Can I charge late payment interest if the contract doesn't mention it?

Yes. The Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right to charge interest on overdue B2B invoices regardless of whether your contract mentions it. You can also claim fixed compensation of £40, £70, or £100 depending on the invoice value, plus reasonable debt recovery costs.

How do I calculate the daily interest on a late commercial payment?

Divide the annual statutory rate (BoE base rate + 8%) by 365 to get the daily rate, then multiply by the outstanding invoice amount and the number of days overdue. For example, at 12.25% annual rate: a £5,000 invoice overdue by 30 days accrues approximately £50.34 in interest (£5,000 × 0.1225 ÷ 365 × 30).

Late Commercial Payment Interest Rate UK 2026 | What You Can Charge

TL;DR — Late Commercial Payment Interest UK 2026

Statutory rate: Bank of England base rate + 8% per annum (~12.25% as of early 2026), accruing daily from the day after payment was due.
Fixed compensation: You can also claim £40 (invoices under £1,000), £70 (£1,000–£9,999.99), or £100 (£10,000+) automatically — no calculation needed.
Default payment terms: 30 days for public sector; up to 60 days for B2B (longer only by express agreement and if not "grossly unfair").
You don't need it in your contract: The 1998 Act gives you this right automatically for all qualifying B2B transactions.

What's the Interest Rate on Late Commercial Payments in the UK? (2026 Guide)

The statutory interest rate on late commercial payments in the UK is 8% above the Bank of England base rate, charged annually and accruing daily. With the BoE base rate sitting at approximately 4.25% in early 2026, that puts the effective rate at roughly 12.25% per annum. This right exists under the Late Payment of Commercial Debts (Interest) Act 1998 — you don't need it written into your contract to use it.

If your business is sitting on unpaid invoices right now, you are legally entitled to charge interest, fixed compensation, and reasonable recovery costs. Most UK businesses never do. This guide explains exactly how — and why it matters more in 2026 than ever before.

The Exact Rate: How the 2026 Calculation Works

The formula is straightforward:

Statutory Interest Rate = Bank of England Base Rate + 8%

The BoE base rate is reviewed by the Monetary Policy Committee (MPC) approximately every six weeks. As of Q1 2026, following the cutting cycle that began in mid-2024, the base rate is approximately 4.25%. That gives a statutory late payment rate of:

Annual rate: 12.25%
Daily rate: 12.25% ÷ 365 = 0.03356% per day

Important: always verify the current BoE base rate at bankofengland.co.uk before issuing a late payment claim. The rate applies from the date the debt became overdue, not today's rate retrospectively — use the rate in force at the time the debt fell due.

Quick reference: interest on common invoice values at 12.25% annual rate

£1,000 overdue 30 days: £10.07 interest + £70 fixed compensation = £80.07
£5,000 overdue 30 days: £50.34 interest + £70 fixed compensation = £120.34
£10,000 overdue 60 days: £201.37 interest + £100 fixed compensation = £301.37
£25,000 overdue 90 days: £756.16 interest + £100 fixed compensation = £856.16

These are conservative figures. If you've incurred actual debt recovery costs (letters, solicitors, collection agencies) you can claim those on top.

The Law Behind It: Late Payment of Commercial Debts (Interest) Act 1998

The Late Payment of Commercial Debts (Interest) Act 1998, updated by the Late Payment of Commercial Debts Regulations 2002 (implementing EU Directive 2011/7/EU, retained in UK law post-Brexit), gives every UK business a statutory right to claim:

Statutory interest at 8% + BoE base rate, from the day after payment was due
Fixed compensation (a flat sum per invoice, automatically owed)
Reasonable debt recovery costs beyond the fixed sum

This applies to business-to-business transactions only — not consumer debts. Both parties must be acting in the course of a business. It does not apply to transactions involving private individuals.

The right is statutory and automatic. You do not need a clause in your contract. Your debtor cannot waive it unless the substituted contractual remedy is "substantial" — courts have struck down attempts to contract out of this right with derisory alternatives.

When Does the Clock Start? Understanding Payment Deadlines

Interest starts accruing the day after the payment deadline passes. The deadline depends on your contract:

No payment terms agreed: 30 days from the date you delivered the goods/services, or the date the debtor received the invoice — whichever is later
Payment terms in the contract: The agreed date — but B2B payment terms cannot exceed 60 days unless both parties expressly agreed and the terms are not "grossly unfair" to the creditor
Public sector contracts: Maximum 30 days — non-negotiable

A common mistake: businesses with "net 60" or "net 90" terms written into contracts by larger buyers. Under the 2002 Regulations, terms beyond 60 days require active negotiation and cannot be imposed unilaterally. If a large customer inserted 90-day terms into your standard agreement without genuine negotiation, those terms may be challengeable.

Fixed Compensation: The Amount Most Businesses Forget to Claim

Separate from interest, you're entitled to a fixed compensation amount for every late invoice. No calculation required — it's owed automatically the moment an invoice becomes overdue:

£40 — invoices under £1,000
£70 — invoices between £1,000 and £9,999.99
£100 — invoices of £10,000 or more

This is per invoice, not per debtor. If a client owes you on five invoices, that's potentially five separate fixed compensation claims. For a business dealing with consistent late payers, this adds up fast — and it requires zero proof of loss.

HMRC Late Payment Interest: A Different Rate

It's worth distinguishing the commercial debt rate from what HMRC charges on tax arrears. HMRC uses a different formula: BoE base rate + 4% (not 8%). Since May 2025, HMRC's late payment interest rate has been approximately 8.25%.

If you're researching this because you owe HMRC money — the rate applying to you is lower than the commercial rate. If you're owed money by a business customer, the higher 8% + BoE rate applies. Don't conflate the two.

How to Actually Claim: A Practical Step-by-Step

Confirm the invoice is overdue. Check your payment terms and calculate the due date precisely. Interest accrues from the day after.
Calculate the interest and fixed compensation. Use the formula: (Invoice Amount × Annual Rate ÷ 365 × Days Overdue). Add fixed compensation on top.
Issue a formal late payment notice. Send a written notice (email with read receipt, or recorded post) referencing the Late Payment of Commercial Debts (Interest) Act 1998, stating the original invoice amount, interest accrued to date, and fixed compensation owed.
Set a new payment deadline. Give 7–14 days. State clearly that interest continues to accrue daily until full payment is received.
Escalate if unpaid. Small Claims Court (under £10,000) or County Court (over £10,000). You can include interest claimed up to the date of judgment.

The notice itself often works. Many businesses pay promptly once they receive a formal letter citing the Act — it signals you know your rights and will pursue them.

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Can You Put Late Payment Interest in Your Invoices and Terms?

Yes — and you should. Including a late payment clause in your standard terms does two things:

It signals to clients upfront that you take payment terms seriously
It can allow you to set a contractual rate instead of the statutory one — but only if it's "substantial" (courts have set the bar at roughly matching or exceeding the statutory rate)

A standard clause to include in your terms:

"Invoices unpaid after [30/60] days from the invoice date will accrue interest at 8% per annum above the Bank of England base rate under the Late Payment of Commercial Debts (Interest) Act 1998, together with fixed statutory compensation of £40/£70/£100 per invoice. We reserve the right to claim reasonable debt recovery costs."

Even with this clause, the statutory right exists as a backstop. The contractual clause simply makes it more visible — and slightly more intimidating to slow payers.

The £70 Billion Problem: Why This Matters in 2026

UK businesses are collectively owed an estimated £70.4 billion in late payments at any given time. The average SME writes off approximately £25,000 per year in unpaid invoices. That's not a rounding error — for many small businesses, it's the difference between growth and survival.

The law exists. The right exists. The problem is enforcement friction: calculating the interest, drafting the notice, following up consistently. Most business owners chase invoices manually via email, abandon the chase after two attempts, and absorb the loss.

The businesses that recover more are not necessarily more aggressive — they're more systematic. Automated reminders sent at the right intervals, formal notices triggered at the right thresholds, consistent follow-through. That's an operational process, not a personality trait.

Ascent Systems builds AI tools for exactly this problem. Our Invoice Chaser tool automates the entire late payment workflow — from friendly reminder to formal late payment notice — so you recover more without the manual overhead.

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Frequently Asked Questions

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

The statutory rate is 8% per annum above the Bank of England base rate. With the BoE base rate at approximately 4.25% in early 2026, the effective rate is around 12.25% per annum, accruing daily. Always verify the current BoE base rate at bankofengland.co.uk when making a claim.

Do I need a contract clause to charge late payment interest?

No. The Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right to charge interest on overdue B2B invoices regardless of what your contract says. You can exercise this right simply by issuing a formal late payment notice referencing the Act.

What fixed compensation can I claim on top of interest?

You can claim £40 per invoice under £1,000, £70 per invoice between £1,000 and £9,999.99, and £100 per invoice of £10,000 or more. This is owed automatically once an invoice becomes overdue — no calculation required, and it applies per invoice, not per debtor.