Late payment interest in the UK: how much can you charge on an overdue invoice?
If a business pays you late, UK law lets you add interest and a fixed compensation fee — even if your contract never mentioned it. Here's how it works, how to calculate it, and how to bring it up without burning the relationship.
Who can charge it
The Late Payment of Commercial Debts (Interest) Act 1998 applies when both sides are businesses. That includes sole traders and freelancers invoicing companies, and limited companies invoicing each other.
- It applies when you invoice a business client for goods or services.
- It doesn't apply to consumers (private individuals). For them you need a late-payment clause they agreed to.
- Your contract can replace it. If you agreed a different late-payment rate, that rate applies instead — as long as it's a substantial remedy, not a token one.
When is an invoice late? On the agreed due date. If you never agreed one, payment becomes late 30 days after the client received the invoice or you delivered the work, whichever is later.
Statutory interest: 8% + Bank of England base rate
The rate is 8% a year plus the Bank of England base rate. The base rate used is fixed for six months at a time: the rate on 31 December applies to debts that become late from January to June, and the rate on 30 June applies from July to December.
Interest is simple (not compound) and runs daily from the day after the due date:
daily interest = invoice amount × (8% + base rate) ÷ 365interest owed = daily interest × days late
Check the current base rate on the Bank of England website before you calculate.
Fixed compensation: £40, £70 or £100
On top of interest, you can claim a fixed sum for the cost of chasing, once for each late payment:
| Amount owed | Fixed compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
If chasing cost you more than that (for example, a collection agency), you may be able to claim reasonable recovery costs on top.
Worked example
You invoiced a client £2,400, due on 1 March. It's paid 45 days late. Suppose the base rate for that period was 3.75% (an example — use the real figure for your dates).
| Interest rate | 8% + 3.75% = 11.75% a year |
|---|---|
| Annual interest | £2,400 × 11.75% = £282.00 |
| Daily interest | £282.00 ÷ 365 = £0.77 |
| Interest for 45 days | £34.77 |
| Fixed compensation | £70 (debt between £1,000 and £9,999.99) |
| Total you can add | £104.77 |
Skip the maths. The free late payment interest calculator works this out for UK and EU invoices in seconds. In DueKindly Pro, the figure is added to your final notice automatically.
Open the calculatorIf you invoice EU clients
The EU's Late Payment Directive (2011/7/EU) gives business suppliers similar rights in every member state:
- Interest of at least the ECB reference rate (the main refinancing rate) plus 8 percentage points.
- At least €40 fixed compensation per late payment, plus reasonable recovery costs above that.
- Default payment term of 30 days if none was agreed. Agreed terms between businesses shouldn't exceed 60 days unless expressly agreed and not grossly unfair.
Each country writes the directive into its own law, and some go further, so check local rules for large amounts.
How to actually charge it
- Mention it before you charge it. Your final reminder should say that interest and compensation will be added if the invoice isn't paid by a specific date. That sentence alone gets many invoices paid. Use the final notice template.
- Send an updated invoice showing the original amount, the interest (with the rate and number of days) and the compensation as separate lines.
- Be ready to waive it. For a client you want to keep who pays promptly after the warning, dropping the fee can be a goodwill gesture — your choice.
- Escalate only if needed. If the client still doesn't pay, see final notice before legal action.
FAQ
How much interest can I charge on a late invoice in the UK?
For business-to-business invoices, statutory interest is 8% a year plus the Bank of England base rate, unless your contract sets a different rate. It runs daily from the day after payment was due.
What is the £40 late payment fee?
It is fixed compensation under the Late Payment of Commercial Debts (Interest) Act 1998: £40 for debts up to £999.99, £70 for £1,000 to £9,999.99 and £100 for £10,000 or more, charged once for each late payment, on top of interest.
Can I charge late payment interest to individuals?
Not under the Late Payment Act: it only covers business-to-business debts. If you invoice consumers, you need a late payment clause they agreed to in your contract.
When does an invoice count as late if we never agreed a payment date?
Under UK rules, 30 days after the customer received the invoice or you delivered the work, whichever is later.
Do I have to warn the client before charging statutory interest?
The right exists without a warning, but in practice you should mention it in your final reminder and then send an updated invoice that shows the interest and compensation separately.
This guide summarises UK and EU rules for business-to-business invoices as of October 2026. It is not legal advice. Official sources: GOV.UK: late commercial payments, Directive 2011/7/EU.