Invoicing basics

Credit notes explained: when and how to issue one

A credit note cancels or reduces an invoice you have already sent. Because tax authorities treat issued invoices as records, you do not edit them. You correct them with a credit note.

By the InvoiceDesk editorial team · Published 21 October 2026 · Updated 28 October 2026 · How we write

What a credit note does

A credit note is a document from the seller to the buyer that reduces the amount owed on a specific earlier invoice. It reverses some or all of the original sale, including the tax. It can result in a refund, a reduced balance, or credit that is applied to a future invoice.

When to issue a credit note

You charged the wrong price or quantity.
Goods were returned, or a service was not delivered.
You agreed a discount after the invoice was sent.
The invoice was issued in error, or to the wrong customer.
A deposit needs to be reversed.

If the invoice was never sent and the customer never saw it, you may be able to void it, but record why. See numbering best practices.

What to put on a credit note

The title “Credit note” and a unique credit note number.
The date and your business details, with tax number if registered.
The customer’s details.
The number and date of the original invoice it corrects.
A description of what is credited and why.
The amount credited, tax credited and total, shown as negative or clearly labelled as a credit.
How the credit will be settled: refund, offset against a future invoice, or both.

Tax treatment

If you charged VAT, GST or sales tax, the credit note should adjust that tax too, and both sides adjust their returns for the period. Some tax authorities set a deadline or a minimum content list for credit notes. For example, UK VAT rules treat credit notes as part of your VAT records, and you must keep them like invoices. Always check your own authority’s guidance.

Create one in a minute

The credit note generator includes a field for the original invoice number and a reason, and uses the same layouts and colours as the invoice generator. Number it in its own series, such as CN-0001.

Check official guidance. We could not fully confirm these points against an official page when we last reviewed, so please verify them before relying on them:

Credit note content rules and time limits for adjusting tax vary by country. Check your tax authority.

Frequently asked questions

Can I just edit the invoice instead?

Not once it has been sent. Editing a sent invoice breaks the audit trail. Issue a credit note and, if needed, a new invoice.

Is a credit note the same as a refund?

No. A credit note is a document. The refund is the payment that may follow it. The customer may prefer to use the credit against later invoices.

Does a credit note have to match the full invoice?

No. You can credit part of an invoice, such as one line or a percentage.

What is a debit note?

A debit note increases an amount owed. It is less common for small businesses, who usually issue an additional invoice instead.

How long do I keep credit notes?

As long as the original invoice. See how long to keep invoices.