--- title: "How Much Interest Can I Charge on Late Payments? (UK)" date: 2026-06-06T19:51:57.611+00:00 url: https://paymentcheck.co.uk/blog/interest-and-fees/how-much-interest-can-i-charge-on-late-payments-uk description: "Charge 8% plus the Bank of England base rate on overdue B2B invoices, plus £40–£100 compensation. UK statutory late payment interest explained." category: "Interest and Fees" --- # How Much Interest Can I Charge on Late Payments? (UK) 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. ## Can I legally charge interest on late invoices? 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. ## How much interest can I charge on a late payment? 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: 1. Take the unpaid invoice amount. 2. Multiply by the statutory rate (11.75%, or 0.1175). 3. Divide by 365 to get the daily interest. 4. Multiply by the number of days late. For example, on a £5,000 invoice paid 30 days late: - £5,000 × 11.75% = £587.50 per year - £587.50 ÷ 365 = £1.61 per day - £1.61 × 30 days = **£48.30 in interest** 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](/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](/blog/interest-and-fees/how-to-calculate-interest-on-overdue-invoices). ## Can I charge a fixed fee as well as interest? 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. ## When can I start charging interest? Interest starts to run **the day after payment becomes due**. There are two scenarios: - **If you agreed a payment term** (for example, "payment within 30 days"), interest can be charged from the day after that period ends. - **If you didn't agree a term**, the default statutory period applies: payment is due **30 days** after the later of the customer receiving the invoice or receiving the goods/services. Interest then runs from day 31. 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](/#send-notice) 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)](/blog/debt-collection/how-to-chase-an-unpaid-invoice-uk). ## What is a "substantial contractual remedy"? 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: - A contractual rate must be a fair, proportionate deterrent. A court can disregard a clause that effectively gives you *less* protection than the statutory rate, or one that is so high it looks like a penalty. - If your contract sets a rate but it isn't a substantial remedy, the statutory rate applies instead. - If your contract is silent on interest, the statutory rate applies by default. 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. ## Can I charge interest to consumers (individuals)? **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: - your contract or terms of sale clearly provide for it **and** - the charge is fair and transparent under consumer protection law. 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. ## How much interest can I charge on late payments? (Quick answer) 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. ## Key points to remember - The statutory right is **automatic** for commercial debts — no contract clause needed. - The rate is **8% + Bank of England base rate** (currently **11.75% total**). - You can add **£40 / £70 / £100** fixed compensation by debt size, plus reasonable extra recovery costs. - Interest runs from the **day after the due date** (or day 31 if no term was agreed). - A **higher contractual rate** can replace the statutory rate if it's a substantial remedy. - **Consumers are excluded** — different, stricter rules apply. Ready to put a figure on what you're owed? Run the numbers with our [free late invoice calculator](/free-late-invoice-calculator), then [send a late payment notice](/#send-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.*