How to Charge Late Payment Interest & Fees on Unpaid Invoices (UK, 2026)

An overdue invoice isn't just frustrating — under UK law you're often entitled to charge interest and a fixed fee on top of the original amount. Most small businesses never claim it, which means leaving money on the table and quietly training clients that late payment is free.

This guide explains your rights under the Late Payment of Commercial Debts (Interest) Act 1998, how to calculate statutory interest, the fixed compensation you can add per invoice, and how to actually put it on an invoice and chase it.

This is general information for UK business-to-business transactions, not legal advice. For consumer debts and complex disputes, take professional advice.

Do You Have the Right to Charge Late Payment Interest?

Yes — for commercial (business-to-business) transactions. If another business pays you late, the Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right to claim interest and compensation, even if your invoice didn't mention it.

A few important points:

• It applies to B2B debts. Selling to consumers is different and not covered by this Act.
• The right is automatic — you don't need a clause in your contract, although having clear payment terms helps.
• You can choose not to claim it (many businesses waive it for a good client), but the right is there when you need leverage.
• You can claim interest going back up to 6 years.

When Does a Payment Count as "Late"?

Payment is late once it passes the agreed due date. If you didn't agree a payment date:

• The default is 30 days after the later of: the customer receiving your invoice, or you delivering the goods/finishing the service.
• Agreed terms over 60 days between businesses can be challenged unless they're fair to both sides.

This is exactly why every invoice should carry an explicit due date. A free tool like 1nvoic3 sets a clear due date (e.g. "Net 14") automatically, so there's no argument about when the clock started.

1. Statutory Interest: 8% + the Bank of England Base Rate

For late commercial payments, statutory interest is:

8 percentage points above the Bank of England base rate.

The base rate changes, so always check the current Bank of England base rate before you calculate. For example, if the base rate were 4%, your statutory rate would be 12% per year.

How to calculate it

Interest = debt × annual statutory rate × (days late ÷ 365)

Worked example. A client owes you £2,000, paid 30 days late, and suppose the statutory rate works out at 12% a year:

• Daily interest = £2,000 × 12% ÷ 365 = £0.66 per day
• 30 days late = £0.66 × 30 = £19.72 in interest

Interest accrues daily from the day after payment was due until you're paid, so the longer they leave it, the more it grows.

2. Fixed Compensation: £40–£100 Per Invoice

On top of interest, you can claim a fixed sum for each invoice that's paid late, to cover the cost of chasing it:

Amount of the debt	Fixed compensation
Up to £999.99	£40
£1,000 to £9,999.99	£70
£10,000 or more	£100

This is per invoice, not per chase. So a £2,000 invoice paid late entitles you to £70 compensation plus the statutory interest above.

3. Reasonable Debt-Recovery Costs

If your actual, reasonable costs of recovering the debt are higher than the fixed sum — for example a debt-collection agency fee or solicitor's letter — you can claim the difference on top of the fixed compensation.

How to Actually Charge It

1. Send the original invoice with clear payment terms and a due date. No due date, no clean claim.
2. Send a polite reminder the day after it falls due (see our late payment email templates).
3. Issue a follow-up invoice or statement that itemises:
   • The original amount outstanding
   • Statutory interest accrued to date (with the daily rate, so it keeps ticking)
   • The fixed compensation (£40 / £70 / £100)
   • Any recovery costs above the fixed sum
4. Keep accruing interest daily until you're paid, and update the figure each time you chase.

Spelling out the interest and the fixed fee on the page is often enough to move a slow payer to the top of their pile — it signals you know your rights and you're tracking the debt precisely.

A Quick Worked Total

For that £2,000 invoice, 30 days late, at a 12% statutory rate:

• Original debt: £2,000.00
• Statutory interest (30 days): £19.72
• Fixed compensation: £70.00
• Total now due: £2,089.72, plus £0.66 for every further day unpaid.

Frequently Asked Questions

Can I charge interest if my invoice didn't mention it? Yes — for B2B debts the statutory right applies automatically under the 1998 Act, whether or not your invoice or contract mentioned interest.

Can I set my own interest rate instead? You can agree a contractual rate, but it must be a "substantial remedy" for late payment. If your agreed rate is too low to be meaningful, the statutory rate can apply instead.

Does this apply to consumers? No. The Late Payment of Commercial Debts (Interest) Act covers business-to-business transactions, not sales to private individuals.

How far back can I claim? Generally up to 6 years for the debt and the interest on it.

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Stop chasing and start invoicing properly. Create clear, dated, professional invoices in under a minute with 1nvoic3 — free, no sign-up. See also our late payment email templates and invoice payment terms guide.