Getting paid

Late fees and interest on invoices: what is allowed

You can often charge for late payment, but the amount, the rules and what you need to say in advance depend on where you operate. Put the terms in writing before the invoice is overdue.

By the InvoiceDesk editorial team · Published 23 October 2026 · Updated 28 October 2026 · How we write

UK: statutory interest and fixed sums

Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can claim interest on late payment of commercial debts, at 8% a year over the Bank of England base rate, plus a fixed sum of £40, £70 or £100 depending on the size of the debt (under £1,000, £1,000 to £9,999.99, and £10,000 or more), plus reasonable recovery costs. This applies unless your contract sets a different substantial remedy. The late payment interest calculator works out the amounts. The government has proposed reforms, so check GOV.UK for the current position.

EU: the Late Payment Directive

Directive 2011/7/EU sets rules for commercial transactions: payment is due within 30 days by default, businesses can agree up to 60 days (longer if not grossly unfair), interest is at least 8 percentage points above the ECB reference rate, and creditors can claim a minimum €40 fixed compensation. Each country implemented the directive in its own law, so the details vary.

US, Canada, Australia and New Zealand

There is no general statutory late-payment interest for private business debts in the US, Australia or New Zealand. You rely on the contract or invoice terms. In the US, state laws limit interest rates (usury), and some states restrict fees. Canada’s federal rules are limited, and provinces differ. In all of them the best protection is a written term, accepted by the customer, saying exactly what happens when an invoice is late, such as “1.5% per month on overdue balances”.

How to word it

State the payment due date and the late charge in your quote or contract and on the invoice.
Use a clear rate or fixed amount: “1.5% per month, or the maximum allowed by law if lower”.
Say when interest starts: the day after the due date.
Do not add an unreasonable penalty. A charge that looks punitive can be unenforceable, especially for consumers.

Use it wisely

Late fees are a tool for firm, polite reminders, not a replacement for them. Many businesses waive the fee for a good customer who pays after one reminder, while stating clearly that they may enforce it. See what to do when a client does not pay and how to get paid faster.

Check official guidance. We could not fully confirm these points against an official page when we last reviewed, so please verify them before relying on them:

UK late-payment reforms were proposed. Confirm the current rules on GOV.UK. Local rules on fees and interest vary.

Frequently asked questions

Can I charge a late fee to consumers?

Consumer law is stricter. Fees must be clear in advance and reasonable.

Is 1.5% a month legal?

It equals 18% a year. It may be allowed in some places and above limits in others. Check local rules.

Can I charge interest if my invoice does not mention it?

In the UK and EU, statutory interest can still apply to business debts. Elsewhere, you usually cannot without agreement.

What is the Bank of England base rate?

The Bank of England’s policy rate. The calculator uses the rate in force on the relevant dates.

How do I apply interest in practice?

Send a statement showing the invoice, due date, days overdue, rate and interest. Offer to waive it if payment arrives by a date.