Should a discount be applied before tax?

Yes. Tax is charged on the amount the customer actually pays for the goods or services.

A 2% discount if the invoice is paid within 10 days, with the full amount otherwise due in 30 days.

Can I give a discount on part of an invoice only?

Yes — either adjust that line's rate and describe why, or issue the discounted items on a separate invoice so the arithmetic stays transparent.

Is a fixed or percentage discount better?

Percentage for ongoing trade terms, since it scales. Fixed for one-off adjustments, since it does not move if the invoice grows.

How do I reverse a discount after sending the invoice?

Issue a credit note against the original invoice number and reissue with the correct figures rather than editing the sent document.

Calculator

Invoice Discount Calculator

Work out a percentage or fixed discount on an invoice and see exactly how it changes the taxable amount and the total due.

Calculate an invoice discount

Subtotal before discount

Discount type

PercentageFixed amount

Discount (%)

Tax rate (%)

Subtotal2,400.00

Discount (10.00% effective)-240.00

Amount after discount2,160.00

Tax (20%)432.00

Total due2,592.00

Apply the discount on a real invoice

The generator deducts discounts before tax, exactly as shown here.

Create Invoice

How do you calculate a discount on an invoice?

For a percentage discount, multiply the subtotal by the percentage and deduct it. For a fixed discount, deduct the amount directly. Tax is then applied to whatever remains.

The reason the order matters is that tax follows value. If you discount 10% off a 2,400 invoice, the customer is buying 2,160 worth of goods, so 2,160 is the taxable figure. Applying tax to 2,400 and then discounting would charge tax on value nobody paid for.

Percentage, fixed and conditional discounts

A percentage discount scales with the invoice and is the right choice for trade and volume arrangements. A fixed discount is better for goodwill adjustments and agreed reductions, because it does not change if the scope grows.

An early-payment discount is different in kind: it is conditional on the customer paying by a date, so it should not be deducted when you issue the invoice. State it in the terms — "2/10 Net 30" — invoice the full amount, and issue a credit note if the customer earns it.

Worked example

A 2,400.00 invoice carries a 10% retainer discount and 20% tax.

Step	Calculation	Result
Subtotal	—	2,400.00
Discount	2,400.00 × 10%	240.00
Amount after discount	2,400.00 − 240.00	2,160.00
Tax	2,160.00 × 20%	432.00
Total due	2,160.00 + 432.00	2,592.00

Showing discounts on the invoice

Put the discount on its own labelled line, with the percentage visible
Say what the discount is for — retainer rate, volume, agreed adjustment
Never reduce a line item's rate quietly instead of showing a discount
Keep conditional discounts in the terms, not in the totals
If you discount to settle a dispute, note the agreement it came from

Frequently asked questions

Published 18 September 2026. Last updated 18 September 2026. Written by the Free Invoice Generator team. General invoicing information, not tax or legal advice.

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