Glossary
What Is Late Payment Interest? (UK)
Last updated: June 2026
What is late payment interest?
Late payment interest is interest a creditor can charge when a commercial debt is paid late. Where a business and its customer have not agreed a different, substantial contractual remedy, the Late Payment of Commercial Debts (Interest) Act 1998 gives a statutory right to interest and fixed compensation on qualifying business-to-business debts.
What is the statutory rate?
The statutory rate is 8% plus the Bank of England base rate. With a base rate of 3.75% (as of June 2026), that is 11.75% a year. It is simple (not compound) interest and runs from the day after the invoice was due until it is paid. Base rate changes over time, so check the current figure before relying on it.
How do you calculate it?
Annual interest = debt × annual rate. Daily interest = annual interest ÷ 365. Total interest = daily interest × days overdue. For example, a £10,000 invoice at 11.75% accrues about £3.22 a day.
How much fixed compensation can you add?
On top of interest, you can usually claim a one-off fixed sum per qualifying debt:
| Debt size | Fixed compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
When can you charge it?
Statutory interest generally applies to commercial debts between businesses once payment is overdue, subject to the contract terms and the facts. Claims are subject to limitation periods (commonly six years for a simple contract debt). This is general information, not legal advice — check your contract and your specific circumstances.
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Sources
- Late Payment of Commercial Debts (Interest) Act 1998 — legislation.gov.uk
- Late commercial payments: charging interest and debt recovery — GOV.UK
- Bank of England official Bank Rate — Bank of England
Frequently asked questions
What is the current statutory rate?
8% plus the Bank of England base rate. With a base rate of 3.75% as of June 2026, that is 11.75% a year. Check the Bank of England for the latest base rate.
Can I charge interest and compensation on each invoice?
Statutory interest and the fixed compensation sum generally apply per qualifying debt, subject to your contract terms and the facts. This is general information, not legal advice.
Do I need to warn the client first?
You do not have to warn a business customer before charging statutory interest, but it is common to set out interest and compensation clearly in a reminder or a Letter Before Action so the position is transparent.
How far back can I claim?
Claims for a simple contract debt are usually subject to a six-year limitation period, but the facts matter. Check your circumstances or take advice.
Work out the interest on your overdue invoice.