HMRC research: only 29% of SMEs say they use e-invoicing

Most small and medium-sized businesses still invoice by PDF and email, and many do not know what an e-invoice actually is. That is the picture from research HMRC published on 26 March 2026, which it says has informed its e-invoicing policy and will shape its guidance ahead of the April 2029 mandate.

What HMRC studied

HMRC commissioned two pieces of research:

• A survey of 800 VAT-registered SMEs (fewer than 250 employees), run by IFF Research by telephone between 24 February and 18 March 2025.
• 45 in-depth interviews with SMEs, both users and non-users of e-invoicing, run by Ipsos in May and June 2025.

Both reports carry a caveat: the survey used quota sampling and the interviews are qualitative, so neither can be generalised to every UK SME. The views are the researchers', not necessarily HMRC's.

Importantly, the survey defined e-invoices as invoices "issued, sent, and received in a structured data format that allows for automatic and electronic processing", and said this does not include PDFs or emails. That is the same distinction the mandate will draw. See does a PDF invoice count as an e-invoice?

The headline numbers

Finding	Result
Familiar with the definition of e-invoicing	59% (19% very familiar)
Say they use e-invoicing	29%
Use e-invoicing: small firms (0–49 staff)	29%
Use e-invoicing: medium firms (50–249 staff)	36%
Don't recall any HMRC communication about e-invoicing	91%

The way businesses actually exchange invoices is even more telling:

Method	Used to send	Used to receive
PDF or email	95%	98%
Paper or post	36%	78%
E-invoicing	15%	24%

Only 10% both sent and received e-invoices. E-invoicing was the main sending method for just 9% of firms, against 80% for PDF or email.

Awareness was lowest in manufacturing, primary industries and construction, where a third of firms (33%) were not at all familiar with e-invoicing.

Software is already there

Nearly every SME surveyed used accounting software. Sage was the most common (48%), followed by Xero (17%) and QuickBooks (9%); only 5% said they used none. The interviews found that firms often have e-invoicing features available in that software but rarely use them.

That matters for 2029: for many small businesses, getting ready may be more about switching on and configuring what they already pay for than buying something new. Ask your provider about their Peppol plans; our guide on checking your accounting software lists the questions.

Why SMEs hold back

The interviews point to practical, not ideological, reasons:

• "If it isn't broken." Firms value stable processes that get them paid. Many saw no pressing reason to change.
• Compatibility worries. Owners feared their software would not work with clients' and suppliers' systems, particularly overseas and in construction.
• Loss of control. Some worried they could not customise invoices or reminders.
• Multiple systems. Running several tools already adds checks, training and cost.

The researchers concluded that "without a mandate or strong industry-wide movement", non-users seem unlikely to adopt e-invoicing voluntarily. The mandate is that push.

Common misconceptions

• Treating any digital invoice, including an emailed PDF, as an e-invoice.
• Believing e-invoicing is only for very large organisations.
• Not realising they already send or receive a few e-invoices through a customer portal or software.

What SMEs want

Businesses said their accountants and software providers are their first port of call, not HMRC. If e-invoicing became mandatory, they expected a "similarly comprehensive and visible communication campaign" to Making Tax Digital, and smaller firms asked for help with training and costs.

What to do now

1. Check whether your accounting software can already send and receive e-invoices, and switch it on for a willing customer or supplier.
2. Ask your accountant how they plan to support clients through 2029. Accountants: see our guide for accountants.
3. Use the scope checker and the readiness checklist to plan.