UK Statutory Late Payment Interest: 11.75% and the Fixed Sum Most Suppliers Never Claim

Guides · Updated October 2026

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:

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:

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:

How to actually get paid

Knowing the right is one thing; collecting is another. The sequence that works:

1. 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.
2. 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.
3. 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.
4. 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.

Frequently asked questions

Related: How to Charge Interest on an Overdue Invoice Without Losing the Client