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Term Explainer

What is a credit note?

A credit note reduces or cancels part of a previously issued invoice.

A credit note is used when an issued invoice needs correction, discount, or partial reversal.

It should reference the original invoice so records stay clear.

Common reasons include overcharge, returned goods, or agreed goodwill adjustment.

Guidance only. Tax and accounting treatment of credit notes should follow HMRC and your accountant's guidance.
Review status: Pending legal review
Last reviewed: 2026-03-05