TL;DR
- Yes, you can. The Late Payment of Commercial Debts (Interest) Act 1998 gives every UK business an automatic right to charge interest on overdue B2B invoices.
- The rate is 8% + Bank of England base rate — currently 12.5% per annum (as of April 2026, base rate 4.5%).
- You can also claim fixed compensation on top: £40, £70, or £100 depending on the debt size.
- You don't need it in a contract — the right is statutory, meaning it applies automatically unless you've agreed otherwise in writing.
Can I Charge Interest on an Overdue Invoice in the UK?
Yes — and most UK businesses don't use this right nearly enough. Under the Late Payment of Commercial Debts (Interest) Act 1998, you are legally entitled to charge interest on any overdue B2B invoice at 8% above the Bank of England base rate. You don't need a solicitor, a contract clause, or permission. The right is automatic. What you need is to know how to calculate it, how to add it to a chaser invoice, and how to enforce it if the client pushes back.
This guide covers all of it — with real numbers, a worked example, and the exact language to use when chasing payment.
What Law Gives You the Right to Charge Interest?
The Late Payment of Commercial Debts (Interest) Act 1998 (amended in 2002 to bring in EU Directive 2000/35/EC) is the foundation. It applies to any contract for the supply of goods or services between two businesses — or between a business and a public authority. It does not apply to consumer debt (B2C invoices).
Key provisions:
- Interest accrues automatically from the day after the invoice due date.
- The statutory interest rate is 8% per annum above the Bank of England base rate that was in force on the date the debt became due.
- In addition to interest, you can claim fixed debt recovery compensation.
- A contract can replace the statutory right — but only with a "substantial remedy" that is not grossly unfair to the supplier. If a client tries to write out your right to interest entirely, that clause is unenforceable.
The Small Business Commissioner also provides guidance and a free interest calculator for UK suppliers: smallbusinesscommissioner.gov.uk.
What Is the Current Late Payment Interest Rate in the UK?
The statutory rate is 8% above the Bank of England base rate. The base rate used is the one in force on the date the debt became overdue — it doesn't change if the base rate moves while the invoice remains unpaid.
| Bank of England Base Rate | Statutory Late Payment Rate |
|---|---|
| 4.50% (April 2026) | 12.50% per annum |
| 5.25% (example) | 13.25% per annum |
| 0.10% (historic low) | 8.10% per annum |
To find the current base rate, check the Bank of England website.
How to Calculate Interest on an Overdue Invoice: Worked Example
Here's the formula:
Daily interest = (Invoice amount × statutory rate) ÷ 365
Example: A £3,500 invoice is 45 days overdue. Base rate on the due date was 4.50%, so the statutory rate is 12.50%.
- Annual interest: £3,500 × 12.5% = £437.50
- Daily rate: £437.50 ÷ 365 = £1.198 per day
- 45 days overdue: £1.198 × 45 = £53.92 in interest
On top of that, you can claim fixed debt recovery compensation of £70 (because the debt is between £1,000 and £10,000).
Total you can add to your chaser invoice: £53.92 + £70.00 = £123.92
That number is often enough to prompt immediate payment from a slow-paying client.
Fixed Debt Recovery Compensation: The Amount Most Businesses Forget
Separate from interest, the 1998 Act lets you charge a fixed compensation fee to cover the cost of chasing the debt. This is claimed once per invoice, not per reminder sent.
| Invoice (Debt) Value | Fixed Compensation |
|---|---|
| Under £1,000 | £40 |
| £1,000 – £9,999.99 | £70 |
| £10,000 or more | £100 |
If your reasonable costs of recovering the debt exceed those fixed amounts, you can also claim the difference — but you'd need to document those costs (legal fees, debt collection agency costs, etc.).
When Does a UK Invoice Become Overdue?
This depends on your agreed payment terms:
- No terms agreed: The law implies a 30-day payment period. Interest starts the day after day 30.
- Terms stated on invoice (e.g., "Net 30"): Interest starts the day after that agreed date.
- Agreed terms over 30 days: Legal up to 60 days. Anything beyond 60 days must not be "grossly unfair" — courts can void clauses that exploit the supplier.
- Public authorities: Must pay within 30 days. This is non-negotiable.
Practical tip: If your invoices don't state payment terms, add them. "Payment due within 30 days of invoice date. Late payment interest will be charged under the Late Payment of Commercial Debts (Interest) Act 1998" is all you need.
Does It Apply to All Invoices? B2B vs B2C
The statutory right under the 1998 Act applies to business-to-business (B2B) transactions only. It also covers contracts with public sector bodies.
It does not apply to consumer contracts (where your customer is an individual, not a business). For consumer debt, different rules apply — you'd need to rely on contractual terms or the courts.
If you work with both businesses and consumers, make sure your invoicing system distinguishes between the two. Consumer invoices need explicit contractual late payment terms if you want to charge interest; B2B invoices don't.
How to Actually Add Interest to an Overdue Invoice
There's no special form to file. You issue a revised or supplementary invoice showing:
- The original invoice number and amount
- The due date and the number of days overdue
- The statutory interest rate used and how you calculated it
- The fixed compensation amount
- The total now owed
Here's example wording you can adapt:
Late Payment Notice — Invoice #INV-2025-047
Original invoice amount: £3,500.00
Original due date: 3 March 2026
Days overdue: 45
Statutory interest (12.5% per annum): £53.92
Fixed debt recovery compensation: £70.00
Total now due: £3,623.92Interest has been calculated under the Late Payment of Commercial Debts (Interest) Act 1998. Interest continues to accrue at £1.20 per day until payment is received.
Send this by email and keep a read receipt or delivery confirmation. If the invoice remains unpaid, this document becomes evidence if you escalate to the courts or a debt recovery agency.
What If My Contract Already Has a Late Payment Clause?
If your contract specifies a late payment rate, that rate applies instead of the statutory rate — but only if it constitutes a "substantial remedy" under the Act. A contractual rate that is significantly lower than 8% + base rate may be challenged and overridden.
If a client has inserted a clause into their standard terms that removes or limits your right to late payment interest, check it carefully. Courts have invalidated clauses that are one-sided or grossly unfair to the supplier. The Act was specifically designed to prevent this.
If in doubt, charge the statutory rate and let the client challenge it. The burden of proving the contractual clause is a "substantial remedy" sits with them.
Should You Actually Charge Interest — or Will It Damage the Relationship?
This is the question most business owners wrestle with, and the honest answer is: it depends on the client and the pattern.
- One-off delay, good relationship: A gentle reminder before invoking statutory interest is usually the right call. Reserve the formal notice for repeat offenders.
- Habitually late payer: Charging interest changes the dynamic. It signals you take your terms seriously and often triggers faster payment going forward.
- Dispute over the invoice: Don't apply interest while the underlying amount is genuinely disputed — resolve the dispute first.
- Silent non-payer: Issue the late payment notice. If they're ignoring your chasers, statutory interest gives you more leverage and more to claim if it goes to small claims court.
The businesses that report the best results treat late payment interest not as a punishment, but as a policy. State it clearly in your terms, mention it in your welcome email to new clients, and apply it consistently. Clients who know you enforce it pay on time.
Chasing invoices manually takes time most business owners don't have. Invoice Chaser by Ascent Systems automates the entire follow-up sequence — reminders, escalations, and late payment notices — so overdue invoices get chased without you lifting a finger.
Try Invoice Chaser FreeWhat If They Still Don't Pay?
Interest charges and compensation notices resolve most situations. For those that don't:
- Small Claims Court (under £10,000): Online process via gov.uk. Filing fee starts at £35. Judges routinely award statutory interest on top of the principal. The process takes weeks, not months.
- Debt recovery agency: Many operate on a no-win no-fee basis for commercial debt. Useful for disputed amounts above £10,000 or where the debtor is evasive.
- Statutory Demand: A formal legal notice that, if unpaid within 21 days, can trigger insolvency proceedings against a company. Powerful, but use only for clear-cut unpaid debts — not disputed ones.
- Small Business Commissioner: Free dispute resolution service for small businesses owed money by larger businesses. No legal fees, and the Commissioner can apply significant pressure.
The earlier you escalate formally — with a properly documented late payment notice — the stronger your position in all of these options.
Frequently Asked Questions
Can I charge interest on an overdue invoice in the UK?
Yes. Under the Late Payment of Commercial Debts (Interest) Act 1998, you have an automatic statutory right to charge interest on overdue B2B invoices. You do not need a contract clause — the right applies by default to all business-to-business transactions.
How much interest can I charge on a late invoice in the UK?
The statutory rate is 8% per year above the Bank of England base rate. With the base rate at 4.50% in April 2026, that's 12.50% per annum. You can also add fixed debt recovery compensation: £40 for debts under £1,000, £70 for £1,000–£10,000, and £100 for debts over £10,000.
When does a UK invoice become overdue?
If no terms are agreed, the statutory default is 30 days. If you've agreed payment terms (e.g. "Net 30"), the invoice becomes overdue the day after that date. Interest starts accruing automatically from that point.