Late Payment Interest Calculator
Work out how much statutory interest and fixed compensation you can claim on overdue invoices under UK law.
Your Right to Charge Interest on Late Payments
Under the Late Payment of Commercial Debts (Interest) Act 1998, UK businesses have the legal right to charge interest on overdue invoices — even if the original invoice did not mention it. This law was designed to protect small businesses and freelancers from the cash flow damage caused by late-paying clients.
The statutory interest rate is set at 8% above the Bank of England base rate. Interest accrues daily from the day after the payment was due. You can also claim a fixed sum as compensation for the cost of recovering the debt.
Fixed Compensation Amounts
In addition to interest, you can claim a fixed compensation amount based on the size of the debt:
- Up to £999.99: £40 compensation
- £1,000 to £9,999.99: £70 compensation
- £10,000 or more: £100 compensation
This compensation is per invoice, not per payment. If a client owes you on three separate invoices, you can claim the fixed amount on each one. This is designed to cover your reasonable costs of chasing the debt.
How to Use This in Practice
Most freelancers use the threat of statutory interest as a negotiation tool rather than actually charging it. Including a note on your invoices that states "We reserve the right to charge statutory interest on overdue payments under the Late Payment of Commercial Debts Act 1998" can encourage clients to pay on time.
If a client is consistently late, you can send a formal letter referencing the Act and including the calculated interest amount. For more strategies on dealing with late payers, read our guide on chasing late payments. You should also review your payment terms to make sure expectations are clear from the start.
When the Act Does Not Apply
The Late Payment Act only covers business-to-business (B2B) transactions and contracts with the public sector. It does not apply to consumer transactions — if you are selling directly to individuals who are not acting as a business, you would need to rely on your contract terms or the courts.
You also cannot claim statutory interest if your contract already includes a substantial remedy for late payment (such as a contractual interest clause that provides a comparable or greater amount). However, if your contract only includes a token penalty, the statutory right may still apply.
Frequently Asked Questions
What interest rate can I charge on late payments in the UK?
Under the Late Payment Act, you can charge 8% above the Bank of England base rate. With a base rate of 5.25%, the current statutory rate is 13.25% per year, calculated daily.
What is the fixed compensation for late payment?
£40 for debts up to £999.99, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000+. This is per invoice.
Does the Late Payment Act apply to all businesses?
It applies to B2B and public sector transactions only. Consumer sales are not covered. Both parties must be acting in the course of business.
Do I need to mention interest on my invoice?
No — your right to statutory interest exists regardless of whether your invoice mentions it. However, adding a late payment clause to your invoices and contracts is good practice as it sets clear expectations.
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