Can I charge my own late fee on an invoice?
The short answer
Yes, if agreed first. A late fee in your terms can replace the interest at 8% over base rate6 and the £40 to £100 fixed sum7 the law gives you, if the customer agreed it before the work and it is a substantial remedy5. A fee that is both too weak to make up for the delay and unfair to rely on does not replace them, and the law's own interest and fixed sum apply instead.
England and Wales only. WolfX is software, not a law firm.
What you can add
A £6,000 invoice, 45 days late
Say you invoiced another business £6,000, due on 31 August 2026. They pay on 15 October: 45 days late. It went late in the second half of 2026, so the rate is 11.75%. This is what the law gives you for that delay. Your own fee is measured against it.
Your own fee, if it stands, replaces these two lines; it does not sit on top. A flat 5% would be £300.00, nearly twice the law's £156.92 for this delay, but it stops growing and the law's route passes it on day 120. If your fee is not a substantial remedy, the law's lines apply, and the interest grows by £1.93 a day.
The road ahead
Five steps before the work, one after. All free.
Step 1: Check the Act covers the sale
The law that gives you interest is the Late Payment of Commercial Debts (Interest) Act 1998. It covers a contract for goods or services where both sides are acting in the course of a business2. A sale to a consumer follows other rules, and this page does not cover it.
Step 3: Make it a substantial remedy
A fee is a substantial remedy5 unless it is both too weak to make up for the delay or deter it, and unfair to rely on in place of the law's interest.
Low alone does not sink it. A court weighs the circumstances when the terms were agreed5, such as each side's strength and what you got in return. Unfair, and the law's interest applies. Fair, and you are held to your lower sum.
Step 4: Shape it like the law's own
Use the law's own shape: interest that grows with the days late6, plus a fixed sum7. A flat fee stops growing while the delay does not, so the longer they take, the likelier it falls short.
Section 9 asks whether a fee is enough5. It does not ask whether it is too much. How far above the law's figures you can go is a question for a solicitor who does commercial contracts.
Step 5: Put it in your terms before the work starts
Put the clause below in the quote, contract or terms the customer accepts before you begin. The Act judges a fee as it stood when the terms were agreed5, so that is the day it counts.
The invoice can point to the clause. It cannot create one. The Act speaks of a remedy the parties agree4, and a fee that first appears on an invoice is one you announced.
Step 6: If they pay late, charge your fee or the law's, not both
If your fee stands, the law's interest does not apply4, and neither does the fixed sum, which is owed only once that interest begins to run3. Invoice your fee, quote the clause number, and stop there.
If your fee does not count, send the letter that adds the law's interest instead.
A letter you can copy
Late payment clause for your terms of business
Put it in your quote, contract or terms of business before the customer agrees to them. It does not work as a notice on the invoice after the job.
Tap a highlighted gap to see what goes in it.
Send the terms by email before the work starts and keep the dated email with the version the customer accepted. That is your record of what they agreed. With 8% in the gap, the clause uses the law's own figures. Go lower and step 3's test decides whether your fee counts. Go higher and have a solicitor who does commercial contracts read the clause first. Keep the last paragraph. It sends you back to the law's interest if part of the clause cannot be enforced.
When not to bother
When it isn't worth it
- The customer is a consumer, not a business. The Act covers contracts where both sides are acting in the course of a business2. Fees to consumers follow other rules, which this page does not cover.
- You only want what the law already gives. The interest1 and fixed sum3 need no clause. Use the letter that adds them instead.
- Your customer is large and sends its own terms. Whichever terms apply, a term that switches off your interest is void unless it gives you a substantial remedy4. Test it as in step 3 and claim the law's interest if it fails.
- The rule may change. A Bill before Parliament would make the law's interest mandatory10, so your fee could not replace it. It is not law yet. If it passes, check your terms.
- The contract is large, or the other side has lawyers. Have a solicitor who does commercial contracts read the clause once before you rely on it.
The Wolf's note
A late fee is an agreement made before anyone is late. Settle it on the day you write your terms, and price it against what the law already gives. Below that line, you may be the one who pays the difference.
Mr. Wolf · the AI inside WolfX
What comes next
Your next move
Can I charge interest on a late invoice?
Yes, if you sold to another business.
3 min read · Letter included
What is late payment compensation, and is it £40, £70 or £100?
All three. If you sold to a business, the law adds a fixed £40, £70 or £100 to each late invoice, by its size, on top of interest, with no costs to prove.
5 min read · Letter included
What late payment wording should go on my invoice?
Two lines: interest at 8% a year above the Bank of England base rate, and a fixed £40, £70 or £100.
4 min read · Letter included
Don't want to do this yourself?
The Wolf does every step for you. He works out the sums, writes the letters and keeps track of every date. Nothing goes without your yes.