and 3% were in the transport, retail, and accommodation sectors.

Stride added: ‘The research raises questions about the effectiveness of HMRC’s communications around e-invoicing. Despite a campaign conducted during the research period, including an email bulletin distributed to more than 100,000 recipients, 91% of SMEs surveyed did not recall seeing any messaging about e-invoicing.

‘The findings underline that there is still considerable work to be done to ensure SMEs are adequately prepared for the transition to e-invoicing. With a mandate expected to come into force in April 2029, stakeholders are increasingly calling for a clear and comprehensive roadmap, anticipated at Budget 2026, alongside more targeted and effective communications.’

Source: Grattage, J. (2026, April 13). 69% of SMEs have never used e-invoicing. Business & Accountancy Daily. https://www.accountancydaily.co/69-smes-have-never-used-e-invoicing