How late payment interest is worked out
When another business pays you late, you can charge statutory interest on the overdue amount. The rate is 8% plus the Bank of England base rate. With the base rate at 3.75% (held at 30 June 2026), the statutory rate is 11.75%. To find the interest, take the debt, apply the annual rate, divide by 365 to get the daily interest, then multiply by the number of days the payment is late. Interest runs from the day after the due date, so a payment due on 1 June and settled on 1 July is 30 days late.
On a £5,000 invoice that is 30 days late, the annual interest is £587.50, the daily interest is £1.61, and 30 days of interest comes to £48.29. On top of the interest you can add a fixed sum to cover the cost of chasing the debt.
The fixed compensation you can add
Alongside interest, the Act lets you claim a flat compensation amount for each late invoice, set by the size of the debt: £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99, and £100 for debts of £10,000 or more. If recovering the debt costs you more than that fixed sum, for example a debt-collection agency fee, you can claim the reasonable extra cost as well.
This is for business-to-business debts
Statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 applies to commercial debts between businesses, and debts owed by public authorities. It does not cover money owed by private consumers, where any interest depends on your contract terms. The right applies even if your invoice says nothing about interest, and you do not need the customer to agree to it. Treat this tool as a way to see the numbers, not as legal advice.
Frequently asked questions
How do I calculate interest on a late commercial payment?
Multiply the unpaid debt by the statutory interest rate, divide by 365 to get the daily interest, then multiply by the number of days the payment is late. The statutory rate is 8% plus the Bank of England base rate. On a £5,000 invoice paid 30 days late at 11.75% (8% plus a 3.75% base rate), the daily interest is £1.61 and 30 days comes to £48.29.
What is the statutory interest rate on late payments?
For business-to-business commercial debts, statutory interest is 8% plus the Bank of England base rate. With the base rate at 3.75% as of 30 June 2026, the statutory rate is 11.75%. The base rate used is the one in force on 30 June for debts due in the second half of the year, and 31 December for debts due in the first half.
Is the late payment interest rate 8%?
The 8% is a fixed margin, not the whole rate. Statutory interest on a commercial debt is 8% plus the Bank of England base rate, so the full rate is higher than 8%. With the base rate at 3.75% as of 30 June 2026, the statutory rate is 11.75%. The base rate is fixed for a six-month period: the rate in force on 30 June covers debts due in the second half of the year, and 31 December covers debts due in the first half.
Can I charge interest on an unpaid invoice?
Yes. If you sold goods or services to another business and the payment is late, you have a statutory right to charge interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998, even if your invoice or contract does not mention it. You do not need the customer's agreement to claim it.
How much compensation can I claim for a late payment?
On top of interest you can claim fixed compensation for each late invoice: £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99, and £100 for debts of £10,000 or more. You can also claim reasonable costs of recovering the debt above that fixed sum, such as debt-collection agency fees.
Does statutory late payment interest apply to consumers?
No. Statutory interest under the 1998 Act applies to commercial debts between businesses, and to public authorities, only. It does not cover debts owed by private consumers. If a consumer owes you money, any interest depends on the terms of your contract rather than this statutory right.
Do I have to charge late payment interest?
No, it is a right, not an obligation. You can choose to waive it to protect a customer relationship, or apply it selectively. Many businesses state the statutory position on their invoices as a deterrent and only enforce it on persistently late payers.
This tool is a guide, not legal or financial advice.
