The key to using indentation in a letter is the purpose of the letter. Personal letters are more casual than business correspondence and allow for a different style. Most letters are written following the American Psychological Association (APA) Manual, a style sheet that governs three elements of writing style: page formats, text rules and documentation. Whether you are typing or writing a letter, begin each paragraph with the same indentation to maintain consistency throughout.
Business Letter -- Full Block Style
Business letters are almost always written in full block style and have no indenting. Full block style is easier to do for people typing on personal computers because it requires no tab key movements. Every line of the full block style is flush left, including the date, addresses, salutation, body and closing.
Business Letter -- Modified Block Style
Modified block style is appropriate for business use and is similar to block style in that all lines are flush left with the exception of three lines: the return address, date and closing line. Placement for these three lines begins at the centre of the page and flows to the right.
Casual and friendly letters include indenting, which helps to differentiate them from business letters. The return address and closing begin in the centre of the page, while the greeting is flush left. Indenting each paragraph five spaces creates a letter that is warmer and more friendly than a business-style letter.
A short note that contains no more than a single paragraph may be written with a five-space indentation or flush left. The closing line, such as "Your friend, Mary," may be started in the centre of the page, with the closing line placed above the name.