UK Statutory Interest on Overdue Invoices — Late Payment of Commercial Debts Act
Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can charge statutory interest on unpaid B2B invoices. The rate is 8% per annum above the Bank of England base rate — so if the base rate is 4.25%, the total interest rate is 12.25% per year.
Interest accrues daily from the date the debt became overdue (after the 30-day statutory payment period, or from the agreed payment date if stated on the invoice). You can also claim a fixed compensation fee on top of the interest: £40 for debts under £1,000, £70 for £1,000–£9,999, and £100 for £10,000 or more.
The statutory rate is 8% per annum above the Bank of England base rate. The daily rate is: (invoice amount × (8% + base rate)) ÷ 365. For example, on a £5,000 invoice with a 4.25% base rate, the annual rate is 12.25%, giving a daily charge of £1.68. After 60 days overdue, the interest would be approximately £100.49. Use our calculator above to get the exact figure for your invoice.
You can charge statutory late payment interest on any business-to-business (B2B) commercial transaction once payment is overdue. The statutory payment period is 30 days from invoice or delivery of goods/services (whichever is later), unless a different payment period is agreed. You cannot contract out of the Act if doing so would be "grossly unfair" to the creditor. The Act does not apply to consumer debts.
In addition to interest, the Act entitles you to a fixed compensation fee to cover the cost of recovering the debt: £40 for debts under £1,000; £70 for debts of £1,000 to £9,999.99; and £100 for debts of £10,000 or more. If your actual recovery costs exceed this fixed amount, you can claim reasonable costs as an alternative. These fees can be added to every late invoice — they are per invoice, not per debtor.
No. The right to charge statutory late payment interest exists automatically by law — you don't need to include it in your contract or invoice. However, it is good practice to state your payment terms clearly on invoices and mention that statutory late payment interest will be charged on overdue amounts. This sets expectations and may encourage prompt payment.
Yes. If your contract specifies a higher rate of interest for late payment, that contractual rate applies instead of the statutory rate — provided it is not unreasonably high. Many businesses specify rates of 2–5% per month in their terms. Always check what your contract or terms of service say, as the contractual rate takes precedence over the statutory rate if it is higher.