Invoicing guide
Late Payment Interest in the UK
What counts as a late commercial payment, what you can charge, and a practical way to chase an overdue invoice without burning the relationship.
What can you charge when a business pays late?
On qualifying UK commercial debts you can generally charge statutory interest at 8 percentage points above the applicable Bank of England reference rate, plus a fixed recovery amount of £40, £70 or £100 depending on the size of the debt. Where your contract sets its own late-payment remedy, the contractual terms may apply instead. None of this is automatic — it is a right you choose to exercise, and this guide is information, not legal advice.
- Statutory interest is simple, not compounded
- Interest runs from the day after payment was due
- The fixed recovery fee is separate from interest
- Consumer debts follow different rules
To put numbers on your own invoice, use the Late Payment Interest Calculator.
When does a payment become late?
If you agreed a payment date — whether that is on acceptance of a quote, in a contract or in your standard terms — lateness generally begins the day after that date. This is why stating "payment due within 30 days of invoice date" on the invoice itself matters: it removes the argument about when the clock started.
If no payment date was agreed, UK rules may treat payment as late 30 days after a relevant trigger, such as receipt of the invoice or delivery of the goods or services, depending on the circumstances. Which trigger applies depends on the facts, so do not assume a flat 30 days from the day you happened to send the email.
Long agreed terms are also not unlimited. Very long payment periods in business-to-business contracts can be challenged as grossly unfair, particularly where they were imposed rather than negotiated.
See the GOV.UK guidance on when a payment becomes late.
Statutory vs contractual interest
Statutory interest
The default position for qualifying commercial debts: 8 percentage points above the applicable Bank of England reference rate, as simple interest on the unpaid amount. The relevant reference rate can depend on the six-month period in which the debt became late, so an invoice that went overdue two years ago may not use today's rate.
Contractual interest
Where your agreement contains its own late-payment remedy, that term may apply instead. A contractual rate is not automatically better or automatically enforceable — a rate that operates as a penalty can be challenged, and a rate lower than the statutory one may simply be what you agreed to. Read the clause before you rely on it.
Either way, charging interest is a right you can choose to exercise, not something that happens by itself. Most suppliers mention it in their terms, apply it rarely, and use it as leverage when an account is badly overdue.
Fixed recovery fees
On top of interest, qualifying commercial debts carry a fixed recovery amount that scales with the size of the debt:
- Up to £999.99 — £40
- £1,000 to £9,999.99 — £70
- £10,000 or more — £100
The fee is per unpaid debt, not per reminder. Additional reasonable recovery costs may sometimes be claimable beyond the fixed amount — for example where you have genuinely incurred costs pursuing the debt — but those depend on what you actually spent. See GOV.UK — claim debt recovery costs on late payments.
Worked examples
Illustrative — £1,000, 50 days late
Using an illustrative reference rate of 4.75%, the statutory rate is 12.75%.
- Annual interest: £1,000 × 12.75% = £127.50
- Daily: £127.50 ÷ 365 = £0.349
- 50 days: £17.47
- Fixed recovery fee: £70.00
- Claimable on top of the debt: £87.47
Illustrative — £12,000, 90 days late
Same illustrative 12.75% statutory rate, larger debt and a longer delay.
- Annual interest: £12,000 × 12.75% = £1,530.00
- Daily: £1,530.00 ÷ 365 = £4.19
- 90 days: £377.26
- Fixed recovery fee: £100.00
- Claimable on top of the debt: £477.26
The reference rate above is an example figure for illustration only, not a current rate. Use the rate that applies to your own debt in the calculator.
A practical chasing workflow
- Before the due date. Send a short, friendly note a few days before payment is due confirming the invoice number, amount and date. Most late payments are admin failures, not refusals.
- Day 1 overdue. A neutral reminder with the invoice re-attached and the payment details repeated. No mention of interest yet.
- Day 7. Ask a direct question: has the invoice been approved for payment, and if so on which payment run? This moves the conversation to accounts payable, where the delay usually lives.
- Day 14. Escalate to your named contact plus their finance address. Note that your terms allow statutory interest and the fixed recovery fee once an invoice is overdue.
- Day 30. Send a formal reminder stating the amount overdue, the interest accrued to date and the fixed recovery amount, with your calculation shown.
- Day 45+. Decide: pause further work, issue a letter before action, or use a small-claims route. Take advice where the sum is significant.
Keep every step in writing and keep the tone factual. A clear record of reminders is worth more later than a strongly worded one.
Reduce the odds of it happening again
- Agree the payment date in writing before the work starts.
- Put the due date, not just the terms, on the invoice itself.
- State that late payments may attract statutory interest.
- Invoice promptly — a late invoice is paid late by default.
- For larger jobs, take a deposit or bill in stages.
Work out the numbers
Related invoicing pages
Official sources
Editorial review
Last reviewed .
Official guidance checked:
- GOV.UK — Late commercial payments: charging interest and debt recovery (opens in a new tab)
- GOV.UK — Late commercial payments: when a payment becomes late (opens in a new tab)
- GOV.UK — Claim debt recovery costs on late payments (opens in a new tab)
Information only — not tax or legal advice. Always check current guidance on GOV.UK for your situation.
Questions
When does a UK commercial invoice become late?
If you agreed a payment date, lateness generally starts after that date. If no payment date was agreed, UK rules may treat payment as late 30 days after a relevant trigger such as receipt of the invoice or delivery of the goods or services, depending on the circumstances.Do I have to charge interest on a late payment?
No. Charging statutory interest is an option, not an obligation. Many suppliers mention the right to charge it in their terms and only apply it when an account becomes seriously overdue or a relationship has broken down.What happens if my contract sets a different interest rate?
Where an agreement contains its own interest remedy, that contractual term may apply instead of the statutory rate. Whether a specific clause is enforceable depends on the contract and the circumstances, so check your terms before relying on them.Can I claim a fixed fee as well as interest?
For qualifying commercial debts there is a fixed recovery amount in addition to interest: £40 for debts up to £999.99, £70 for debts from £1,000 to £9,999.99, and £100 for debts of £10,000 or more. Additional reasonable recovery costs may sometimes be claimable beyond the fixed amount.Does any of this apply to consumer customers?
No. These rules cover commercial, business-to-business debts. Different rules apply where your customer is a consumer rather than another business.Should I mention interest on my invoice?
Stating your payment terms and that late payments may attract interest makes the position clear from the start and usually makes a later reminder easier to send. It does not by itself decide what you can recover.