Late payment interest in the UK: what you can charge business customers
When another business pays you late, UK law lets you add interest and a fixed amount for the cost of chasing. Here’s how it works, and how to raise it without souring the relationship.
Updated 27 October 2026
Who it applies to
The Late Payment of Commercial Debts (Interest) Act 1998 covers money owed by one business to another, including public bodies, for goods or services. It doesn’t apply to consumers.
When a payment is late
If you agreed a payment date, it’s late the day after that date. If you didn’t agree one, it’s late 30 days after the customer received your invoice, or after you delivered the goods or service, whichever is later.
Agreed payment periods between businesses are normally up to 60 days, unless both sides agree a longer period is fair. Public authorities should normally pay within 30 days.
Statutory interest: 8% above base rate
You can claim interest at 8% a year plus the Bank of England base rate. The base rate used is fixed twice a year: the rate on 31 December applies to debts that become late from 1 January to 30 June, and the rate on 30 June to those from 1 July to 31 December.
You can’t claim statutory interest if your contract sets a different rate of interest for late payment.
Working out the interest
GOV.UK sets out a simple way to do it:
- Multiply the amount owed by the total rate (8% plus base rate) to get a year’s interest
- Divide by 365 to get the daily interest
- Multiply by the number of days late
Fixed compensation
On top of interest, you can claim a fixed sum for the cost of recovering each late payment:
- £40 for a debt under £1,000
- £70 for a debt of £1,000 to £9,999.99
- £100 for a debt of £10,000 or more
How to ask, politely
Statutory interest is a right, but it works best as a nudge. Mention it in your payment terms, remind the customer before you add it, and send a new invoice showing the interest and compensation when you do. Many businesses waive it for a good customer who pays promptly once reminded.
- Put your payment terms on every invoice
- Remind before the due date, and on it
- Explain what you’ll add, and from when
- Send a new invoice for the interest and compensation
- Keep a note of every reminder
Official sources
- GOV.UK: Late commercial payments: charging interest and debt recovery
- GOV.UK: Interest on late commercial payments
- GOV.UK: Claim debt recovery costs on late payments
- Legislation.gov.uk: Late Payment of Commercial Debts (Interest) Act 1998
- Bank of England: Bank Rate
This guide is general information, not legal advice.