Late Payment Interest Calculator

Under the Late Payment of Commercial Debts (Interest) Act 1998, UK businesses have a statutory right to charge interest and claim compensation when another business pays an invoice late. The statutory interest rate is the Bank of England base rate plus 8 percentage points per annum. Interest accrues from the day after the agreed payment date, or 30 days after delivery of the goods or services or receipt of the invoice, whichever is later, where no payment terms were agreed. The right applies automatically to overdue business-to-business invoices, so nothing needs to be written into the contract for it to bite.

Interest is worked out as the debt amount multiplied by the base rate plus 8%, divided by 365, then multiplied by the number of days overdue. With the base rate at 3.75% in 2026 the statutory rate is 11.75%, although you should check the current base rate before relying on any figure, because it moves. On a £5,000 invoice standing 30 days late that produces £48.29 of interest. Contract terms can specify a different rate, but it must be a substantial remedy, and where a contract sets an unreasonably low rate the statutory rate can still be invoked.

On top of interest sits a fixed compensation payment scaled to the size of the unpaid debt. Debts up to £999.99 attract £40, debts between £1,000 and £9,999.99 attract £70, and debts of £10,000 or more attract £100. Reasonable recovery costs can be claimed as well, such as sending reminder letters or instructing a debt collection agency, where the fixed sum does not cover them. Add the two together and that £5,000 invoice 30 days overdue is worth £118.29 in claimable charges rather than £48.29.

In practice the money is recovered through a sequence of escalating letters rather than by the calculation alone. A polite reminder goes out 7 to 14 days past the due date. A formal demand follows, citing the Late Payment Act and stating the interest and compensation being claimed. A final demand before legal action is sent 30 days after that, and most disputes settle at this stage. Only then does a money claim online make sense, where the court fee starts at £35 for claims under £300 and scales up with the value. The government estimates that late payment costs the UK economy £11 billion a year, so the Act is worth using. Stronger rules are on the way but are not yet law: the Commercial Payments Bill, introduced in the House of Lords on 19 May 2026, would cap payment terms at 60 days for large businesses paying smaller suppliers and make statutory late payment interest mandatory.

None of this reaches consumer debts. The 1998 Act covers business-to-business transactions and money owed by public authorities, so when the customer is a private individual you can charge interest only where your terms and conditions say so. Take a consumer to court and interest up to judgment is at the court's discretion unless your terms set a rate, while interest after judgment runs at 8% a year under the Judgments Act 1838 on High Court judgments and, under the County Courts (Interest on Judgment Debts) Order 1991, on County Court judgments of £5,000 or more. Any late penalty you set must be reasonable, and collection conduct has to stay within the unfair commercial practices rules in Part 4, Chapter 1 of the Digital Markets, Competition and Consumers Act 2024, which replaced the Consumer Protection from Unfair Trading Regulations 2008 on 6 April 2025 and prohibit aggressive debt collection.