Late payment interest in the UK: what can you charge?

The Late Payment of Commercial Debts rules give businesses a statutory right to charge interest when another business pays late for goods or services.

The statutory rate for business-to-business transactions is:

Bank of England base rate + 8 percentage points.

So if the relevant Bank of England rate were 4%, the statutory rate would be:

4% + 8% = 12% a year

The interest accrues on the unpaid debt.

It is not an 8% one-off penalty.

The easiest situation is where you and the customer agreed a payment date.

If the invoice is not paid by that date, it is late.

Agreed payment dates must usually be within 60 days for business transactions and 30 days for public authorities, although businesses can agree a longer period if it is fair to both parties.

If you did not agree a payment date, the statutory rules provide a fallback.

The payment generally becomes late 30 days after the later of:

• the customer receiving the invoice, or
• you delivering the goods or providing the service.

If there is any uncertainty about when the debt became due, check the contract and get appropriate advice before calculating interest.

The basic calculation is:

Debt × annual interest rate × days late ÷ 365

For example, imagine:

• Invoice: £10,000
• Relevant statutory rate: 12%
• Days overdue: 30

Annual interest:

£10,000 × 12% = £1,200

Daily interest:

£1,200 ÷ 365 = approximately £3.29

Interest after 30 days:

£3.29 × 30 = approximately £98.70

Here is another simple example.

Say a customer owes you £5,000.

Assume the applicable statutory annual interest rate is 12%.

The invoice is 45 days overdue.

Step 1: calculate annual interest

£5,000 × 0.12 = £600

Step 2: calculate daily interest

£600 ÷ 365 = £1.64 per day

Step 3: calculate interest for 45 days

£1.64 × 45 = approximately £73.80

You could therefore have approximately £73.80 of statutory interest at that point, assuming the debt qualifies and that 12% is the correct applicable rate.

The exact amount continues to change while the debt remains unpaid.

Yes, for qualifying late commercial payments.

The current fixed sum is:

You can charge the fixed sum once for each qualifying late payment.

Suppliers can also claim reasonable recovery costs in addition to the fixed amount in relevant circumstances.

If you plan to claim additional recovery costs, particularly substantial ones, get advice on what is recoverable in your situation.

Imagine a customer owes you:

£7,500

The invoice is overdue.

You calculate statutory interest of:

£82

Because the debt is between £1,000 and £9,999.99, the fixed recovery compensation is:

£70

The additional amount would therefore be:

£82 interest + £70 compensation = £152

That would make the total outstanding amount:

£7,652

Again, this assumes the debt qualifies and you are entitled to apply the statutory provisions.

This is important.

You cannot claim statutory interest if the contract provides a different rate of interest.

So do not automatically calculate 8% above the Bank of England base rate simply because an invoice is late.

Check the contract first.

Your terms may already explain:

• When payment becomes overdue.
• What interest applies.
• Whether late charges apply.
• How disputes affect payment.
• What recovery steps can be taken.

If you are unsure whether the contractual terms replace your statutory entitlement, get appropriate legal advice.

The statutory right can apply even where your contract does not contain its own late-payment interest clause, provided the debt falls within the relevant rules.

That is one of the reasons the legislation exists.

But clear payment terms are still better.

Your customer should know:

• When payment is due.
• What payment terms apply.
• Who invoices should be sent to.
• What happens if an invoice is disputed.

The aim should be to prevent payment problems, not rely on interest charges to fix them later.

No.

Having the right to claim something does not mean you have to use it every time an invoice is one day late.

Think commercially.

Imagine a long-standing customer normally pays reliably but an invoice has slipped by three days because the finance manager was away.

Adding statutory interest and recovery compensation immediately may not be the best way to handle the relationship.

Compare that with a customer who is 90 days overdue, has ignored repeated follow-ups and has missed several payment promises.

The calculation may be the same.

The commercial decision is different.

There is no one correct point in every collections process.

For an otherwise reliable customer who is slightly late, a normal reminder may be enough.

For example:

Hi [Customer name],

I'm following up on invoice [Invoice number] for [Amount], which was due on [Due date].

Could you confirm when payment is scheduled?

If there's anything holding it up, let me know and I'll help get it resolved.

Thanks,

[Your name]

If the invoice becomes materially overdue and you are considering charging statutory interest, be factual.

Do not use interest as an empty threat.

Hi [Customer name],

Invoice [Invoice number] for [Amount] was due on [Due date] and remains unpaid.

We are now applying statutory late payment interest to the overdue amount in accordance with the applicable UK late payment rules.

The current interest due is [Interest amount], bringing the outstanding balance to [Total amount].

Please arrange payment by [Date], or contact me if there is an issue preventing payment.

Thanks,

[Your name]

If you are also claiming the fixed recovery sum, state it separately so the customer can see how the total was calculated.

Hi [Customer name],

Invoice [Invoice number] for [Invoice amount] was due on [Due date] and remains outstanding.

We are claiming:

Original invoice: [Invoice amount]
Statutory late payment interest to date: [Interest amount]
Fixed recovery compensation: [£40 / £70 / £100]

Total currently due: [Total amount]

Please arrange payment by [Date].

If there is a genuine issue with the invoice that has not yet been raised, please let me know.

Thanks,

[Your name]

Keep the calculation and your records.

If you decide to add statutory interest to the amount owed, you should send a new invoice for the interest.

Be careful.

If the customer says the invoice itself is wrong, the priority should usually be to understand and resolve the dispute.

Do not blindly continue a normal chasing sequence while somebody inside your company is still investigating whether the invoice is correct.

Ask:

• What exactly is being disputed?
• Is the whole invoice disputed or only part of it?
• What evidence is needed?
• Who owns the resolution?
• Is any undisputed amount still payable?

For significant disputes, get professional advice before adding charges or escalating formally.

There is a bigger point here.

Adding interest does not actually collect the invoice.

You can have:

• the correct statutory calculation,
• a £70 recovery charge,
• a perfectly written notice,

and still have no money in the bank.

The real collections work is still:

• contacting the right person,
• understanding why the invoice is unpaid,
• resolving blockers,
• securing a payment date,
• following up missed commitments,
• escalating when normal chasing stops working.

That is why late-payment interest should sit inside a broader collections process.

Our guide to collecting unpaid invoices covers that full escalation process.

If an invoice becomes seriously overdue, keep the history clean.

Record:

• The original invoice.
• Due date.
• Payment terms.
• Customer communications.
• Payment promises.
• Disputes.
• Changes or corrections to the invoice.
• Interest calculations.
• Recovery compensation claimed.
• Notices sent.
• Payments received.

Your aged debt report can show how old the balance is, but the communication history explains why it is still unpaid.

There is an important current development.

The UK government has introduced a Commercial Payments Bill containing proposed reforms to commercial payment rules, including measures relating to payment terms and late-payment interest.

However, as of 15 September 2026, the Bill is still going through Parliament and has not received Royal Assent. The existing rules described in this article therefore remain the current position.

Because legislation can change, check the latest GOV.UK guidance before relying on this article for a live debt.