Late Payment Interest UK: Rate, Formula & Calculator
Your legal right to charge interest and claim compensation when business clients pay late, including the current rate and the status of proposed 2026 reforms.
Quick Answer
For UK business-to-business invoices, statutory late payment interest is 8% per year above the Bank of England base rate. It starts from the day after the invoice due date and is calculated daily on the overdue amount.
Bank Rate was 3.75% on 12 August 2026, making the statutory rate 11.75% at that date. Check the current Bank Rate before calculating a live claim.
You can also claim fixed compensation of £40, £70, or £100 depending on the debt size. If the contract sets a different interest rate, you cannot also claim statutory interest.
Use the late payment interest calculator before sending a final reminder or Letter Before Action.
Statutory interest formula
Debt × (Bank Rate + 8%) × days overdue ÷ 365
At a 3.75% Bank Rate, a £1,000 invoice that is 30 days late accrues approximately £9.66 in statutory interest: £1,000 × 11.75% × 30 ÷ 365. Check the live Bank Rate and your contract before relying on the result.
The Late Payment of Commercial Debts Act 1998
UK law gives every business the automatic right to charge interest on overdue invoices sent to other businesses. You don't need to agree this upfront - it's a statutory entitlement explained in the GOV.UK late commercial payments guidance. A different contractual interest rate replaces the statutory rate.
The Act applies to all B2B transactions in England, Wales, Scotland, and Northern Ireland. It does not apply to consumer sales or transactions with individuals acting outside their business.
How Much Interest Can You Charge?
The statutory rate is 8% per annum above the Bank of England base rate. Interest is calculated on a simple (not compound) basis.
Calculation Example
- Invoice amount: £5,000
- Bank of England base rate: 3.75% (12 August 2026)
- Statutory rate: 8% + 3.75% = 11.75% per annum
- Daily interest: £5,000 × 11.75% ÷ 365 = £1.61 per day
- 30 days overdue: £48.29
Fixed Compensation Amounts
On top of interest, you can claim a fixed compensation payment for the inconvenience of chasing the debt:
| Debt Amount | Compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 – £9,999.99 | £70 |
| £10,000 or more | £100 |
The fixed sum can be charged once for each qualifying late payment, not per day. You can also recover reasonable debt recovery costs if the fixed sum doesn't cover them.
When Does Interest Start?
Interest accrues from the day after the payment due date. If your invoice doesn't specify a due date, the default period is 30 days from either:
- 📅 The date the customer receives the invoice, or
- 📅 The date you delivered the goods or completed the service (whichever is later)
Always set clear payment terms on your invoices (e.g. "Payment due within 14 days") to avoid ambiguity.
How to Charge Late Payment Interest
- State your policy on the original invoice- include a line such as "Late payments will incur statutory interest at 8% above the Bank of England base rate plus fixed compensation under the Late Payment of Commercial Debts Act 1998."
- Send a reminder when the invoice becomes overdue - note the outstanding amount, the overdue period, and the interest that is accruing.
- Issue a supplementary invoice or statement - listing the original debt, the interest calculated to date, and the fixed compensation amount.
- Keep records - log the Bank of England base rate you used, the number of days overdue, and all correspondence.
Proposed 2026 Late Payment Reforms
The Commercial Payments Bill was introduced to Parliament in May 2026. The measures below are proposed and not yet in force. The government says there will be a transition period before any new rules apply. See the official Commercial Payments Bill overview.
- 🔹 Maximum payment terms - the Bill would impose a 60-day maximum, with limited exemptions.
- 🔹 Mandatory late-payment interest - the Bill would make interest at 8% above Bank Rate mandatory for qualifying late commercial payments.
- 🔹 Small Business Commissioner powers - the Bill would add investigation, adjudication, direction, and financial penalty powers.
- 🔹 Reporting and scrutiny - planned secondary legislation would expand reporting by large businesses and require commentary from persistently late-paying companies.
💡 Practical Tip
State the applicable interest terms clearly on the invoice and in the contract. Before adding statutory interest, confirm that the contract does not already specify a different rate and check the current Bank Rate.
Frequently Asked Questions
What is the statutory late payment interest rate in the UK?
The statutory rate is 8% per annum above the Bank of England base rate. Bank Rate was 3.75% on 12 August 2026, making the statutory rate 11.75% at that date. Check the current Bank Rate before calculating interest.
How much fixed compensation can I claim for a late payment?
You can claim £40 for debts under £1,000, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more. GOV.UK says the fixed sum can be charged once for each qualifying late payment.
Does late payment interest apply to consumer invoices?
No. Statutory late payment interest under the Late Payment of Commercial Debts Act 1998 only applies to business-to-business (B2B) transactions. Different consumer credit rules apply to B2C debts.
Do I need to mention late payment interest on my invoice to claim it?
You do not have to state statutory interest on the invoice for the statutory right to apply. However, you cannot claim statutory interest if the contract sets a different interest rate, so clear wording matters.
What are the 2026 late payment reforms?
The Commercial Payments Bill was introduced to Parliament in May 2026. Its measures are proposed and are not yet in force; the government says there will be a transition period before the new rules apply.
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