UK Statutory Late Payment Interest: 11.75% and the Fixed Sum Most Suppliers Never Claim
Most UK freelancers and small businesses are sitting on a legal right they have never used. Under the Late Payment of Commercial Debts (Interest) Act 1998, you can charge statutory interest on overdue business invoices automatically. You do not need a late fee clause in your contract. You do not need to have warned the client. The right is implied into the contract by statute, so it applies even if your invoice was a plain total with a due date. I have watched suppliers leave thousands of pounds unclaimed simply because nobody told them this exists.
The rate right now: 11.75% per year
The statutory rate is the Bank of England base rate plus 8 percentage points, fixed in six month blocks. The reference rate is the base rate in force on 30 June for debts falling due July to December, or 31 December for debts falling due January to June. The base rate has been 3.75 percent since June 2026, so:
| Debts falling overdue | Reference date | Statutory rate |
|---|---|---|
| July to December 2025 | 30 June 2025 | 12.25% |
| January to June 2026 | 31 December 2025 | 11.75% |
| July to December 2026 | 30 June 2026 | 11.75% |
Interest is simple, not compound, and runs from the day after payment was due on a 365 day year. One practical wrinkle: the rate is fixed by when the debt fell due, not when you get around to claiming. If an invoice went overdue in May 2026, the 11.75 percent rate from that half year applies even if you invoice the interest in October.
Who it covers, and who it does not
The Act covers commercial debts: a business supplying goods or services to another business, or to a public authority. A limited company, a partnership, and another sole trader all count. A private householder does not. This is the sentence most guides skip, and it matters: if your customer is a consumer, you have no statutory right and can only charge interest if your terms said so before the work started. Get this wrong and you will look foolish in front of exactly the client you are trying to impress.
If your contract already provides its own late payment remedy or rate, the statutory regime may not apply. The statute is the fallback, not an override. Check your contract first.
The fixed compensation almost nobody claims
Here is the part I find genuinely surprising. On top of the interest, the Act lets you claim a fixed sum per overdue invoice as compensation for recovery costs:
| Debt size | Fixed compensation |
|---|---|
| Under £1,000 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
This is per invoice, not per client, and both the interest and the compensation are outside the scope of VAT. On a small overdue invoice, the £40 fixed sum can exceed the interest itself, which is precisely why it exists: chasing a £600 invoice should not cost you money. Yet in my experience, most small suppliers have never heard of it. Claim it. It is the law, not a favor.
When the clock starts
Interest runs from the day after the agreed payment date. If no payment terms were agreed, the law defaults to 30 days from the later of the invoice date or the date the goods were delivered or services provided. Public authorities must pay within 30 days. Business to business contracts can agree payment terms up to 60 days. Anything longer needs to be fair and expressly agreed, and grossly unfair terms can be challenged.
A full worked example
Take a design agency owed £4,800 on an invoice due 1 June 2026, paid on 2 September 2026. That is 93 days late. The contract says nothing about interest, so the statutory rate applies:
£4,800 invoice, 93 days late, statutory rate 11.75%
Interest: £4,800 × 11.75% ÷ 365 × 93 = £143.70
Fixed compensation (debt £1,000 to £9,999.99): £70
Total claimable on top of the £4,800: £213.70
The debt also accrues roughly £1.55 for every additional day it stays unpaid.
How to actually get paid
Knowing the right is one thing; collecting is another. The sequence that works:
- Remind, then state your rights. A polite reminder on the due date, then a second one a week later that quotes the interest and compensation now accruing. Many customers pay at this point. The quote of a specific number does more work than any threat.
- Issue an interest invoice. A separate invoice for the interest and compensation, referencing the original. Run the figures through our calculator so the math is exact.
- Letter before action. State the debt, the interest, and the compensation, and give 14 days before court proceedings. Templates are widely available, and the letter itself often produces payment.
- Money Claim Online. For debts under £10,000, the small claims track is designed for businesses without solicitors. Fees start at £35 and get added to the claim.
Calculate statutory interest on your overdue invoice.
UK, EU, and US state rates with the statute cited for each.
Run your own numbers with the free calculatorFrequently asked questions
Do I need a late payment clause in my contract to charge statutory interest?
No. The right under the Late Payment of Commercial Debts (Interest) Act 1998 is implied into qualifying commercial contracts automatically. It applies even if your invoice and contract never mentioned interest. The exception is if your contract already provides its own late payment remedy, which can displace the statutory regime.
Can I charge statutory interest on invoices to private individuals?
No. The Act applies to business to business and business to public authority debts only. Consumer debts are governed by separate rules, and you can only charge a consumer interest if your terms provided for it before the work started.
Is VAT charged on late payment interest?
No. Both the statutory interest and the fixed compensation sums are outside the scope of VAT in the UK. Do not add VAT to the interest invoice.
What if the debt fell overdue in an earlier half year?
Use the base rate in force on the reference date for that half year: 30 June for July to December debts, 31 December for January to June debts. The rate is locked to when the debt became overdue, not when you claim. Our calculator lets you enter the correct rate for older debts.
Related: How to Charge Interest on an Overdue Invoice Without Losing the Client