A debit note works in the opposite direction to a credit note. A seller uses it to increase the amount due without reissuing the original invoice, and HMRC notes that a debit note may be issued instead of a supplementary invoice when the price of a supply goes up. A buyer uses one to claim money back from a supplier and usually expects a credit note in return.
When sellers issue a debit note
- Undercharges. The invoice used an old price, missed items or got the quantity wrong.
- Agreed price increases. A surcharge or price change the contract allows after the invoice was issued.
- Late payment interest and compensation. An interest note is a type of debit note, and a late payment interest calculator gives you the amount.
- Other charges in the contract. Storage, redelivery or debt recovery costs the terms let you pass on.
When buyers issue a debit note
A buyer sends a debit note when it deducts something from a supplier's invoice, such as returned or damaged goods, a short delivery or a price difference. The note tells the supplier what will be deducted and why. If the supplier agrees, it issues a credit note so both ledgers show the same balance. Until then the deduction appears as a short payment that someone has to resolve during cash application.
If you are the supplier, say in your terms how customers must claim deductions, for example within a set number of days of delivery and with evidence such as a delivery note or photos. Deductions taken without a debit note or a reason often leave small balances that stay open for months.
Debit note vs credit note vs invoice
| Document | Who issues it | Effect on what the buyer owes | Typical use |
|---|---|---|---|
| Invoice | Seller | Creates the amount due | Billing a sale |
| Debit note from the seller | Seller | Increases it | Undercharges, interest, agreed extra charges |
| Debit note from the buyer | Buyer | Claims a reduction | Returns, short deliveries, price differences |
| Credit note | Seller | Reduces it | Returns, invoicing errors, agreed discounts |
What a debit note should include
- A unique number and the date of issue.
- The names and addresses of both parties.
- The number and date of the original invoice.
- The reason for the debit and how the amount was worked out.
- The amount, with the VAT rate and VAT if the note charges for a taxable supply or changes its price.
- When and how to pay.
In the UK, when a supplier and customer agree a price increase, the supplier issues the debit note within 14 days of the agreement and accounts for the extra VAT in the period of the change, as HMRC set out in Revenue and Customs Brief 6 (2019).
Debit note example
Example. On 1 August 2026 you invoice 200 units at £45, although the price agreed from 1 July was £48. The undercharge is 200 × £3 = £600 plus VAT of £120 at 20%, so you issue a debit note for £720 that refers to the original invoice. The same customer later pays a different £12,000 invoice 45 days late, so you send a second debit note, an interest note, for £173.84 of statutory interest at 11.75% a year and £100 of fixed compensation, £273.84 in total. All figures are illustrative.
The seller records a debit note by debiting the customer's account and crediting revenue, or interest income for an interest note, plus VAT payable where VAT applies. The buyer records the same amounts the other way round in accounts payable.
Sunbay issues interest notes as part of the reminder sequence you set, using invoice and payment data from your ERP or accounting system, and keeps each note, reminder and customer reply next to the invoice. It also issues payment demands when invoices stay unpaid. See how automated reminders and escalations work.
Frequently asked questions
Who issues a debit note, the buyer or the seller?
Both use them. A seller issues a debit note to add to what the customer owes, and a buyer issues one to tell a supplier about an amount it is deducting, such as for returned goods.
Is a debit note the same as an invoice?
No. An invoice bills a sale, while a debit note adjusts an amount already invoiced or adds a related charge. A seller's debit note asks for payment like an invoice and refers back to the original one.
What is the difference between a debit note and a credit note?
A seller's debit note increases the amount the buyer owes, and a buyer's debit note claims a reduction. A credit note is the seller's document that reduces the amount owed.
Do you charge VAT on a debit note?
Yes when the note charges for a taxable supply or changes its price, such as correcting an undercharge. Late payment interest is usually treated as compensation rather than payment for a supply, but check the rules in your country.
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