Late Payment Interest UK: Your 8% + Base Rate Right
Quick answer
On overdue business-to-business invoices you can charge statutory interest of 8 percentage points above the Bank of England base rate, plus a fixed compensation sum per invoice (GBP 40, GBP 70 or GBP 100 by debt size). This is a legal right under the Late Payment of Commercial Debts (Interest) Act 1998, not a favour you ask for.
Late payment interest and fixed compensation (2026)
| What you can charge | Amount |
|---|---|
| Statutory interest (B2B invoices) | 8% plus the Bank of England base rate, per year, on the overdue amount |
| Base rate on 25 June 2026 | 3.75% (held by the Bank of England on 18 June 2026), so statutory interest is 11.75% a year - check the current base rate before you calculate |
| Fixed sum: debt under GBP 1,000 | GBP 40 per invoice |
| Fixed sum: debt GBP 1,000 to GBP 9,999.99 | GBP 70 per invoice |
| Fixed sum: debt GBP 10,000 or more | GBP 100 per invoice |
| Reasonable recovery costs | Claimable on top of the fixed sum if your actual costs are higher |
| When interest starts (agreed date) | The day after the agreed payment date |
| When interest starts (no agreed date) | 30 days after the later of the customer getting the invoice or you delivering the goods or service |
| Maximum payment terms | Usually 30 days for public authorities, 60 days for B2B unless a longer term is expressly agreed and not grossly unfair |
| Not the same as | HMRC interest on late tax you owe (base rate plus 4%, currently 7.75%) - a different rate on a different debt |
Step by step
- 1
Confirm the invoice is actually late
Check the payment date. If you agreed one, the invoice is late the day after it. If you did not, it is late 30 days after the later of the customer getting the invoice or you delivering the work. Only commercial (B2B) invoices carry the statutory right.
- 2
Send a polite reminder
A short, friendly email the day the invoice falls overdue: restate the amount, the original due date, and your payment details. Most late payments are admin slip-ups, not refusals, and a nudge clears them. Keep a copy.
- 3
Send a formal notice citing the 1998 Act
If the reminder is ignored, send a formal notice that names the Late Payment of Commercial Debts (Interest) Act 1998, states the daily interest now accruing at 8% plus the Bank of England base rate, and adds the fixed compensation sum (GBP 40, GBP 70 or GBP 100). Issue a fresh invoice showing the interest and fixed sum.
- 4
Send a letter before action
Still unpaid? Send a letter before action: a final demand setting a clear deadline (commonly 7 to 14 days) and stating that you will start court proceedings to recover the debt, interest and costs if it is not met. This is the last step before escalation and often the one that gets you paid.
- 5
Use the Small Business Commissioner or claim through court
Use the Small Business Commissioner interest calculator to confirm the exact figure, then recover the debt through the small claims process (Money Claim Online for debts up to GBP 10,000) if the letter before action is ignored. You can claim the debt, the statutory interest and the fixed recovery sum.
If a business client pays you late, you are not asking a favour by chasing the money. Under the Late Payment of Commercial Debts (Interest) Act 1998 you have a legal right to charge statutory interest of 8 percentage points above the Bank of England base rate on the overdue amount, plus a fixed compensation sum of up to GBP 100 per invoice. The right applies automatically to commercial invoices even if your contract never mentions interest. The table above is the detail at a glance; the steps are the chasing ladder that turns the right into a payment.
One thing to clear up first, because Google itself muddles it: this is not the interest HMRC charges you on late tax. That is a separate debt at a separate rate (base rate plus 4%, currently 7.75%). This guide is about money owed to you on unpaid commercial invoices, where you are the one charging the interest. A worked example shows how it stacks up: a freelancer owed on three GBP 2,000 invoices can claim GBP 70 of fixed compensation on each (GBP 210 in total) on top of the daily interest, before the debt is even argued.
A separate business account makes chasing and reconciling overdue invoices far cleaner, which is why we compare the options in business bank accounts. Getting paid on time is one half of self-employed cash flow; reserving for the bill is the other, covered in how much to set aside for tax. For the wider picture of keeping a one-person business solvent between invoices, see sole trader cash management.
Figures are correct as at 25 June 2026 and taken from gov.uk and the Bank of England; the base rate and therefore the statutory interest rate can change, so check the current base rate before you calculate. This is general information, not financial or legal advice.
Frequently asked questions
How much interest can I charge on a late payment in the UK?
On a commercial (business-to-business) invoice you can charge statutory interest of 8 percentage points above the Bank of England base rate per year. With the base rate at 3.75% on 25 June 2026 that is 11.75% a year on the overdue amount, plus a fixed compensation sum of GBP 40, GBP 70 or GBP 100 depending on the size of the debt.
What is the interest on late payments?
For overdue business invoices the statutory rate is 8% plus the Bank of England base rate, set by the Late Payment of Commercial Debts (Interest) Act 1998. This is separate from the interest HMRC charges you on late tax payments, which is the base rate plus 4% (7.75% from 9 January 2026).
When can I start charging late payment interest?
If you agreed a payment date, interest can run from the day after that date. If no date was agreed, the payment is late 30 days after the later of the customer receiving the invoice or you delivering the goods or service. You then send a new invoice that adds the interest and fixed sum.
Can I charge a fixed fee as well as interest?
Yes. On top of the interest you can claim a fixed compensation sum once per late invoice: GBP 40 for debts under GBP 1,000, GBP 70 for GBP 1,000 to GBP 9,999.99, and GBP 100 for GBP 10,000 or more. If your actual recovery costs are higher than the fixed sum, you can claim the reasonable difference too.
Will charging late payment interest affect my credit score?
No. Charging a business client statutory interest does not touch your personal or business credit score. The score consequences of late payment fall on the late payer if the debt escalates to a county court judgment, not on the supplier who is owed the money.
Do I have to put late payment interest in my contract?
No. The statutory right applies automatically to commercial debts even if your contract or invoice says nothing about interest. A contract can set its own substantial remedy for late payment, but if it does not, the Late Payment of Commercial Debts (Interest) Act 1998 gives you 8% plus base rate by default.
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General information, not financial advice. Tax rules and figures can change; check the current position on gov.uk before acting.