Free tool

Late payment interest calculator

If another business pays you late, the law lets you add interest at 11.75% a year and a fixed sum of £40, £70 or £100 to each invoice. Work out exactly what you can claim.

Written by , Solicitor, qualified 2003 · Last reviewed

The short answer

Under the Late Payment of Commercial Debts (Interest) Act 1998, a business that pays another business late owes statutory interest at 8% a year above the Bank of England reference rate (11.75% for invoices overdue from 1 July 2026), from the day after the due date. Each late invoice also carries a fixed sum: £40 under £1,000, £70 up to £9,999.99, and £100 from £10,000.

Work out what you can claim

Enter each unpaid invoice: the amount still owed (including VAT) and the date it was due.

Still not paid? Send a letter before claim

Answer a few questions and get a letter that sets out the debt, the interest and the fixed sums, gives your customer the right time to pay, and follows the court's pre-action rules. Word and PDF, with a statement of account. £19.

Get the letter, £19

How statutory interest works

The Late Payment of Commercial Debts (Interest) Act 1998 adds a term to every contract between businesses for goods or services: if the customer pays late, it owes simple interest at 8% a year above the reference rate. Interest runs from the day after the payment was due until the day you are paid.

The reference rate is the Bank of England's Bank Rate on 31 December (for invoices that fall overdue from January to June) or 30 June (for July to December). Whatever rate applies on the day an invoice becomes overdue stays fixed until it is paid, even if Bank Rate later moves.

The daily figure is the amount owed, times the yearly rate, divided by 365. So an invoice of £1,200 overdue since July 2026 earns 1,200 × 11.75% ÷ 365 = £0.39 a day.

The fixed compensation sums

Once interest starts to run, section 5A of the Act also gives you a fixed sum for each invoice, towards the cost of chasing it:

  • £40 for an invoice under £1,000
  • £70 for £1,000 or more, but under £10,000
  • £100 for £10,000 or more

The sum is per invoice, not per customer, so five small unpaid invoices carry £200. If chasing the debt costs you more, for example a collection agent's fee, you can claim the reasonable extra cost too.

When you can't use the Act

  • Your customer is a consumer, not a business.
  • Your contract sets its own interest or other substantial remedy for late payment.
  • The money isn't yet due: check the payment date you agreed, or 30 days from delivery or invoice if you didn't agree one.
  • The debt is more than six years old: a court claim is generally out of time.

Reference rates used by this calculator

Invoice became overdueReference rateStatutory interest
1 July to 31 December 20263.75%11.75%
1 January to 30 June 20263.75%11.75%
1 July to 31 December 20254.25%12.25%
1 January to 30 June 20254.75%12.75%
1 July to 31 December 20245.25%13.25%
1 January to 30 June 20245.25%13.25%
1 July to 31 December 20235%13%
1 January to 30 June 20233.5%11.5%
1 July to 31 December 20221.25%9.25%
1 January to 30 June 20220.25%8.25%
1 July to 31 December 20210.1%8.1%
1 January to 30 June 20210.1%8.1%
1 July to 31 December 20200.1%8.1%
1 January to 30 June 20200.75%8.75%
1 July to 31 December 20190.75%8.75%
1 January to 30 June 20190.75%8.75%

Source: Bank of England Bank Rate history. Checked 17 October 2026.

Questions about late payment interest

What is the statutory interest rate for late payment in the UK?
8% a year above the Bank of England reference rate. The reference rate is Bank Rate on 30 June or 31 December, and it applies for the six months that follow. For invoices that became overdue between 1 July and 31 December 2026 the reference rate is 3.75%, so statutory interest is 11.75% a year. The rate that applies when an invoice becomes overdue stays the same until it is paid.
How much compensation can I claim for a late invoice?
A fixed sum for each invoice, under section 5A of the Late Payment of Commercial Debts (Interest) Act 1998: £40 if the invoice is under £1,000, £70 if it is £1,000 or more but under £10,000, and £100 if it is £10,000 or more. You can also claim reasonable costs of recovering the debt beyond the fixed sum, such as a debt collector's fees.
Can I claim late payment interest from a consumer?
No. The Act only applies where both the supplier and the customer are acting in the course of a business. For money owed by a private individual, look at what your contract says about interest, or ask the court for interest when you make a claim.
When does an invoice become late if we never agreed payment terms?
If you did not agree a payment date, the Act treats the debt as due 30 days after the later of the day you delivered the goods or finished the service and the day the customer received your invoice. Interest runs from the day after that.
Can I claim statutory interest if my contract has its own late payment clause?
Usually not. If your contract sets its own interest or other remedy for late payment, and it is a substantial remedy, that clause applies instead of the Act. If the clause gives a token amount, the Act can override it. Choose your contract rate in the calculator to work out interest on that basis. If you are not sure, take advice before you claim.
Do I add VAT before working out the interest?
Work out interest on the full amount of the invoice, including VAT. Statutory interest and the fixed sum are compensation, not payment for a supply, so they are normally outside the scope of VAT. Take your accountant's advice on how to show them in your books.
What should I do if the customer still won't pay?
Send a letter before claim. The court expects you to give the customer a written summary of the debt and a fair chance to pay or reply before you issue a claim: 14 days is usual for a company, and 30 days, with the forms from the Pre-Action Protocol for Debt Claims, for a sole trader. Our late payment letter does this for £19, at the statutory rate or your contract rate.
Is the law about to change?
The Commercial Payments Bill was going through the House of Lords in autumn 2026. It would cap most payment terms at 60 days, stop businesses contracting out of statutory interest, and add a fixed sum for late disputes. It is not law yet, and the rules on this page are the ones that apply today.

This calculator gives general information about the law in England and Wales. It is not legal advice. For a disputed or large debt, speak to a solicitor; for bespoke advice, Bonsai Law at clientcare@bonsai.law.