What you can actually charge on a late invoice

A customer owes you £6,400. The invoice was due in June. It is now the end of August, they have stopped replying to emails, and the working assumption in your business is that you will eventually get the £6,400 and that will be that.

You are entitled to more than £6,400. You have been since the day it went late — without writing anything into your contract, without asking, and without going to court. Most businesses never claim it. Partly because they don’t know, and partly because a lot of the advice online gets the number wrong.

The rate is not the one you think it is

The Late Payment of Commercial Debts (Interest) Act 1998 gives you interest on a late commercial debt at the Bank of England base rate plus 8%. That much is widely repeated. What gets repeated wrongly is which base rate.

It is not today’s. Under the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, the rate is taken from the base rate in force on one of two dates a year:

• 30 June: for debts where interest starts running between 1 July and 31 December;
• 31 December: for debts where interest starts running between 1 January and 30 June.

And it is fixed once. Article 4 sets the rate by reference to the day “immediately before the day on which statutory interest starts to run”, so it attaches to the debt, not to the calendar. If the Bank cuts in September, your rate doesn’t move. When the reference date rolls over on 31 December, it still doesn’t move: that debt keeps the rate it started with until it is paid.

The Bank held Bank Rate at 3.75% on 30 June 2026. So for a commercial debt where interest started running between 1 July and 31 December 2026:

And a fixed sum on top, per invoice

Section 5A of the same Act gives you compensation for the cost of chasing, as of right, on top of the interest. It scales with the size of the debt:

• £40: debt under £1,000
• £70: debt of £1,000 up to £9,999.99
• £100: debt of £10,000 or more

Two things people miss. It is per debt, not per customer. A customer sitting on nine unpaid invoices of £800 owes nine lots of £40, not one. And it is a floor, not a cap: where your reasonable costs of recovering the debt come to more than the fixed sum, s.5A(2A) entitles you to the difference as well. Instruct a solicitor to send a letter and that cost is recoverable, not something you quietly absorb.

The worked example

Back to the £6,400, paid 74 days late, in the second half of 2026.

• Interest: £6,400 × 11.75% = £752 a year, or £2.06 a day. Over 74 days: £152.46
• Compensation: the debt is between £1,000 and £10,000, so £70
• Total on top of the invoice: £222.46

Not life-changing on one invoice. Across a year of a customer who always pays sixty days late, it stops being a rounding error. But the real value isn’t the £222. It is that “we will be adding statutory interest and compensation from the due date” is a sentence that gets invoices paid, because the other side’s finance team knows it is true and knows it grows.

When the clock starts, and why 60 days is a myth

This is where a lot of published advice has it backwards, so it is worth being precise.

If you did not agree a payment date, the default is 30 days. Not 60. Section 4(2A)(b) makes the relevant day the last day of the 30-day period, and that period runs from the latest of you performing, or the customer receiving notice of the amount owed. It applies whoever the customer is.

The 30 and 60 day figures people quote are a different thing entirely. They are ceilings on an agreed date, not defaults. If the customer is a public authority, an agreed payment day later than 30 days is cut back to 30 (s.4(2D)). If it is an ordinary business, an agreed day later than 60 days is cut back to 60 (s.4(2E)), and a longer term survives only where it is not grossly unfair to the supplier.

The upshot is better than most businesses assume: silence on your invoice doesn’t put you on 60 days. It puts you on 30.

The catch worth knowing

You can contract out of statutory interest, but only just barely.

Under s.8, a contract term that excludes the right to statutory interest is void unless the contract provides “a substantial contractual remedy for late payment”. Section 9 sets the test: a remedy is not substantial if it is insufficient to compensate for or deter late payment and it would not be fair or reasonable to let it displace the statutory right. That is judged on the circumstances when the terms were agreed — including the balance of bargaining power, whether the terms were imposed on you unilaterally, and whether you got anything in return for accepting them.

In practice: if a large customer’s standard terms quietly cap late-payment interest at 2%, that clause is doing a lot of work it may not be entitled to do. Worth a second look rather than an assumption.

The flip side matters too. If your terms set a sensible interest rate of your own, that can validly replace the statutory rate, and some businesses prefer that for the certainty.

Jurisdiction

The Act extends to England, Wales, Scotland and Northern Ireland. The interest and the compensation above are the same in all four.

What differs is what happens when they still don’t pay. Court procedure, the pre-action steps you are expected to take, and the routes for enforcing a judgment are materially different in Scotland and in Northern Ireland from England and Wales. That is a separate piece, and we would rather write it properly than fudge it here.

What to do this week

1. Check your invoice terms. Know whether you are on an agreed date or the 30-day default, and whether an agreed date is longer than the ceiling allows.
2. Work out what you are owed on every overdue invoice. Interest from the relevant day at 11.75% for anything that went late since 1 July, plus £40, £70 or £100 each.
3. Put the number in writing. Not a threat — a statement of the position, with the statute named and the figures shown. That alone clears a surprising number of debts.
4. Keep claiming it. The entitlement is automatic, but nobody pays it unless you ask.

This article is general information about UK law, not legal advice for your situation. Almost Legal is AI drafting software grounded in UK law, not a law firm — you review and send everything it produces.