Last checked October 2026 · by the PaySorted team
Who it applies to
The Late Payment of Commercial Debts (Interest) Act 1998 applies to invoices between businesses — including sole traders, partnerships, companies and the public sector. It doesn't apply to invoices to private individuals (consumers).
How much interest
Statutory interest is 8% a year plus the Bank of England base rate. The base rate you use is fixed for six months at a time:
- If interest starts (the day after the payment was due) between 1 January and 30 June, use the base rate on the previous 31 December.
- If interest starts between 1 July and 31 December, use the base rate on the previous 30 June.
The Bank of England base rate was 3.75% on 30 June 2026, so invoices falling due between July and December 2026 attract interest at 11.75% a year. Interest is simple (not compound) and runs daily from the day after the due date.
Fixed compensation
On top of interest you can claim a fixed sum for the cost of recovering the debt:
| Amount owed | Fixed sum |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
You can claim this once per invoice, and you may be able to claim reasonable extra recovery costs on top.
When a payment counts as late
If you agreed payment terms, it's late after that date. If you didn't agree any terms, the law sets a default of 30 days from when the customer received the invoice or the work was done (whichever is later). Between businesses, payment terms longer than 60 days are only allowed if they were expressly agreed and aren't grossly unfair to you.
Worked example
A business customer owes you £1,200 that was due on 1 August 2026 and is paid 60 days late.
- Interest: £1,200 × 11.75% × 60 ÷ 365 = £23.18
- Fixed sum (£1,000–£9,999.99): £70
- Total you can claim: £93.18
Try your own figures in the late payment interest calculator.
How to claim it
Write to the customer (an email is fine) setting out the invoice, the amount, how much interest and compensation you're claiming and how you worked it out. Many businesses mention their right to statutory interest in their terms and on their final reminder — that alone often gets the invoice paid. If you go on to court, include the interest in your claim.
Private customers
You can't claim statutory interest from private individuals. You can only charge interest to a consumer if your terms said so before the work started, and the rate is fair. For most trades, polite and persistent reminders work better — see how to chase an unpaid invoice.
General information based on GOV.UK guidance (checked October 2026), not legal advice. Check the current base rate on the Bank of England website.
Common questions
What is the statutory interest rate for late payment in the UK?
8% a year above the Bank of England base rate — using the base rate on 31 December (if interest starts January–June) or 30 June (if it starts July–December). Where interest starts July–December 2026 that's 11.75%.
Can I charge £40 for a late payment?
Yes, if your customer is a business and the invoice is under £1,000. It's £70 for £1,000–£9,999.99 and £100 for £10,000 or more.
Can I charge late payment interest to a homeowner?
Only if your terms said so before the work started, and the rate is fair. The statutory scheme only covers business customers.