If a business customer pays you late, UK law is firmly on your side. The Late Payment of Commercial Debts (Interest) Act 1998 gives suppliers a statutory right to charge interest and claim compensation on overdue commercial invoices, even when nothing was written into the contract.
This guide explains what the Act covers, how much you can charge, and how it fits alongside the wider framework of UK late payment legislation. It is general information, not legal advice; for a specific dispute, speak to a qualified solicitor.
The Late Payment of Commercial Debts (Interest) Act 1998 is the main piece of UK legislation that protects businesses against slow-paying customers. It was later strengthened by the Late Payment of Commercial Debts Regulations 2002 and 2013, which brought UK rules into line with the EU Late Payment Directive.
In plain terms, the Act does three things:
Crucially, these rights apply automatically. You do not need a late payment clause in your contract for them to take effect.
The Act applies to business-to-business (B2B) commercial transactions for the supply of goods or services. That includes sales between companies, sole traders, partnerships and public sector bodies acting in a business capacity.
It does not cover:
So if you have invoiced another business and they have missed the payment deadline, you are almost certainly within the Act's scope.
Under the Act, statutory interest is set at 8% above the Bank of England base rate.
With the Bank of England base rate currently at 3.75%, that gives a statutory interest rate of 11.75% per year on the overdue amount.
A few important points:
To work out the exact figure for a specific invoice, including the day count, use our free late payment interest calculator. For a worked example and the wider rules, see our companion guide on how much interest you can charge on late payments in the UK.
On top of interest, the Act entitles you to a fixed sum of compensation for each late invoice, to cover the administrative cost of recovering the debt. The amount depends on the size of the debt:
| Debt amount | Fixed compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
This is a flat fee per invoice, not per chase, and it is payable in addition to any interest. If a customer is late on several invoices, you can claim the relevant fixed sum on each one.
Yes. If your reasonable costs of recovering the debt are higher than the fixed compensation above, the Act allows you to claim the difference.
For example, if you instruct a debt recovery agency or solicitor and your reasonable costs come to £250 on a £5,000 invoice, you can claim the £70 fixed sum plus the additional reasonable costs over and above it. You would need to be able to evidence those costs if challenged.
No. This is one of the most useful features of the Act. The statutory right to interest and compensation applies even without a contract clause. It is an implied term in every qualifying B2B contract.
If your contract sets its own interest rate, that contractual rate can apply instead, provided it offers a "substantial remedy" for late payment. But if your contract is silent, or tries to remove the right altogether, the statutory rights step in to protect you.
Where you and your customer have not agreed a payment period, the Act sets default deadlines after which payment counts as late:
The clock generally starts from whichever is later: the date the customer receives the invoice, or the date they receive the goods or services.
Businesses are free to agree a longer period, but only if it is expressly agreed and is not "grossly unfair" to the supplier. A term imposing, say, 120-day payment with no commercial justification could be challenged as grossly unfair, in which case the statutory default would apply instead.
The 1998 Act gives individual suppliers a private right to claim interest and compensation. It sits alongside a separate transparency regime: the Reporting on Payment Practices and Performance Regulations 2017.
Those regulations require large UK companies and LLPs to publish, twice a year, details of their payment practices, including their average time to pay, the percentage of invoices paid within set periods, and their standard payment terms.
The two work together. The Act gives you a financial remedy when a specific invoice is paid late; the reporting regulations let you check a company's track record before you extend credit. You can review any large UK company's published payment data using our company search to see how quickly they actually settle invoices.
An invoice is late once the agreed payment date has passed. If no date was agreed, it becomes late after the statutory default period: 30 days for the public sector or 60 days for B2B, counted from receipt of the invoice or the goods/services, whichever is later.
You can choose not to pursue interest on a particular invoice without losing the right on others. Waiving your rights as a blanket contractual term, however, may not be enforceable if it leaves you without a substantial remedy for late payment.
There is no legal requirement to warn a customer first, but in practice a clear reminder is often more effective at getting you paid than going straight to interest. A formal letter that sets out the overdue amount, the statutory interest accruing and the fixed compensation due tends to focus minds. You can generate one with our late payment notice tool.
If reminders and a formal notice do not work, the debt (including statutory interest and compensation) can ultimately be pursued through the courts, for example via the small claims track for lower-value debts. Our step-by-step guide on how to chase an unpaid invoice in the UK walks through the escalation path.
The position depends on the governing law of the contract and where the parties are based. Where English law applies to a B2B contract, the Act's protections generally apply. Cross-border debts can be more complex, so take advice for international invoices.
Ready to act on a late invoice? Calculate exactly what you are owed with our free late payment interest calculator, then send a formal demand with the late payment notice tool.
This article is general information about UK late payment legislation and is not legal advice. For advice on a specific situation, consult a qualified solicitor.
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