UK late payment interest calculator

How to work out statutory late payment interest

1. Enter the unpaid amount. Use the invoice amount that is overdue, including VAT if it is part of the debt.
2. Enter the due date. This is the date payment was due under the contract, or 30 days after the invoice or goods and services, if no date was agreed.
3. Enter the payment date. Use the date the debt was paid, or today’s date to see the interest so far.
4. Check the base rate. The calculator chooses the Bank of England reference rate for your due date. You can override it if you want to use another figure.
5. Add the fixed recovery cost and claim. Keep the fixed cost option on to include £40, £70 or £100. Put the figures on a statement or reminder to the customer.

What the Late Payment Act lets you charge

In the UK, when a business or public body pays another business late, the supplier has a statutory right to claim interest and fixed compensation under the Late Payment of Commercial Debts (Interest) Act 1998. The right applies automatically to qualifying B2B contracts, unless the contract sets a substantial alternative remedy.

The rule has three parts:

1. Interest at 8% a year above the Bank of England base rate. The base rate used is a reference rate, fixed for six months at a time.
2. Fixed compensation for each late invoice: £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.
3. Reasonable additional recovery costs, if the fixed sum does not cover them, for example for debt collection costs.

The Act covers contracts for the supply of goods or services between businesses, and between public authorities and businesses. It does not cover payments by consumers, which are not a commercial debt for these purposes.

The formula, step by step

The calculator uses simple interest by day:

interest = debt × (reference rate + 8%) ÷ 365 × days late

• Days late are counted from the day after the due date up to the payment date.
• Reference rate is the Bank of England base rate on 30 June for debts that fall due from 1 July to 31 December, and the base rate on 31 December for debts that fall due from 1 January to 30 June.
• Fixed compensation is added once per invoice, whatever the number of days.

Worked example

Reference rates used by the calculator

The reference rate is the Bank of England base rate on a fixed date, so it only changes twice a year. The table shows the figures the calculator uses. Please check the latest figures: the base rate changes with Monetary Policy Committee decisions, and the next one is due on 5 November 2026, but the reference rate for debts due from 1 January 2027 depends on the base rate on 31 December 2026.

For the periods that began after our last full check, the reference rate is inferred from the base rate on the stated date. Please confirm it on the Bank of England page and use the override field if it differs.

When you can and cannot claim

• Business customers only. The right is against another business or a public authority, not a private consumer.
• Payment terms. If your contract states a payment date or a period, interest runs from the day after that date. If it does not, the default is 30 days after the later of receiving the invoice or the goods and services.
• Maximum agreed terms. Terms over 60 days must not be grossly unfair to the supplier. Some public contracts have shorter limits.
• Your own terms can reduce the right. A contract may include its own late payment remedy, but it must be substantial, or the statutory rules apply instead.
• Time limit. A claim is a debt claim and is subject to the normal limitation period, typically six years in England and Wales.
• Disputed invoices. If the invoice is genuinely disputed, interest depends on how the dispute ends.
• Keep claiming per invoice. The fixed sum applies to each late invoice, not each customer.

The Act is also being reviewed. The government has proposed measures on payment times and interest. Check GOV.UK for any change before you rely on these rules.

How to ask for the money

1. Send a polite reminder on the day after the due date, and keep the invoice link or PDF attached.
2. If you have not been paid after the reminder, send a formal letter that says you will claim statutory interest and the fixed sum, and set a payment deadline of 7 to 14 days.
3. Show the calculation: debt, due date, days, rate and amount. Our calculator’s result can be pasted into the letter.
4. Issue a separate invoice or statement for the late payment interest and fixed cost, if you want to claim them. Check with an accountant on the VAT treatment: interest on late payment is generally outside the scope of VAT.
5. If the customer still does not pay, consider a letter before action and the Money Claim Online service. Take legal advice if the amount is large.

Read our guides on what to do when a client does not pay and late fees and interest on invoices, and use the UK invoice generator to add a late payment clause to your terms.

A late payment clause for your invoice terms

You can state on your invoices that you will charge statutory interest. For example: “Payment is due within 30 days. We reserve the right to charge interest and compensation for debt recovery costs under the Late Payment of Commercial Debts (Interest) Act 1998.” This is an example, not legal advice. Alternatively, a contractual rate must be a substantial remedy to replace the statutory one.

Glossary

Reference rate

The Bank of England base rate on 30 June or 31 December that sets the rate for the next six months of due dates.

Statutory interest

Interest that the law gives you on late B2B payments, without a contract term.

Fixed compensation

A fixed sum per late invoice of £40, £70 or £100.

Commercial debt

A debt for goods or services supplied between businesses or to a public authority.

Substantial remedy

A contractual late-payment remedy that is adequate enough to replace the statutory one.

Related topics

• late payment interest calculator
• Late Payment Act
• 8% above base rate
• statutory interest
• fixed compensation £40 £70 £100
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• UK late fees
• commercial debt interest
• Bank of England reference rate
• overdue invoice interest
• debt recovery costs