Free Credit Note Template — Excel, Word & PDF
A credit note is a seller-issued document that reduces or cancels the amount owed on an invoice you have already sent — without touching the original. This free credit note template gives you an editable credit note format in Excel, Word or PDF, with the credit note number, original invoice reference, itemised lines and the VAT fields HMRC expects, ready to send in under two minutes.
Issue a credit note when goods are returned or arrive damaged, when a customer was overcharged or billed twice, when part of an order is cancelled after invoicing, or when you agree a discount after the invoice has gone out. A quick credit note example: you invoiced £240 (£200 net plus £40 VAT at 20%) and the customer returns £60 of damaged stock. You raise a credit note for £60 — £50 net plus £10 VAT — against the original invoice, and the balance owed drops to £180. The invoice itself stays untouched in your records; deleting or editing it breaks your audit trail.
For a credit note template UK VAT rules will accept, HMRC's VAT Notice 700 (section 18) is specific. A VAT credit note must show an identifying number and date of issue; your name, address and VAT registration number; the customer's name and address; a description of the goods or services credited with the quantity and amount for each; the total credited excluding VAT; and the rate and amount of VAT credited in sterling — plus the number and date of the original VAT invoice. Under Regulation 15C of the VAT Regulations 1995 the note must be issued within 14 days of the refund or agreed reduction, and you adjust output VAT in the period you issue it. Every one of those fields is built into this VAT credit note template.
Number credit notes in their own sequence with a CN- prefix — CN-0087 — and quote the invoice each one corrects; auditors flag gaps and orphaned notes, so some firms bake the link into the number itself (CN-INV-2041). A credit note is not a refund, either: the note records the reduction, while a refund is money actually moving back. Most small businesses simply offset the credit against the customer's next invoice — it keeps cash in the bank and the paper trail clean — but if the relationship is ending, refund promptly, because a stale credit sitting on account is a dispute waiting to happen. Download the credit note template Word file to edit freely, the Excel version if you want totals to calculate themselves, or the PDF to send a locked final copy. (Caught an undercharge instead? That correction travels the other way, as a debit note.)
Create a credit note free · Open the invoice software
What This Template Includes
- "Credit Note" title clearly displayed, so it is never mistaken for an invoice
- Credit note number and date of issue (e.g. CN-0087 — sequential, no gaps)
- Your business name, address and VAT registration number
- Customer name and address
- Number and date of the original VAT invoice being credited
- Reason for the credit — returned goods, damaged items, overcharge or post-invoice discount
- Description identifying the goods or services being credited
- Quantity and amount for each line
- Total credited excluding VAT
- VAT rate and VAT amount credited in sterling, at the rate on the original invoice
- Total credit including VAT
- Settlement method — refund, offset against the next invoice, or credit held on account
Worked Example: Credit Note #
Fairway Office Supplies Ltd · VAT GB 234 5678 90 billing Credit to: Harborview Design Studio:
| Description | Qty | Rate | Amount |
|---|---|---|---|
| Returned: A4 laser paper 80gsm, damaged in transit (5 boxes) | 5 | $6.00 | $30.00 |
| Overcharge: heavy-duty stapler invoiced £44, correct price £24 | 1 | $20.00 | $20.00 |
| Returned: ergonomic office chair, wrong model shipped | 2 | $95.00 | $190.00 |
| Returned: black toner cartridges, unopened surplus stock | 3 | $42.00 | $126.00 |
| Damaged: coloured card reams, water-damaged in transit | 8 | $7.50 | $60.00 |
| Post-invoice discount: agreed 5% on bulk stationery order | 1 | $60.00 | $60.00 |
| Overcharge: delivery fee billed twice on INV-2041 | 1 | $12.00 | $12.00 |
| Total | $498.00 | ||
Credits invoice INV-2041 (12 Jun 2026) · Net £50.00 + VAT @ 20% £10.00 = £60.00 total credit · Settlement: offset against next invoice.
How to Use It
1. Open the template
Click "Create a credit note free" to open the credit note template pre-loaded in the generator.
2. Reference the original invoice
Enter the number and date of the invoice you are crediting, then state the reason — returned goods, damaged stock, overcharge or agreed discount.
3. Add the credited lines and VAT
List each item being credited with quantity and amount, apply the VAT rate from the original invoice, and add your logo and accent colour.
4. Download or send
Export a clean PDF, print it, or email it to your customer — no sign-up required. Keep a copy with the original invoice for your records.
VAT guidance on this page is summarised from HMRC's VAT Notice 700, section 18 (credit and debit notes) and Regulation 15C of the VAT Regulations 1995, last verified July 2026. It is informational only, not tax or legal advice — confirm the current rules on GOV.UK or with your accountant.
Free Downloads
Frequently Asked Questions
Is this credit note template free?
Yes. The template is 100% free with no watermark, no document cap and no required sign-up. Fill it in online, download it as PDF, Word or Excel, or open it in the invoice generator and raise the credit note there.
Does a credit note need to reference the original invoice?
Yes. HMRC's VAT Notice 700 (paragraph 18.2.3) requires a VAT credit note to show the number and date of the original VAT invoice it corrects. If you genuinely cannot link the credit to one invoice — returned goods drawn from several orders, say — you must be able to show HMRC by other means that VAT was accounted for on the original supply. Unreferenced credit notes are also the first thing auditors question.
Is VAT shown on a credit note?
Yes, whenever the original invoice was a VAT invoice. Show the total credited excluding VAT, then the rate and amount of VAT credited in sterling — always at the rate charged on the original invoice, even if rates have changed since. If you and your customer agree not to adjust the VAT, the document must state "This is not a credit note for VAT".
Can I issue a partial credit note?
Yes. A partial credit note credits specific line items — two damaged units out of ten, or the difference on a mispriced line — while the rest of the invoice stands. Several credit notes can reference the same invoice, each with its own sequential number, as long as the combined credits never exceed the original invoice amount.
How long is a credit note valid?
A credit note stays valid until it is used or until any expiry terms you set — many businesses honour them indefinitely. Record-keeping is stricter: in the UK, keep credit notes for at least six years alongside the invoices they adjust. On the VAT side, issue the note within 14 days of the refund or agreed price reduction and reflect it in the VAT return for the period you issue it.
Is a credit note the same as a refund?
No. The credit note is the document recording that the customer owes less; a refund is money actually moving back to them. A credit note can be settled three ways — cash refund, offset against the next invoice, or credit held on account. And if you receive a credit note from a supplier, it means they owe you: use it against your next order or ask for the cash.