UK Late Payment Interest Calculator

Last updated 23 September 2026. Rates checked against the Bank of England decision of 17 September 2026 (Bank Rate held at 3.75%).

How the late payment interest calculator works

When another business pays your invoice late, UK law lets you add interest and a fixed compensation charge to the debt. You don't need a clause in your contract to do this. The right comes from the Late Payment of Commercial Debts (Interest) Act 1998, and it applies automatically to business-to-business contracts for goods and services.

The calculator above does four things:

1. Finds the due date. It uses your agreed payment terms, an agreed due date, or the 30-day default if nothing was agreed.
2. Picks the right interest rate. It looks up the Bank of England base rate on the correct reference date and adds 8%.
3. Calculates simple daily interest from the day after the due date up to the day you're paid (or today, if you're still waiting).
4. Adds fixed compensation of £40, £70 or £100 depending on the size of the invoice.

It then writes a chasing email with your figures already filled in, which you can edit and send.

The current statutory interest rate: 11.75%

Statutory interest is 8% a year plus the Bank of England base rate. The base rate you use isn't the one in force today. It's the one in force on a fixed reference date:

• If the invoice became overdue between 1 January and 30 June, use the base rate on the previous 31 December.
• If the invoice became overdue between 1 July and 31 December, use the base rate on 30 June of the same year.

The base rate was 3.75% on both 31 December 2025 and 30 June 2026, so any invoice that became overdue in 2026 carries statutory interest at 11.75% a year.

Once set, the rate stays fixed for the whole life of that debt. If the Bank of England changes the base rate while you're still waiting to be paid, your rate on that invoice doesn't change. The Rate history tab in the calculator shows the rate for every half-year back to 2019.

Fixed compensation for late payment

On top of interest, you can claim a fixed sum for the cost of chasing the debt. It depends on the amount of the invoice:

You can claim compensation once per invoice, so a customer who pays three invoices late owes three compensation payments. If your reasonable recovery costs are higher than the fixed sum (a debt collection agency's fee, for example), you may be able to claim the difference as well.

How to calculate late payment interest yourself

The Act uses simple interest, not compound, so the maths is straightforward:

Daily interest = invoice amount × statutory rate ÷ 365

Interest owed = daily interest × number of days overdue

Worked example

You invoiced a client £5,000 on 1 June 2026 on 30-day terms, so payment was due on 1 July 2026. The invoice became overdue in the second half of 2026, so the reference date is 30 June 2026 and the rate is 3.75% + 8% = 11.75%.

• Daily interest: £5,000 × 11.75% ÷ 365 = £1.61
• By 23 September 2026 the invoice is 84 days overdue: £1.61 × 84 = £135.21 (using the unrounded daily figure)
• Fixed compensation for a £1,000–£9,999.99 invoice: £70
• Total you can add: £205.21, making the full amount owed £5,205.21

Enter those figures in the calculator above and you'll get the same result.

When is an invoice legally overdue?

Interest starts running the day after payment was due. When that is depends on what you agreed:

• You agreed payment terms (for example, 30 days from invoice). The invoice is due at the end of that period.
• You agreed no terms. Payment is due 30 days after the later of (a) the customer receiving your invoice and (b) you delivering the goods or services.
• Your customer is a public body. Terms are normally capped at 30 days.
• Terms longer than 60 days between businesses are only valid if they were expressly agreed and aren't grossly unfair to the supplier.

Put your payment terms on every invoice and in your contract. Clear terms make the due date easy to prove if the customer disputes it.

Who can claim statutory interest?

You can claim if all of these apply:

• Both you and your customer are acting in the course of business. That includes sole traders, partnerships, limited companies and public sector bodies.
• The contract is for goods or services.
• Your contract doesn't already set out a different, "substantial" remedy for late payment. If it sets its own interest rate, that rate normally applies instead, provided it's a fair and meaningful remedy.

You can't use the Act to charge interest to consumers (private individuals buying for personal use). Consumer debts follow different rules.

The Act applies across the whole of the UK: England, Wales, Scotland and Northern Ireland.

How to claim late payment interest, step by step

1. Check the invoice is genuinely overdue and that there's no open dispute about the work.
2. Calculate what's owed using the calculator above.
3. Send a written claim. Use the Chasing email tab to create a message that sets out the invoice, interest, compensation and total. You don't have to warn customers in advance that you'll charge interest, but telling them early often gets you paid faster.
4. Follow up by phone. Speak to the person who approves payments, not just the general accounts inbox.
5. Send a formal letter before action if there's still no payment. Give a final deadline (usually 14 days) and say you'll start court proceedings if the debt isn't paid.
6. Escalate. Claims up to £10,000 in England and Wales normally go through the small claims track, which you can start online through Money Claim Online. You can also ask the Small Business Commissioner for help if you're a small business with a payment dispute against a larger one.

Should you charge interest to a client you want to keep?

Many small businesses never claim statutory interest because they're worried about damaging the relationship. That's a commercial decision, and you can waive interest if you choose. Some practical middle ground:

• Mention the right, then offer to waive it if the invoice is paid by a set date. That keeps goodwill and gives the customer a clear reason to pay now.
• Always claim from repeat late payers. If a customer is routinely late, interest compensates you for effectively lending them money.
• State your terms up front. A line on your invoices such as "We reserve the right to charge interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998" sets expectations without sounding aggressive.

Does VAT apply to late payment interest?

No. Statutory interest and fixed compensation aren't payment for a supply of goods or services, so they're outside the scope of VAT. Don't add VAT to them. You calculate interest on the full invoice amount you're owed, including any VAT on the original invoice. If you're VAT registered, our UK VAT Calculator can help you check the original invoice figure.

Changes coming: the Small Business Protections (Late Payments) Bill

The government introduced the Small Business Protections (Late Payments) Bill (originally called the Commercial Payments Bill) in the House of Lords on 19 May 2026. As published, it would:

• make statutory interest at 8% above base rate mandatory in commercial contracts, so contract terms that exclude or reduce it would be void
• cap payment terms at 60 days when larger businesses pay smaller suppliers, with limited exceptions
• set a deadline for raising disputes about an invoice, with a financial penalty for customers who raise disputes late
• give the Small Business Commissioner stronger powers to investigate poor payment practices and fine the worst offenders

The Bill is still going through Parliament and isn't law yet. Commentators expect most changes to take effect from 2027 at the earliest. Until then, the 1998 Act as described on this page applies. We'll update this calculator when the new rules take effect.

Tips to get paid on time

• Invoice promptly, on the day work is delivered, and include clear payment terms and your bank details.
• Check who approves payments and whether the customer needs a purchase order number on the invoice.
• Take deposits or stage payments on larger projects so you're never carrying the full cost.
• Send a friendly reminder a few days before the due date, not only after it.
• Offer easy ways to pay, such as bank transfer details on the invoice or a payment link.
• Track your cash position. Knowing your break-even point tells you how long you can afford to wait for payment.

Frequently asked questions

What is the late payment interest rate in the UK in 2026?

For invoices that became overdue at any point in 2026, the statutory rate is 11.75% a year: the Bank of England base rate of 3.75% on the reference date plus 8%.

Can I charge interest on a late invoice without a contract clause?

Yes. The Late Payment of Commercial Debts (Interest) Act 1998 gives you an automatic right to statutory interest and compensation on business-to-business invoices, even if your contract says nothing about late payment.

Is late payment interest simple or compound?

Simple. Interest builds up daily on the original invoice amount only, not on interest that has already been added.

Can I claim late payment interest from a consumer?

No. The Act only covers contracts between businesses, or between a business and a public body. It doesn't apply to sales to private individuals.

Do I have to tell my customer before charging interest?

No, the right is automatic. In practice, telling the customer in writing and showing how you calculated the figure makes it more likely they'll pay.

Can I claim compensation on every late invoice?

Yes. Fixed compensation of £40, £70 or £100 applies to each overdue invoice separately.

What if my customer disputes the invoice?

Try to resolve the dispute first. If part of the invoice is undisputed, the customer should pay that part on time. Interest can still apply to amounts that turn out to be properly owed.

More free tools for UK businesses

• UK VAT CalculatorAdd or remove VAT and track the threshold
• Corporation Tax CalculatorMarginal relief and payment deadlines
• Break-Even CalculatorFind your break-even point in units and revenue
• All free business toolsSee all our calculators

This page is general guidance, not legal advice. For large or disputed debts, speak to a solicitor. Sources: GOV.UK: Late commercial payments; Late Payment of Commercial Debts (Interest) Act 1998; Bank of England: Bank Rate history.