How to charge interest on late payments (UK)

When another business pays you late, the law lets you add interest and a fixed charge on top of what you’re owed. Here’s how it works.

Statutory interest

Under the Late Payment of Commercial Debts (Interest) Act 1998, you can charge statutory interest of 8% plus the Bank of England base rate on overdue business invoices. Interest accrues daily from the day after the payment was due until you’re paid.

The base rate used is fixed per half-year: the rate in force on 31 December applies January–June, and the rate on 30 June applies July–December. If a debt runs across one of those dates, each period uses its own rate.

Fixed compensation

On top of the interest, you can claim a one-off fixed sum for each late invoice:

• £40 for debts under £1,000
• £70 for debts of £1,000 to £9,999.99
• £100 for debts of £10,000 or more

You can also claim reasonable costs of recovering the debt beyond that fixed sum.

Working it out

Use the late payment interest calculator: enter the amount, the due date and the date paid (or today), and it works out the interest (splitting across rate periods automatically) plus the fixed compensation.

How to claim it

1. Make sure the invoice is genuinely overdue (past your agreed payment terms, or the statutory default of 30 days if none were set).
2. Send a polite reminder stating the amount, the statutory interest accruing, and the fixed compensation due.
3. Keep claiming until you’re paid — interest continues to accrue daily.

It’s worth adding a late-payment clause to your invoices so customers know your terms in advance. The invoice generator can add a statutory late-payment notice for you.

Business-to-business only

These statutory rights apply to commercial (B2B) debts. They do not apply to debts owed by consumers — with a consumer you can generally only charge interest if your contract specifies a rate, and otherwise interest is a matter for the courts.