UK late payment interest, worked out for you

If you sell to UK businesses, the law already lets you charge interest and compensation on late invoices. Almost nobody claims it because working it out is fiddly. Terms Due does the maths.

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UK late payment interest, worked out for you

Above the Bank of England base rate: the statutory interest rate on late business invoices

Late Payment of Commercial Debts (Interest) Act 1998

£40 to £100

Fixed compensation you can add to each late invoice, depending on its size

30 days

Default period before interest runs when no payment date was agreed

What the law allows

The Late Payment of Commercial Debts (Interest) Act 1998 lets a business supplier claim interest on a late business-to-business invoice at 8% a year above the Bank of England base rate, unless your contract sets a different substantial remedy.

You can also claim a fixed sum for the cost of recovering the debt, on top of the interest. Read the detail, including the half-year reference rate rule, in our UK late payment interest guide.

The right exists whether or not your trade terms mention it. Saying so in your terms is still good practice, because a buyer who knows interest will be charged tends to pay before it is.

Fixed compensation per invoice

Invoice amount	Fixed sum
Up to £999.99	£40
£1,000 to £9,999.99	£70
£10,000 or more	£100

Compensation is per invoice, so a buyer with four late invoices of £500 owes £160 in compensation alone.

What Terms Due does

Works out daily interest from the day after the due date, using the reference base rate for the right half-year.
Adds the correct fixed compensation for each invoice.
Shows interest and compensation as separate lines on the buyer's statement and final reminder.
Keeps running until the invoice is paid, so the figure on the statement is always current.
Lets you waive it for any company or invoice, for example a long-standing buyer who is rarely late.
Only applies it to companies you mark as UK businesses, because the Act does not cover consumers or most overseas contracts.

Worked example

A £2,400 invoice, 20 days late

A trade buyer pays a £2,400 invoice 20 days after the due date. The reference base rate for that half-year is 4%, so the statutory rate is 12%. Interest is £2,400 × 12% ÷ 365 × 20 = £15.78. Fixed compensation for an invoice between £1,000 and £9,999.99 is £70. The buyer owes £85.78 on top of the invoice.

The interest is small; the compensation is not. On a book of late invoices the compensation alone often covers the cost of the app many times over, and the knowledge that it will be charged is what shortens the next delay.

Invoice	£2,400
Days late	20
Statutory rate (8% + 4% base)	12%
Interest	£15.78
Fixed compensation	£70.00
Total added	£85.78

Claiming by hand, and with Terms Due

By hand

Look up the base rate for the right half-year.
Count the days late for each invoice separately.
Work out the compensation band for each invoice.
Add it to a statement, then recalculate when the buyer pays a fortnight later.
Most merchants give up at step one.

Terms Due

Reference rate applied automatically for the period the debt became late.
Interest accrues daily on every open invoice.
Compensation added per invoice at the right band.
Lines appear on the statement and final notice and update until payment.
One switch per company to apply or waive.

When to apply it, and when not to

Interest and compensation are a lever, not a revenue line. Apply them by default for accounts that are routinely late and for any invoice that reaches a final notice. Waive them for a good buyer who has slipped once, and say that you have, because a waived charge is a favour the buyer remembers.

Put the policy in your trade terms so it is a rule you apply rather than a punishment you decide on. Terms Due makes the figures appear; whether to insist on them is still your call, invoice by invoice.

What may change: the Small Business Plan

On 30 July 2025 the UK government published proposals to tighten the law: a maximum of 60 days for agreed payment terms, falling to 45 days after five years; a 30-day window for a buyer to dispute an invoice, after which it must be paid in full; statutory interest that cannot be contracted out of; and new powers for the Small Business Commissioner to fine large companies that persistently pay late. The consultation closed on 23 October 2025.

At the time of writing these are proposals that need legislation. If they become law, Terms Due will follow the new rules; in the meantime, the 1998 Act as described here applies. Check GOV.UK for the current position before relying on any of it.

Questions

Can I charge late payment interest to consumers?

No. The Act only covers business-to-business sales. Terms Due only applies it to B2B companies you mark as UK businesses.

Is this legal advice?

No. Terms Due calculates the figures from your invoice dates and amounts. Check your own trade terms and take advice for disputed debts.

Do I have to charge it?

No. It is a right, not a duty. You can waive it per company or per invoice, and many merchants only insist on it once an invoice reaches a final notice.

Does it apply to buyers outside the UK?

Usually not. The Act applies to contracts governed by the law of England and Wales, Scotland or Northern Ireland. For overseas buyers, your own trade terms decide what you can charge.

Which base rate is used?

The Bank of England base rate on 31 December for debts that became late between January and June, and the rate on 30 June for debts that became late between July and December. Terms Due keeps the table up to date.

What if my trade terms set a different rate?

If your contract sets a substantial remedy for late payment, that applies instead of the statutory rate. You can enter your contract rate in Terms Due and it will use that.

Stop chasing wholesale invoices by hand

Install Terms Due, set a credit limit for each buyer and let the app hold, remind and collect.

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