Every late business-to-business invoice carries interest and a fixed sum on top. Here is what, how much, and how to claim it.
An invoice went out on 30-day terms. It is now 100 days old, the customer has gone quiet, and you are wondering whether you can charge them for the delay. You can, by more than most businesses realise, and the right does not depend on your terms and conditions saying anything at all.
This guide covers what you can add, at what rate, how to work it out, and how to use it without turning a slow payer into a lost customer.
Three things, under the Late Payment of Commercial Debts (Interest) Act 1998.
Statutory interest at 8% over the Bank of England base rate, running from the day after payment was due until it is paid.
A fixed compensation sum on each late invoice — £40, £70 or £100 depending on the size of that debt.
Your reasonable recovery costs above the fixed sum. This one is routinely forgotten. If it costs you more than the fixed sum to recover the debt — a recovery firm's fee, for instance — the difference is claimable on top.
Per invoice, not per customer. A customer with twelve late invoices owes twelve fixed sums. Late Payment of Commercial Debts (Interest) Act 1998, s.5A.
The statutory rate is 8% over base rate — but not today's base rate. The Act fixes the rate for six months at a time, using the base rate in force at the reference date immediately before interest started running.
The reference dates are 31 December, which governs debts where interest starts between 1 January and 30 June of the following year, and 30 June, which governs 1 July to 31 December of that year. Once the rate is set for a debt it does not move, even if the base rate changes several times while the invoice sits unpaid.
This is where most online calculators go wrong. Applying today's rate to a debt that fell due in 2024 understates what you are owed, because base rate was higher then and your debt kept the higher rate. On an aged ledger the difference is real money, and it is money you would simply not have claimed.
8% over the Bank of England base rate in force at the preceding reference date. Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, art. 4. Verified 30 August 2026. Calculate yours →
Daily interest is the debt multiplied by the rate, divided by 365. Multiply by the number of days late and add the fixed sum. Interest runs from the day after the due date, not from the invoice date — a common and expensive slip when a business calculates its own claim.
Illustrative. Interest keeps running at £2.09 a day until the debt is paid — which is the number worth quoting in a chase.
Now scale that. A customer with twenty unpaid invoices of £6,500 owes twenty fixed sums — £1,400 of compensation on its own, before a penny of interest. That is why an aged ledger is almost always worth costing properly before anyone decides which entries to chase.
The Act applies to contracts for the supply of goods or services where both parties act in the course of a business. That covers most unpaid trade invoices, including where the customer is a sole trader buying for their business.
It does not apply to consumer contracts, and there are carve-outs — consumer credit agreements, and contracts intended to operate as a mortgage or charge. If your customer bought as a private individual, this is not your route, and the interest you can claim depends on your contract or on the County Courts Act instead.
You do not need it in your terms. It is implied into qualifying contracts by statute. You may have your own contractual interest rate instead, and if it amounts to a substantial remedy for late payment it will generally displace the statutory rate — but a token 2% clause somebody copied years ago is open to challenge, and most businesses are better off relying on the statute than on their own paperwork. See payment terms that get you paid.
You cannot calculate interest without a due date, and it is less obvious than it looks. Where no term is agreed, payment is due 30 days after the later of two events: the customer receiving the invoice, and the goods or services being supplied. So an invoice raised before delivery does not start the clock early.
Agreed terms beyond 60 days in a business contract are open to challenge as grossly unfair to the supplier. A public authority is held to 30 days and cannot contract out of it. And a term saying payment is due only when the customer has themselves been paid is, in construction contracts, largely ineffective by statute.
A fair worry: you want the money and you also want to keep trading with them. Three things make this easier than it sounds.
Stating the entitlement is not the same as enforcing it. Many chases say the invoice is accruing statutory interest at a stated daily rate and then, on payment of the principal, quietly do not pursue it. The number does the work. Waiving it is a concession you can make once, deliberately, in exchange for payment now — and it is a far more valuable concession than a discount, because it costs you nothing you had already earned.
Quote the daily figure, not the annual rate. "This invoice is costing you £2.09 a day" lands harder than "11.75% per annum", because it turns delay into a running cost rather than an abstraction. It also invites the person reading it to do the arithmetic on how long they have already left it.
Put it on the invoice, not just in the chase. A line stating that late payment attracts statutory interest and compensation is much less confrontational at the point of invoicing than at the point of argument, and it removes the "you never said" response entirely.
Yes. The entitlement is implied into qualifying business-to-business contracts by statute, so it does not depend on your paperwork saying anything at all. This surprises most business owners, who assume they had to have thought of it in advance. You can have your own contractual interest rate instead, and if it amounts to a substantial remedy for late payment it will generally displace the statutory rate. But a term that sets a token rate, or that tries to exclude the right altogether, is open to challenge — and in practice a clause someone copied years ago is usually worse for you than the statute would have been. If your terms say 2% a year, you are contracting yourself down from 11.75%.
Interest runs from the day after each invoice fell due, and a simple contract debt stays enforceable for 6 years from that date. So a two-year-old invoice carries two years of interest, at the rate that applied when it first went late rather than today's rate. Two things extend that. A written acknowledgement of the debt restarts the limitation clock, and so does a part payment — which means a customer who pays you £500 off an old balance has just made the whole remaining balance live again for another six years. It is worth checking your ledger for exactly that before writing anything off as out of time.
Interest runs on the sum that is outstanding. Where the invoice including VAT has not been paid, that is the amount that is late, so the interest is calculated on the gross figure. That is the ordinary position and it is not controversial. What you should not do is claim interest on a sum you have already recovered, or on a part of the invoice that has been paid. If the customer has paid half, recalculate on the balance actually outstanding from the date of the part payment. Getting this wrong is the kind of small inaccuracy that gives a debtor something to argue about, and the whole point of costing a debt properly is to remove those arguments before they start.
Statutory interest on a qualifying debt is an entitlement rather than a discretion, and it is routinely included in judgments on undefended debt claims. You do not have to persuade anyone that it is fair; it applies because the debt is late and the contract qualifies. There is a safety valve: a court may remit statutory interest in whole or in part where the interests of justice require it — for instance where the creditor's own conduct caused the delay, or where the creditor sat on the debt for years without mentioning it and then claimed a large accrued sum. That is the exception rather than the rule, and it is another argument for raising the entitlement early rather than saving it up.
Often more than on large ones, proportionally, because the fixed compensation sum does not scale with the debt. On a £400 invoice the £40 fixed sum is 10% of the debt before any interest is added. On a £40,000 invoice the £100 fixed sum is a rounding error. The place this really matters is a ledger of many small invoices — haulage, recruitment temp billing, wholesale trade accounts. Fifty late invoices of £400 carry £2,000 of compensation between them, which is frequently more than the cost of doing something about the whole ledger. Our interest calculator will do a single invoice; send us the ledger and we will do all of it.
The letter-before-action checklist, the interest and compensation rules, and the escalation ladder with what each step costs. One email, no sequence.
Tell us what you are owed and who owes it. You get back what the debt is actually worth once interest and compensation are added, what we would do first, and the fixed fee for doing it.