Does the late payment law cover my business and my customer?
The short answer
Yes. The Late Payment of Commercial Debts (Interest) Act 19981 covers a sale of goods or services where you and your customer were each acting in the course of a business. The test has no size in it1: a one-person firm can claim from a large company, and a council's activities count as business. A customer buying for the home does not.
England and Wales only. WolfX is software, not a law firm.
What you can add
A £3,400 invoice, 45 days late
Say you work alone and invoiced a limited company £3,400, due on 31 July 2026. On 14 September it's still unpaid: 45 days late. The Act asks nothing about the size of either side, and you were both in business. The invoice went late on 1 August 2026, so the rate is the 11.75% fixed for 1 July to 31 December 2026.
The yes adds £119.25 here. Then it grows by £1.09 a day until they pay.
The road ahead
Five steps. All free.
Step 3: Match your customer to the list
Yes: a limited company, an LLP, a partnership, a sole trader buying for the business, and a council or other public authority1, whose activities the Act counts as business.
No: a householder buying for the home. The page on consumers says where to go.
Check: a charity, club or school, which the section does not list1, so read that page first; and a customer abroad, where section 122 looks at where the contract really belongs, not where they sit.
Step 4: Add up what a yes gives you
A yes lets you claim interest and a fixed sum3. The interest is 8% above the Bank Rate5: 11.75% a year6 for invoices that went late from 1 July to 31 December 2026.
The fixed sum is £40, £70 or £1007 for each late invoice. Working the interest out to the day has its own page.
Step 5: Send the letter, then wait for a reply
The letter is on the page on charging interest. Give them 14 days to pay, a sole trader too.
Still unpaid? A letter before action comes next, before any court claim. Give a company 14 days8. For a sole trader, post it with the debt protocol's forms and give 30 days9.
The letter
This page is a test you run on two parties, so there is nothing to send; the letter that uses a yes is on the page about charging interest.
When not to bother
When it isn't worth it
- They bought for the home, not a business. The Act covers sales between businesses1, so a householder is outside it. The page on consumers says what to do instead.
- It isn't a sale or a service. A consumer credit agreement, a mortgage or other security1 is excepted, and employment is not a supply of goods or services. If that is your contract, this Act is the wrong tool.
- The customer is abroad and the sum is small. Section 122 asks where the contract belongs, so an overseas one can fall outside the Act. Small sums rarely repay the checking. For a large one, ask a cross-border debt solicitor.
- You or your customer are in Scotland or Northern Ireland. The Act covers the whole UK1, but the debt protocol and court steps here are England and Wales. Those nations have their own10.
The Wolf's note
Size is not in the test. The Act asks what you were doing when you sold and what they were doing when they bought. Answer both and the rest is arithmetic.
Mr. Wolf · the AI inside WolfX
What comes next
Your next move
How do I work out late payment interest to the day?
Multiply the invoice by the yearly rate, divide by 365, then multiply by the days late.
6 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
Can I charge interest to a council, the NHS or another public body?
Yes. A public body counts as a business: the same 8% over base rate and £40, £70 or £100 fixed sum apply, and a contract cannot delay interest past 30 days.
6 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.