Free Template
Free Late Payment Letter Template UK
A late payment letter for UK trades, with the statutory interest and compensation you are entitled to claim on commercial debts, and the wording that tends to move an invoice up somebody payment run.
Overdue invoice INV-1213, £3,180.00
Dear Sir or Madam,
Our invoice INV-1213 dated 9 June 2026 for £3,180.00 was due for payment on 9 July 2026 and remains unpaid. It is now 22 days overdue.
Please arrange payment in full by 14 August 2026. If you have already paid, or if there is a query on the invoice, please contact me and I will deal with it straight away.
If payment is not received by that date, we will exercise our right under the Late Payment of Commercial Debts (Interest) Act 1998 to claim statutory interest at 8% above the Bank of England base rate from 10 July 2026, together with fixed compensation of £70 towards our recovery costs.
Payment can be made to sort code 00-00-00, account 12345678, using reference INV-1213.
Yours faithfully,
D. Smith
Smith Plumbing & Heating
What You Can Legally Claim on a Late Commercial Payment
Under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim statutory interest at 8% above the Bank of England base rate on overdue business to business invoices, running from the day after payment was due.
You can also claim fixed compensation for the cost of recovering the debt, on a scale set by the Act: £40 on debts under £1,000, £70 on debts from £1,000 to £9,999.99, and £100 on debts of £10,000 or more. That is per invoice, not per customer.
One important limit. This applies to business to business debts only. It does not apply where your customer is a private individual having work done on their own home, which covers a large share of domestic trade work. Against a consumer you rely on the interest and charges written into your own terms, so make sure your terms actually have some.
The Three Letters, In Order
- Polite reminder. A few days after the due date. Assume it was an oversight, because usually it was. Attach the invoice again.
- Formal notice. Two to three weeks overdue. States the amount, the days outstanding, and puts them on notice that statutory interest and compensation will be applied. This is the template below.
- Letter before action. The final step before a claim. Sets a deadline, usually 14 days, states exactly what you will do next, and complies with the Pre Action Protocol for Debt Claims if your customer is an individual or sole trader.
Do not skip straight to the last one. Courts expect to see a reasonable attempt to resolve matters first, and a customer who was genuinely away for two weeks will not forget being threatened over it.
What Makes a Late Payment Letter Work
- A specific amount and a specific invoice number. Vague chasing is easy to ignore.
- The number of days overdue, stated plainly. It reframes the conversation from a request to a fact.
- A clear deadline with a date on it, not soon or as a matter of urgency.
- The consequence, stated calmly. Statutory interest and compensation, then referral for recovery.
- How to pay, repeated in full. Never make somebody dig out the original invoice to find your bank details.
- A route to talk. Most late payment is a cash flow problem, not a refusal, and a payment plan you agreed beats a debt you did not collect.
Should You Actually Charge the Interest?
Often the leverage matters more than the money. Stating your entitlement clearly is usually what gets an invoice moved up the payment run, and many trades then waive the interest as a gesture once the principal clears.
That is a reasonable commercial call with a customer you want to keep. It is a bad habit with one who is late every single time, because waiving it consistently teaches them that your payment terms are a suggestion.
Where the relationship has already broken down, claim everything. It is your money, the entitlement is statutory, and you do not need the customer to agree to it.
Before It Gets to This: Stopping Late Payment Earlier
- Invoice the day the work finishes. Every day of delay in issuing is a day added to when you get paid.
- Put the due date on the invoice as an actual date, not as thirty days from a date they have to work out.
- Take a deposit on anything material heavy. It funds the job and it filters out the customers who were never going to pay.
- Send a statement monthly so nothing becomes a surprise on either side.
- Automate the first two reminders. The chase that happens on day one and day seven without you thinking about it collects far more than the one you keep meaning to send.
Frequently Asked Questions
Can I charge interest on a late invoice in the UK?
On business to business invoices, yes. The Late Payment of Commercial Debts (Interest) Act 1998 entitles you to statutory interest at 8% above the Bank of England base rate from the day after the due date, plus fixed compensation of £40, £70 or £100 depending on the size of the debt. Against a private consumer the Act does not apply and you rely on the terms in your own contract.
How much compensation can I claim for a late payment?
The statutory scale is £40 for debts under £1,000, £70 for debts of £1,000 up to £9,999.99, and £100 for debts of £10,000 or more. It applies per overdue invoice, and it is on top of the statutory interest.
What is a letter before action?
It is the formal final warning sent before starting a court claim. It states the amount owed, gives a deadline to pay, and explains what you will do if they do not. Where your customer is an individual or a sole trader, the Pre Action Protocol for Debt Claims sets out what it must contain and normally gives them 30 days to respond.
How long do I have to chase an unpaid invoice?
Six years from the date the debt became due, under the Limitation Act 1980 in England and Wales. Five years in Scotland. That is the outer limit rather than a plan, since the realistic chance of collection drops steeply after the first few months.
Should I keep working for a customer who has not paid?
Not without addressing it. Continuing to work while an invoice sits unpaid increases what you stand to lose and signals that the terms are negotiable. Check whether your contract lets you suspend work for non payment, and if it does not, add that clause before the next job.
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