For guidance only, not legal or tax advice.
How statutory late payment interest works
If another business pays you late, the Late Payment of Commercial Debts (Interest) Act 1998 lets you charge interest at 8% above the Bank of England reference rate, plus a fixed sum for the cost of chasing the debt. It applies to business to business sales, not sales to consumers.
The reference rate is fixed for each half year. For interest that starts between 1 July and 31 December, use the Bank Rate in force on 30 June. For interest that starts between 1 January and 30 June, use the rate in force on the previous 31 December. So for debts that became late from 1 July 2026, the rate is 3.75% plus 8%, which is 11.75% a year. The calculator picks the right Bank Rate from your due date.
The sum
The interest is simple, not compound. Annual interest is the debt times the rate. Divide by 365 for the daily figure, then multiply by the number of days late.
Example, £2,400 due on 30 September and paid on 29 October is 29 days late. £2,400 × 11.75% = £282 a year, about 77p a day, so £22.41 interest, plus £70 compensation.
GOV.UK's own worked example rounds the daily figure to the nearest penny before multiplying. We keep the unrounded daily figure, so you may see a few pence of difference.
Fixed compensation
| Amount of debt | What you can charge |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
You can charge it once for each payment, on top of the interest. You can also claim reasonable costs each time you try to recover the debt.
Questions people ask
What is the late payment interest rate in the UK right now?
For debts where interest starts between 1 July and 31 December 2026, it is 11.75% a year, the Bank of England reference rate of 3.75%, plus 8%. Bank Rate has been 3.75% since 18 December 2025.
When does a payment count as late?
After the date you agreed. If you did not agree one, it is late 30 days after the customer receives the invoice or you deliver the goods or service, whichever is later. Agreed terms between businesses are usually no longer than 60 days, unless both sides agree longer terms and they are fair.
Can I charge interest if my contract has its own rate?
If the contract sets its own late payment rate, statutory interest does not apply and the contract rate is used instead. Untick the statutory 8% box and enter the contract rate. You cannot use a lower rate when the customer is a public authority.
How much compensation can I claim?
£40 for debts up to £999.99, £70 for £1,000 to £9,999.99 and £100 for £10,000 or more. You can charge it once per invoice, on top of interest.
Does the rate change if Bank Rate changes while the invoice is unpaid?
No. The rate is fixed by the date the interest starts, using the Bank Rate on the last 30 June or 31 December before that. A later change in Bank Rate does not change interest that is already running.
Can I charge late payment interest to a consumer?
No. The Act covers payments between businesses, and between businesses and the public sector.
Sources
- Bank of England. Bank Rate, 3.75%, next decision 5 November 2026
- Bank of England. Bank Rate history, used for past due dates
- Late Payment of Commercial Debts (Interest) Act 1998
- The Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, article 4, the 30 June and 31 December rule
- GOV.UK. Late commercial payments, charging interest
- GOV.UK. Claim debt recovery costs on late payments
- GOV.UK. When a payment becomes late
Tools that automate this
Chasing late invoices by hand takes time. These tools send reminders and track what is overdue. Check each one's own page for what its plan includes.
Xero
Accounting
Invoicing and bookkeeping for most businesses.
QuickBooks Online
Accounting
Bookkeeping with built in AI on paid plans, plus a free US plan.
FreeAgent
Accounting
UK sole traders, freelancers and limited companies.
Sage Accounting
Accounting
UK bookkeeping and VAT.
Invoice Ninja
Invoicing
Low cost professional invoices.
Zoho Invoice
Invoicing
Free quotes and invoices.
Each line says what the tool is best for. Features change, so check each tool before you buy.
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Late payment interest, VAT, hourly rates and invoice due dates.