Guide · United Kingdom

Late payment interest in the UK

If another business pays your invoice late, UK law lets you add interest and a fixed sum on top, even if your contract never mentions it. This guide covers who can claim, how much, and how to ask.

Who can claim

The Late Payment of Commercial Debts (Interest) Act 1998 applies to contracts for goods or services where both sides are acting in the course of a business. That includes sole traders, freelancers, limited companies and public authorities. It does not cover sales to consumers.

When a payment counts as late

• If you agreed a payment date, the payment is late the day after that date.
• If you agreed nothing, it is late 30 days after the customer receives the invoice, or 30 days after you deliver the goods or services if that is later.

The rate

Statutory interest is 8% above the Bank of England base rate. The base rate used is fixed for six months at a time: the rate in force on 31 December applies to debts that become late between 1 January and 30 June, and the rate on 30 June applies from 1 July to 31 December.

The formula, with a worked example

Interest is simple, not compound. It runs on the full amount owed, including VAT, from the day after the due date.

If the debt runs across a change in the reference rate, each period is worked out at its own rate and the results are added together. The calculator does that split for you.

Fixed compensation

On top of the interest you can claim a fixed sum for the cost of recovering the debt, once per late invoice:

How to claim it

1. Tell the customer in writing that you are claiming statutory interest and compensation, naming the Act.
2. State the amounts, the date they are calculated to, and the daily figure by which the interest is growing.
3. Say how to pay and by when. Many businesses offer to waive the charges if the invoice itself is paid within a week; it gives the customer a reason to act.

You do not have to have warned the customer in advance, and you do not need a clause in your terms.

Things that change the answer

• Your contract sets its own rate. A contractual late-payment rate normally replaces the statutory one, provided it is a substantial remedy.
• The invoice is disputed. Interest generally runs only on what is properly due.
• Time. In England and Wales a claim for a contract debt generally has to be brought within six years.
• VAT. Interest and compensation are generally treated as outside the scope of VAT. Confirm with your accountant.

This guide is general information, not legal advice. Rates shown were checked on 10 November 2026.