Late Payment Fixed Compensation: Claim Your £40, £70, or £100 Under UK Law

When a client pays your invoice late, you're entitled to more than just interest. The UK law recognises that late payment causes real disruption to your business, and it protects you with statutory fixed compensation. Depending on your invoice value, you can claim late payment fixed compensation of £40, £70, or £100 — separate from any interest accrued.

For freelancers, sole traders, and small business owners, these amounts add up quickly. If you've sent out dozens of invoices over the past year, a single client with chronic payment delays could owe you hundreds in compensation alone. Yet most businesses don't claim it. This guide explains exactly how the scheme works, what you're entitled to, and how to calculate your claims.

Understanding the Three Compensation Tiers

The Late Payment of Commercial Debts (Interest) Act 1998 sets out fixed compensation amounts that you can claim on top of interest. These aren't discretionary — they're your legal right when certain conditions are met.

The £40 Tier

You can claim £40 fixed compensation on any qualifying debt up to £1,000. This applies whether the invoice is £500 or £999. The amount doesn't scale with the debt size in this bracket; it's a flat £40 for meeting the statutory requirements. For many freelancers dealing with smaller clients, this is the most common compensation level.

The £70 Tier

Debts between £1,000 and £10,000 qualify for £70 fixed compensation. This covers most small business invoices — agency retainers, contractor work, or supplies. Again, it's a flat amount regardless of whether the debt is £1,001 or £9,999.

The £100 Tier

Debts over £10,000 attract £100 fixed compensation. This is the maximum statutory amount under the Act. For larger contracts or multiple overdue invoices combined, you're entitled to the full £100 per debt.

The key insight: late payment fixed compensation of 40, 70, or 100 pounds is in addition to interest. If a £5,000 invoice is 45 days overdue, you claim both the £70 compensation AND the statutory interest (8% + Bank of England base rate, currently 12.50% for 2026).

What Makes a Debt Qualify for Compensation?

Not every late payment triggers compensation rights. The Act applies specific criteria:

• Commercial debts only. The invoice must be for goods or services supplied in the course of your business. Personal invoices don't qualify.
• The debtor must be a business. You can claim against companies, partnerships, and sole traders — but not consumers.
• Payment terms must be agreed. There must be clear payment terms (e.g., "Net 30"). If no terms are specified, the statutory default is 30 days.
• The invoice must be properly issued. Your invoice must contain required information: your business details, the invoice date, a unique reference number, and the amount due.
• Payment must be genuinely overdue. The debt must be unpaid after the agreed date (or 30 days after invoice if no terms were set).

If any of these conditions fail, you won't be able to claim statutory compensation. However, the bar is relatively low — most formal business invoices will qualify.

Calculating Your Interest and Compensation Combined

Let's walk through a real example. Suppose you invoiced a client for £4,500 on 15 January 2026, with Net 30 terms. They paid on 1 March — 46 days late.

Step 1: Calculate the statutory interest.

Interest = Debt × (Statutory rate ÷ 365) × Number of days overdue
Interest = £4,500 × (0.125 ÷ 365) × 46
Interest = £4,500 × 0.000342466 × 46
Interest = £71.08

Step 2: Add the fixed compensation.

Because the debt is between £1,000 and £10,000, you claim £70 compensation.

Step 3: Calculate your total recovery.

Total = Interest + Compensation
Total = £71.08 + £70
Total = £141.08

This is what you should invoice the client for. Many businesses miss this step entirely and simply accept the late payment. You're entitled to pursue the full amount.

The Late Payment of Commercial Debts (Interest) Act 1998: Your Legal Foundation

The Act gives you two key rights:

1. The right to statutory interest, calculated as 8% plus the Bank of England base rate.
2. The right to fixed compensation — the £40, £70, or £100 amounts — automatically payable when payment is late.

Section 1A of the Act sets out the compensation amounts explicitly. They exist because the government recognises that late payment isn't just about lost interest — it disrupts cash flow, creates accounting burden, and can force small businesses to take expensive credit.

Importantly, you don't need to prove loss to claim compensation. It's not discretionary. If the conditions are met, the compensation is owed. This is different from damages in contract law, where you'd normally have to prove the harm caused.

When Payment is Considered "Late"

The clock starts from your agreed payment date. If you invoice on 1 January with "Net 30" terms, payment is due on 31 January. Any payment arriving on 1 February or later is overdue.

Some invoices might have different terms — Net 60, Net 90, or fixed payment dates. The Act respects your agreed terms. However, terms can't reasonably exceed 60 days (for large businesses paying small businesses). For B2B transactions, 30 days is standard.

Partial payments complicate things. If a client pays part of an invoice, the compensation right applies only to the unpaid portion, calculated as a separate debt.

How to Claim Late Payment Compensation

There's no official form or process. Instead, you take these steps:

1. Send a Formal Payment Demand

Write to your debtor (email is fine) stating:

• The original invoice number and date
• The original amount and payment terms
• The date payment was due
• The current date and the number of days overdue
• The statutory interest owed (calculated to the current date)
• The fixed compensation (£40, £70, or £100)
• The total amount now due
• A deadline for payment (typically 14 days)

2. Invoice for the Compensation and Interest

Raise a new invoice (or credit note, depending on your accounting practice) to the debtor for the interest and compensation. This formalizes your claim and creates a paper trail.

3. Keep Records

Document everything: the original invoice, your payment terms (as stated on the invoice or in your contract), emails, payment records, and your calculation showing how you arrived at the interest and compensation figures.

4. Pursue Non-Payment

If the debtor refuses to pay the compensation, you have options:

• Small Claims Court. If the total is under £10,000, you can pursue a small claim. The process is relatively straightforward and designed for businesses without legal representation.
• County Court. For larger amounts, file in the County Court for your region.
• Debt Recovery Agency. Hand the debt to a professional firm, who'll pursue it on your behalf for a fee.

Many debtors pay immediately once they receive a formal demand citing the Act — they know the law is on your side.

Practical Example: Three Invoices, One Client

Suppose you sent three invoices to the same client in Q1 2026:

Invoice 1: £800, due 1 February, actually paid 20 March (47 days late)
Fixed compensation: £40
Interest: £800 × 0.000342466 × 47 = £12.87
Total: £52.87

Invoice 2: £3,200, due 15 February, actually paid 25 March (38 days late)
Fixed compensation: £70
Interest: £3,200 × 0.000342466 × 38 = £41.59
Total: £111.59

Invoice 3: £6,500, due 1 March, actually paid 5 April (35 days late)
Fixed compensation: £70
Interest: £6,500 × 0.000342466 × 35 = £78.06
Total: £148.06

Combined recovery: £312.52 in interest and compensation alone. Over a year, chronic late payers can cost you thousands.

Common Objections and How to Respond

"We'll deduct the compensation from future invoices."
This isn't valid. They can't unilaterally rewrite the terms. You have the right to payment in full plus statutory compensation, or you can pursue recovery.

"Our payment system doesn't allow us to process partial compensation payments."
Not your problem. Compensation is a legal obligation, not a favour. They can pay it separately if needed.

"We have a long-standing relationship — can you waive the compensation?"
You can choose to, but you're not obliged to. Many businesses waive compensation for valuable clients with occasional slip-ups — but serial late payers should face the full consequence.

"We're a small business like you — we can't afford it."
The Act applies equally to all businesses. If they can't manage cash flow, that's their problem, not yours. Your business shouldn't subsidise theirs.

Prevention: The Better Approach

While knowing how to claim late payment fixed compensation is valuable, prevention is cheaper:

• Invoice immediately. Don't batch invoices; send them the same day work is completed.
• Be clear about terms. Print "Net 30" (or your terms) prominently on every invoice.
• Follow up early. Contact clients 2–3 days before the due date with a reminder.
• Set payment conditions. For new or unreliable clients, require deposits or staged payments.
• Use automated reminders. Tools like Invoice Chaser automatically track overdue invoices and flag them for action.

For clients with a pattern of late payment, you might:

• Switch to upfront payment or COD
• Shorten terms (Net 15 instead of Net 30)
• Charge an arrangement fee for extended terms
• Stop doing business with them

Key Takeaways

Late payment fixed compensation under UK law is straightforward:

• £40 for debts up to £1,000
• £70 for debts £1,000–£10,000
• £100 for debts over £10,000

These amounts are automatic and non-negotiable when a commercial debt is paid late. They exist alongside statutory interest (currently 12.50% annually for 2026). Together, they compensate your business for the disruption and cost of late payment.

Most importantly: claim what you're owed. The Act gives you this right. It's not greedy or unreasonable — it's the law. Debtors who consistently ignore it should face the full financial consequence.