Guide

Late payment interest in the UK

If a UK business owes you money and hasn't paid on time, you're entitled to charge statutory interest plus a fixed compensation fee — separately from the debt itself. This right comes from the Late Payment of Commercial Debts (Interest) Act 1998, as amended.

The rate

Bank of England base rate + 8%. The base rate is fixed for each six-month period (1 January and 1 July) using the rate in force on that date. Check the current base rate on the Bank of England site.

The fixed compensation

You can also add a flat fee per invoice, once, to cover recovery costs:

• £40 for debts under £1,000
• £70 for debts of £1,000 – £9,999.99
• £100 for debts of £10,000 or more

When does interest start running?

From the day after the agreed payment date. If no date was agreed, the default is 30 days after the later of: delivery of the goods/services, or receipt of the invoice.

Worked example

An invoice for £2,500 falls due on 1 March and is still unpaid on 1 July (122 days late). Assume base rate 5% — statutory rate is 13%.

• Daily interest: £2,500 × 13% ÷ 365 = £0.89/day
• Interest for 122 days: £108.58
• Fixed compensation: £70
• Total owed: £2,500 + £108.58 + £70 = £2,678.58

Consumer vs business debts

The statutory 8%-over-base rate and fixed compensation only apply to business-to-business debts. For debts owed by a consumer, you can claim interest under section 69 of the County Courts Act 1984 — currently 8% simple interest per year — but only once you issue proceedings, not before.

Including it in your letter

Add a line to your Letter Before Action showing the daily interest figure and stating it will continue to accrue until payment. See our step-by-step writing guide.

General information for England & Wales. Not legal advice.