How to Charge Interest on Late Invoices (UK)

Key facts

Under the Late Payment of Commercial Debts (Interest) Act 1998, a business can charge another business statutory interest of 8% a year above the Bank of England base rate on a late invoice.

You can also claim a fixed sum per invoice: £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more, plus reasonable recovery costs.

The base rate you use is the one on 30 June for interest starting from July to December, or on 31 December for January to June. Bank Rate was 3.75% on 30 June 2026, so the statutory rate for debts falling late from July to December 2026 is 11.75% a year.

If no payment date was agreed, a business payment is late 30 days after the customer received the invoice or the work, whichever is later.

The Act does not cover homeowners. To charge them interest, agree late payment terms in writing before the work starts.

The short answer

If your customer is a business and they pay late, the law lets you add interest and a fixed charge, even if your terms never mentioned it. The interest is 8% a year above the Bank of England base rate. The fixed charge is £40, £70 or £100 per invoice depending on its size. If your customer is a homeowner, you can only charge interest if you agreed it in writing before the work.

Who the Late Payment Act covers

The Late Payment of Commercial Debts (Interest) Act 1998 covers payments between businesses, including the public sector. For a trade, that means main contractors, letting agents, landlords running a business, commercial clients and councils. It doesn't cover homeowners paying for work on their own home.

When a payment counts as late

If you agreed a payment date, the invoice is late the day after it. If you didn't, GOV.UK says payment is late 30 days after the customer received the invoice or the work, whichever was later. Agreed terms between businesses should usually be no more than 60 days, and 30 days for public authorities.

Working out the rate

Statutory interest is 8% plus the Bank of England base rate, using a fixed reference rate: the base rate on 30 June if the debt fell due between 1 July and 31 December, or on 31 December if it fell due between 1 January and 30 June. It stays fixed for that half year even if the base rate changes.

Bank Rate was 3.75% on 30 June 2026, after the Bank of England held it at its June meeting. For a debt that fell due between July and December 2026, the statutory rate is 11.75% a year.

A worked example

A main contractor owes you £2,400 on an invoice that was due on 1 September 2026, and pays on 1 October, 30 days late.

The same example in our late payment interest calculator.

Annual rate: 8% + 3.75% = 11.75%.
Interest per year: £2,400 × 11.75% = £282.00.
Interest per day: £282.00 ÷ 365 = £0.77.
Interest for 30 days: £0.77 × 30 = £23.18 (using the unrounded daily figure).
Fixed compensation for a debt between £1,000 and £9,999.99: £70.
Total you can claim on top of the invoice: £93.18.

Compensation and recovery costs

The fixed sums are £40 for a debt up to £999.99, £70 for £1,000 to £9,999.99 and £100 for £10,000 or more. You can charge each business once per late payment. If recovering the debt costs you more than that, you can also claim reasonable recovery costs.

Charging interest to homeowners

The Act doesn't help with domestic customers. To charge a homeowner interest, put clear and reasonable late payment terms in your quote or terms and conditions, and make sure they agree to them before the work starts. Unfair or hidden charges in consumer contracts can be unenforceable, so keep it simple and prominent.

Should you actually charge it?

Often the threat is more useful than the money. Mentioning statutory interest on your invoices and in your final reminder tells a business customer you know your rights, and many pay rather than see the bill grow. Whether to actually add it depends on the relationship: for a contractor who always pays at 90 days, it can change their habits. Our guide to chasing unpaid invoices covers when to raise it.

The late payment interest calculator works out the interest and compensation for any invoice in a few seconds.

Jodie in Traddie listing overdue invoices oldest first with the total owed — Every overdue invoice, oldest first.

Common questions

How much interest can I charge on a late invoice?

To a business, 8% a year above the Bank of England base rate, plus fixed compensation of £40, £70 or £100 per invoice. With the base rate at 3.75% on 30 June 2026, that is 11.75% a year on debts that fell due from July to December 2026.

Can I charge late payment interest to a homeowner?

Not under the Late Payment Act, which only covers business to business payments. You can charge a homeowner interest only if you agreed reasonable late payment terms with them in writing before the work started.

Do I have to put late payment interest on my invoice?

No. The right to statutory interest exists whether or not it is on your terms. Mentioning it on your invoices and quotes makes customers aware of it, which often gets you paid on time.

Can I claim the £40 compensation on every invoice?

Yes, once per late invoice. Three late invoices from the same customer can each carry their own fixed sum.

How to charge interest on late invoices in the UK