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How to charge late payment interest in the UK (2026 guide)

Updated 16 October 2026 · Sources: GOV.UK, legislation.gov.uk

If a business customer pays you late, UK law usually lets you add interest to the invoice, even if your contract never mentioned it. This right comes from the Late Payment of Commercial Debts (Interest) Act 1998. Most freelancers and small agencies never use it, mainly because they don't know how to work out the figure or worry it will seem aggressive. This guide shows you exactly how to calculate it, when you can claim it and how to ask for it politely.

Who can charge statutory interest?

Statutory interest applies to business-to-business debts. You can claim it if you supply goods or services to another business (a company, sole trader, partnership or public sector body) and they pay after the agreed date. It does not apply to sales to consumers, so if your client is a private individual buying for personal use, this guide is not for you.

You also need to check your contract. If you and your client agreed a different, "substantial" contractual late payment remedy, that applies instead. If your terms say nothing about late payment, the statutory rate applies automatically. GOV.UK's guidance on charging interest confirms this.

When does an invoice count as late?

An invoice is late once the agreed payment date has passed. If no date was agreed, the law sets a default of 30 days after the customer received the invoice or the goods or services, whichever is later. Businesses can agree longer terms with each other, but terms over 60 days must be fair to both sides. Public authorities must generally pay within 30 days. See the GOV.UK overview of late commercial payments for the full rules.

The formula: 8% plus the Bank of England reference rate

Statutory interest is charged at 8% a year plus the Bank of England "reference rate". The reference rate is fixed for six months at a time:

• for invoices that become late between 1 January and 30 June, use the base rate in force on the previous 31 December
• for invoices that become late between 1 July and 31 December, use the base rate in force on 30 June

The base rate has been 3.75%, so the statutory rate is currently 8% + 3.75% = 11.75% a year. Always check the current figure on the Bank of England website before you send a claim, because it changes over time.

Interest is simple, not compound. You work it out per day like this:

• daily interest = invoice amount × 11.75% ÷ 365
• total interest = daily interest × number of days late

Worked example

You invoiced a client £2,500 with 30-day terms. They pay 45 days after the due date.

• daily interest: £2,500 × 0.1175 ÷ 365 = £0.80 (to the nearest penny)
• interest for 45 days: about £36.22
• fixed compensation for a debt between £1,000 and £9,999.99: £70
• total you can add: about £106.22

Interest keeps building each day until the invoice is paid, so the longer a client waits, the more they owe. You can try your own figures below.

Fixed compensation on top of interest

As well as interest, the Act lets you claim a fixed sum for the cost of recovering the debt. It is £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. You can claim it once per invoice. If your reasonable recovery costs are higher, you may be able to claim the difference. Read our compensation explainer or GOV.UK on debt recovery costs for details.

How to actually ask for the interest

Charging interest is legal, but how you ask matters if you want to keep the client. A sensible order is:

• Day 1 overdue: a friendly reminder with the invoice attached. Many late payments are just oversight.
• Day 7: a firmer email that mentions your right to statutory interest and compensation.
• Day 14 and beyond: a formal letter or email that states the interest accrued so far, the compensation and the new total, and gives a clear deadline.

You can send an updated invoice or a separate "interest and compensation" invoice. Make sure it shows the original invoice number, the due date, the days late, the rate used and the calculation, so the client can check it. Our overdue invoice email templates give you wording for each stage.

Tips to avoid disputes

• Put it in your terms. Add a line such as "We reserve the right to claim interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998." It isn't required, but it sets expectations.
• Be precise. Show the dates and the calculation. Vague figures invite arguments.
• Be consistent. If you waive interest for one client, do it on purpose, not by accident.
• Keep records. Save every invoice, reminder and reply. You will need them if it ever goes to court.
• Waiving is your choice. Many businesses use the interest as leverage and waive it if the client pays the principal promptly. That's allowed.

When the client still won't pay

If reminders and an interest claim don't work, the next steps are a letter before action and, if needed, a court claim. You can include statutory interest and compensation in a county court claim. Our guide on what to do when a client won't pay walks through each step up to the small claims track.

Let software do the maths and the chasing

Working out interest by hand for every invoice is tedious, which is why most people never do it. LatePay UK tracks your invoices, sends polite, firm and formal reminders at 1, 7 and 14 days overdue, and calculates statutory interest and compensation automatically.

This guide is general information, not legal advice. Statutory interest applies to B2B debts only. Check the latest rules on [GOV.UK](https://www.gov.uk/late-commercial-payments-interest-debt-recovery).