If a business customer hasn't paid your invoice, you don't have to absorb the cost of waiting. UK law gives you a statutory right to charge interest on overdue commercial invoices — and to add a fixed compensation fee on top — even if your contract says nothing about it.
This guide explains exactly how much you can charge, how the rate is calculated, when the right kicks in, and the one situation where these rules don't apply.
Yes. For business-to-business (B2B) transactions, the Late Payment of Commercial Debts (Interest) Act 1998 gives suppliers a statutory right to claim interest and compensation on overdue invoices.
The key point that surprises most people: this right exists automatically. You don't need a clause in your contract, and you don't need the customer's agreement. If the debt is a commercial one and payment is late, you're entitled to charge interest by law.
You can choose whether or not to enforce it — many businesses use the right as leverage in a conversation before formally adding it to an invoice — but the entitlement is there from the moment payment becomes overdue.
The statutory interest rate for late commercial payments is:
8% plus the Bank of England base rate
The base rate is currently 3.75%, which makes the total statutory rate 11.75% per year.
This is an annual rate. To work out what's actually owed, you calculate the daily portion and multiply by the number of days the invoice is overdue:
For example, on a £5,000 invoice paid 30 days late:
The base rate can change, so the "8% plus base rate" figure moves with it. If you want the maths done for you, use our free late invoice calculator — it applies the correct current rate and the right compensation band automatically. For a full worked walkthrough, see our guide on how to calculate interest on overdue invoices.
Yes — and this is separate from, and in addition to, the interest. The Act lets you claim a fixed compensation sum to cover the cost of chasing the debt. The amount depends on the size of the unpaid invoice:
| Amount of the debt | Fixed compensation you can claim |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
This is a one-off charge per invoice, not per chase or per reminder. You can add it on top of the statutory interest, so in the £5,000 example above you could claim £48.30 interest plus £70 compensation.
If your actual recovery costs exceed the fixed sum — for example, you instructed a debt recovery agency or solicitor — you can also claim "reasonable" additional costs above the fixed amount.
Interest starts to run the day after payment becomes due. There are two scenarios:
You don't have to give a warning before interest begins, although in practice sending a polite reminder first is usually the better commercial move. If you'd rather formalise the position, our send a late payment notice tool generates a notice setting out the amount owed, the interest accruing and the compensation due.
For the wider process of recovering what you're owed, see how to chase an unpaid invoice (UK).
The statutory 8%-plus-base-rate rate is a fallback. You're free to set your own, higher rate of interest in your contract — for example, "interest at 3% per month on overdue accounts."
If you do this, it generally overrides the statutory rate, provided it counts as a "substantial contractual remedy." In other words, your contractual rate must be a genuine deterrent against late payment and a real remedy for it — not a token amount designed to deprive the supplier of the protection the Act provides.
A few practical points:
So you have a choice: rely on the statutory 11.75%, or set your own commercially sensible rate in your terms and conditions and enforce that instead. You can't claim both for the same period.
No. The Late Payment of Commercial Debts (Interest) Act 1998 applies only to business-to-business debts. It does not cover sales to consumers — i.e. individuals buying for personal, non-business purposes.
If a private customer pays you late, you can only charge interest or fees if:
Consumer late-payment charges are tightly regulated, and an unfair or hidden term may be unenforceable. If you regularly sell to consumers, it's worth taking specific advice on what your terms can lawfully include — the rules in this guide are for commercial debts only.
For overdue B2B invoices in the UK, you can charge statutory interest of 8% above the Bank of England base rate (currently 3.75%, giving 11.75% per year), plus a fixed compensation sum of £40, £70 or £100 depending on the size of the debt — even if your contract doesn't mention it. You can charge from the day after payment was due. These rules do not apply to consumers.
Ready to put a figure on what you're owed? Run the numbers with our free late invoice calculator, then send a late payment notice to start the conversation with your customer.
This guide is general information about UK late payment rules and is not legal advice. For specific disputes or unusual contracts, consider taking professional advice.
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