How To Charge Late Payment Interest
You can charge statutory interest and a fixed compensation fee on late commercial invoices. The rate, the amounts, and how to work out exactly what you're owed.
If another business pays your invoice late, the Late Payment of Commercial Debts (Interest) Act 1998 entitles you to statutory interest at 8% above the Bank of England base rate, which is 11.75% as at August 2026. On top of that you can claim a fixed compensation sum of £40, £70 or £100 depending on the size of the debt, plus reasonable costs of recovering it. You don’t need any of it written into your contract, because the Act supplies it. You can’t claim it if your contract sets its own interest rate, and it only applies business to business.
When you can charge it
Three conditions have to line up.
It has to be a commercial debt: business to business, or business to public authority, for goods or services supplied in the course of a business.
Your contract can’t already set its own interest rate. Statutory interest is a default that fills a gap. Where your terms specify a rate for late payment, that rate governs instead. gov.uk puts it plainly: *”You cannot claim statutory interest if there’s a different rate of interest in a contract.”*
And the payment has to be genuinely late. That means past the agreed payment date, or where nothing was agreed, 30 days after the later of you delivering the work or the customer receiving the invoice.
Not consumers, though. Work for a homeowner isn’t a commercial debt. You can only charge interest on a domestic job if your own terms say so and the term is fair, which is exactly why written terms matter more on domestic work than commercial.
What you can claim
Statutory interest is 8% plus the Bank of England base rate. Base rate is 3.75%, held on 30 July 2026, so statutory interest is 11.75% as at August 2026. It runs from the day after payment was due until the day it’s paid.
Fixed compensation is a set sum per late invoice, on top of the interest:
Debt | Fixed sum |
|---|---|
Up to £999.99 | £40 |
£1,000 to £9,999.99 | £70 |
£10,000 or more | £100 |
Claimable once per payment.
Reasonable recovery costs cover the gap where the fixed sum doesn’t come close to what chasing actually cost you. A debt recovery agency’s fee, for instance.
How to work it out
Statutory interest is simple interest, calculated daily.
Take the debt and multiply by the rate for the annual figure. Divide that by 365 for the daily figure. Multiply by the number of days late. Then add the fixed compensation for whichever band the debt falls in.
Worked example
A £6,400 invoice to a commercial customer on agreed 30-day terms, paid 38 days after it fell due.
Annual interest: £6,400 × 11.75% = £752.00
Daily: £752.00 ÷ 365 = £2.06
38 days late: £2.06 × 38 = £78.28
Fixed compensation (£1,000 to £9,999.99 band): £70.00
Total claimable: £148.28 on top of the £6,400.
On smaller invoices the fixed sum does most of the lifting. A £600 invoice 20 days late throws off about £3.86 of interest, but still carries the £40 fixed sum, so £43.86. Which is the bit almost nobody claims.
How to actually charge it
Get the invoice right first. State the payment terms and the date payment is due. Where nothing’s agreed the 30-day default applies, but an actual date on the invoice removes the argument before it starts.
Chase before you charge. Interest is a right, not usually the opening move. Most late payments are just admin, and leading with a statutory interest claim against a customer you want to keep is rarely the smart play. How to chase an unpaid invoice covers the sequence.
When you do claim it, put the working on the page: the debt, the rate and the date you took it from, the days late, the daily figure and the fixed sum. A claim with the arithmetic showing is much harder to wave away, and it’s what a court would want to see anyway.
Keep the running total visible, because interest accrues daily and the figure moves. A statement showing invoices, payments and the interest position keeps you accurate.
Then decide commercially. You’re entitled to this. You don’t have to claim it. Plenty of trades use it purely as leverage, and mentioning the entitlement produces the payment without ever invoicing the interest.
Common mistakes
Inventing a rate with no terms behind it. If your contract is silent, the statutory rate is what you’re entitled to. Not 5% a month because it sounds firm.
Charging it to homeowners. Not a commercial debt. Domestic late payment interest depends entirely on your own terms, and an unfair term in a consumer contract can be unenforceable.
Forgetting the fixed sum. It’s often the bigger half on a small invoice, and it goes unclaimed constantly.
Using the wrong base rate. The base rate moves. Take the rate that applied when the debt went late, and date it in your claim.
Undercutting yourself in your own terms. If your paperwork states an interest rate, that’s the rate you get, even where the statutory one would have been higher. Worth checking your own template isn’t quietly costing you money.
Do this in FieldHive
Interest is only claimable if you can show what was owed and when it was paid. Build a statement of account with an ageing summary that makes the late balances obvious, free in your browser. Set payment terms clearly on the invoice itself with the invoice generator, which can also add statutory late-payment interest.
Aid, not advice
This guide explains the statutory entitlement so you can work out what you’re owed. It is not legal or financial advice. Whether interest is claimable depends on your contract terms and the nature of the debt. For a disputed or high-value claim, take proper advice.
*Rate and figures checked August 2026: Late Payment of Commercial Debts (Interest) Act 1998; gov.uk late commercial payments guidance; Bank of England Bank Rate 3.75% (30 July 2026).*
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