UK SMEs Lag in E-Invoicing Adoption, HMRC Finds

UK HMRC published the results of research conducted in two stages: the quantitative and the qualitative. The research aimed to understand small and medium-sized (SMEs) enterprises' use of, awareness of, and perceptions of e-invoicing. The research is another step in the UK's efforts to implement nationwide e-invoicing, following last year's HMRC and the Department for Business and Trade's joint public consultation.

Results of Two-Stage E-invoicing Research

The quantitative stage was conducted by IFF Research in early 2025, surveying 800 businesses to assess the extent of e‑invoicing use and SMEs' awareness of it. The results show that around 59% of SMEs surveyed were familiar, either very or somewhat, with the definition of e‑invoicing used in the research, with 19% reporting they were very familiar. 

Notably, the familiarity was higher among medium-sized businesses. More precisely, 70% of medium-sized businesses were familiar with it, compared to 58% of small businesses. Also, SMEs operating in the manufacturing and construction sectors were the least familiar, where 33% reported they were not at all familiar, compared with other sectors.

The qualitative stage was conducted in May and June 2025 by Ipsos and included 45 in-depth interviews to explore SME attitudes toward e‑invoicing, including both users and non-users. The research found that UK SMEs generally rely on accountancy software but often do not use its e‑invoicing features. Also, businesses prefer to use low-risk, trusted invoicing methods that ensure payment and preserve client relationships. Overall awareness of e‑invoicing is quite low, and even users are sometimes unclear about its purpose and operation.

Furthemore, despite recognizing some potential benefits, SMEs expressed concerns about software compatibility and client preferences, which they see as barriers to wider adoption. Additionally, the SMEs showed little intrinsic motivation to adopt or expand e‑invoicing without external incentives. 

Most SMEs look to software providers and accountants for guidance on key matters. Finally, most participants in the research stated that they anticipate needing support if e‑invoicing becomes mandatory, highlighting the need for clear explanations to encourage uptake and increase usage.

Conclusion

HMRC stated that it will use the findings from reports to inform the development of its e-invoicing policy, communication campaigns, and guidance, specifically addressing the needs and concerns of UK SMEs. The insights and data gathered throughout the research process should lead to initiatives that make e‑invoicing more accessible, understandable, and appealing to SMEs, thereby supporting a smoother transition toward a nationwide e‑invoicing system.

Source: UK Government - HM Revenue & Customs, VATabout