Late Payment Interest Calculator
Calculate exactly how much statutory interest and compensation you're owed on overdue invoices under UK law.
Calculation Breakdown
Understanding Late Payment Interest in the UK
What Is Statutory Late Payment Interest?
If you're a freelancer, contractor, or small business owner in the UK and a client hasn't paid your invoice on time, you have a legal right to charge interest on the overdue amount. This right is established by the Late Payment of Commercial Debts (Interest) Act 1998, as amended by the Late Payment of Commercial Debts Regulations 2013.
Statutory late payment interest applies automatically to all business-to-business (B2B) commercial transactions in England, Wales, Scotland, and Northern Ireland. You don't need to have mentioned it in your contract or on your invoice — it's your legal right. However, the Act only covers commercial debts, meaning it doesn't apply to consumer transactions (B2C).
The purpose of the legislation is to discourage late payment culture and protect smaller businesses from cash flow problems caused by larger companies or public authorities paying late. It gives you a straightforward mechanism to recover the cost of being paid late.
How Is Late Payment Interest Calculated?
The statutory interest rate is set at 8% per year above the Bank of England base rate. Interest is calculated on a simple (not compound) basis, accruing daily from the day after the agreed payment date.
Multiply daily interest by the number of days overdue to get total interest owed
For example, if you're owed £3,000 and the Bank of England base rate is 3.75%, the statutory rate is 11.75%. Your daily interest would be £3,000 × 0.1175 ÷ 365 = £0.97 per day. After 60 days overdue, that's £57.95 in interest alone.
What Is the Fixed Compensation Amount?
In addition to interest, you're entitled to claim a fixed sum of compensation for each overdue invoice. This is intended to cover the cost of recovering the debt. The amount depends on the size of the debt:
| Debt Amount | Fixed Compensation |
|---|---|
| Up to £999.99 | £40.00 |
| £1,000 – £9,999.99 | £70.00 |
| £10,000 or more | £100.00 |
This compensation is per invoice — if a client owes you on three separate invoices, you can claim the fixed compensation on each one individually.
How to Claim Late Payment Interest
Claiming what you're owed doesn't have to be confrontational. Follow these steps:
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Calculate what you're owed
Use the calculator above to work out the exact interest and compensation. Having a precise figure adds credibility to your claim.
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Send a formal demand
Write to your client referencing the Late Payment of Commercial Debts (Interest) Act 1998. Include the original invoice details, the amount of interest accrued, and the fixed compensation. Use the Statement of Interest generated above.
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Set a deadline
Give the debtor a clear deadline to pay — typically 7 to 14 days. Be polite but firm. State that you'll escalate if payment isn't received.
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Follow up
If the deadline passes, send a follow-up. Consider whether mediation, a solicitor's letter, or the Small Claims Court (for debts under £10,000) is the right next step.
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Escalate if necessary
For debts under £10,000, you can use the Money Claim Online service. The court fee is relatively small and often the mere threat of legal action prompts payment.
Frequently Asked Questions
What is the current statutory late payment interest rate in the UK?
+The statutory late payment interest rate is 8% above the Bank of England base rate. As of February 2026, the base rate is 3.75%, making the total statutory interest rate 11.75% per year. This rate is set by the Late Payment of Commercial Debts (Interest) Act 1998 and applies to all business-to-business transactions in the UK.
Can I charge late payment interest on invoices that didn't mention it?
+Yes. Under the Late Payment of Commercial Debts (Interest) Act 1998, you have a statutory right to charge interest on late commercial payments, even if your contract or invoice doesn't mention it. This right applies automatically to all B2B transactions. However, it's good practice to include late payment terms on your invoices to set clear expectations.
How much fixed compensation can I claim for a late payment?
+You can claim fixed compensation on top of interest: £40 for debts up to £999.99, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more. This is per invoice, not per payment, and is your right under the Late Payment of Commercial Debts Act 1998.
When does late payment interest start accruing?
+Late payment interest starts accruing from the day after the agreed payment date. If no payment terms were agreed, the default is 30 days after the invoice date or 30 days after the goods/services were delivered (whichever is later). For public authority debts, the maximum payment term is 30 days.
Does late payment interest apply to invoices from sole traders and freelancers?
+Yes. The Late Payment of Commercial Debts Act 1998 applies to all business-to-business (B2B) commercial transactions in England, Wales, Scotland, and Northern Ireland. This includes sole traders, freelancers, limited companies, partnerships, and public authorities. It does not apply to consumer transactions (B2C).