Late payment interest in the UK: what you can add to an unpaid invoice
Type the amount and how many days late it is: the statutory interest and the fixed compensation come out at once.
A business customer in the UK who pays an invoice late owes you statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998, unless your contract sets a different rate. The rate is 8% a year over the Bank of England reference rate, and the reference rate is fixed twice a year: the Bank Rate in force on 30 June applies to interest that starts to run between 1 July and 31 December, and the rate on 31 December applies from 1 January to 30 June. The Bank Rate on 30 June 2026 was 3.75%, so a debt that fell late from 1 July 2026 earns 11.75% a year. Interest is simple, worked out per day on a 365-day year. On top, you can charge a fixed sum once per invoice for the cost of recovery: £40 on a debt under £1,000, £70 up to £9,999.99 and £100 from £10,000. Both apply only between businesses, never to consumers.
Statutory interest and compensation on a late invoice
You can claim
£139.75
| Statutory interest | £69.75 |
| Fixed compensation | £70 |
| Rate applied | 11.75% a year (8% + 3.75%) |
| Interest per day | £1.55 |
Reference rate: Bank Rate on 30 June 2026.
Checked by Radif Partners · Editorial policy · Methodology
The rate, and the date that fixes it
The Act sets the interest at 8% a year over the "official dealing rate" of the Bank of England. Article 4 of the Rate of Interest (No. 3) Order 2002 then freezes that base for six months at a time: the rate in force on 30 June serves for interest that starts to run from 1 July to 31 December, the rate on 31 December for interest starting from 1 January to 30 June. What matters is when the debt fell late, not when you claim it. A debt that became overdue in November 2026 keeps the reference rate read on 30 June 2026 for its whole life, even if it is paid two years later.
| Interest starting from | Reference day | Bank Rate | Statutory rate |
|---|---|---|---|
| 1 January 2024 | 31 December 2023 | 5.25% | 13.25% |
| 1 July 2024 | 30 June 2024 | 5.25% | 13.25% |
| 1 January 2025 | 31 December 2024 | 4.75% | 12.75% |
| 1 July 2025 | 30 June 2025 | 4.25% | 12.25% |
| 1 January 2026 | 31 December 2025 | 3.75% | 11.75% |
| 1 July 2026 | 30 June 2026 | 3.75% | 11.75% |
The table is built from the Bank of England Bank Rate history, which a scheduled job reads every week. When the Bank changes its rate in the middle of a half-year, nothing changes for debts already overdue; only the next 30 June or 31 December reading moves the statutory figure.
Working out the interest day by day
Statutory interest is simple interest. Multiply the debt by the yearly rate, divide by 365 to get the daily amount, and multiply by the number of days since the due date. GOV.UK gives its own worked example: a debt of £1,000 at a base rate of 0.5% costs £85 a year, about £0.23 a day, so £11.50 after 50 days. The calculator rounds the daily figure to the penny in the same way, so it reproduces that example exactly.
With today's reference rate the arithmetic looks like this. An invoice for £4,800 due on 31 August 2026 and paid on 15 October 2026 is 45 days late. Interest starts on 1 September, so the 30 June reading applies: 11.75% a year, £1.55 a day, £69.75 in total, plus £70 of fixed compensation because the debt is between £1,000 and £9,999.99.
The fixed compensation bands
The debt recovery costs are a flat sum per invoice, on top of the interest. They exist so that a small business can recover something for the time spent chasing, without itemising it.
| Unpaid invoice | Compensation | Interest after 30 days late | Total you can add |
|---|---|---|---|
| £600 | £40 | £5.70 | £45.70 |
| £2,500 | £70 | £24.00 | £94.00 |
| £12,000 | £100 | £115.80 | £215.80 |
The bands are applied to the size of the debt, which is the invoice amount including VAT. A supplier who spends more than the flat sum, on a debt collector for example, can claim reasonable costs beyond it, but must be ready to justify them.
When a payment is late in the first place
GOV.UK sets out the default: if you agree a payment date, it should usually be within 30 days for a public authority and 60 days between businesses, and a longer period between businesses must be fair to both. If nothing was agreed, the payment is late 30 days after the customer received the invoice, or after you delivered, whichever is later. That is the strongest reason to print a due date on every invoice: it turns a vague "within a month" into a date that starts the clock. The payment terms guide compares the usual choices.
Claiming it in practice
Most suppliers mention the right to statutory interest in their terms and on the invoice itself, then decide case by case whether to charge it. If you do, send a separate invoice for the interest and the compensation, referring to the original invoice number. Keep the calculation: the debt, the due date, the reference rate and the number of days. If the customer still does not pay, the interest and the compensation can be included in a court claim for the debt.
Early payment discount: the yearly rate behind it
Equivalent yearly rate
37.2%
| Customer pays early | $4,900.00 |
| Discount you give | $100.00 |
| Days gained | 20 |
Formula: discount ÷ (1 − discount) × 365 ÷ days gained.
A gentler lever works before the due date rather than after it: a small discount for early payment. The calculator above shows its true yearly cost, often far higher than the statutory rate, which is why many firms prefer to rely on interest. The early payment discount guide explains the trade-off.
What the statute does not cover
The Act applies to contracts for the supply of goods or services where both parties act in the course of a business. It does not apply to sales to consumers, and it gives way when your contract already sets a rate of interest for late payment, as GOV.UK points out. Public authorities buying from you are covered, with a payment period that should usually stay within 30 days. The text itself is on legislation.gov.uk.