If your client is a business, the interest and fixed compensation are owed whether or not they agree, because the Late Payment of Commercial Debts (Interest) Act 1998 writes them into every business contract. Whether to insist is a commercial call: you can answer the objection, waive the charge in writing on conditions, or claim it alongside the invoice if things go further.
In this article
The short version
- Between businesses, interest and compensation are owed whether or not the client agrees.
- Most objections have a factual reply, from 'not in our contract' to '90-day terms'.
- Waiving can make sense, but do it in writing with a condition and a date.
- If the invoice is unpaid, claim the interest with it in a money claim.
- Check your own terms first: a contract rate replaces statutory interest.
Are you still entitled to it?
Yes, if the invoice was to a business. Statutory interest at 8% above the Bank of England base rate (11.75% a year for invoices that go late before 1 January 2027) and fixed compensation of £40, £70 or £100 apply automatically. Your client didn't have to agree to them and your terms don't have to mention them.
Check your own side before you reply, though. If your terms set your own late payment interest rate, you're entitled to that rate instead of statutory interest, not both. The fixed compensation comes with statutory interest, so a reminder that claims your contract rate and the statutory compensation together may give your client a fair point to push back on.
And if the client is a private individual, the Act doesn't apply. You're relying on whatever late payment term they agreed to, and that term has to be fair.
What to say to the usual objections
Most refusals take one of a handful of forms, and most of them have a factual answer.
| What your client says | What you can say |
|---|---|
| "It isn't in our contract." | "It doesn't need to be. The Late Payment of Commercial Debts (Interest) Act applies between businesses whether or not either of us wrote it down." |
| "Our purchase terms exclude interest." | "Could you send me the clause? A term that removes the right to interest is void unless it gives the supplier a substantial remedy for late payment instead." |
| "We pay everyone at 90 days." | "Where a payment term runs past 60 days, the law cuts it back to 60 unless the longer term isn't grossly unfair to the supplier. Let's agree a due date we can both work to." |
| "We'll pay the invoice but not the interest." | "Thanks, please settle the invoice today. The interest and compensation are a separate amount and stay on the account." |
| "Nobody charges this." | "That's fair, very few businesses do. It still applies to every late invoice between businesses." |
The last one has some truth in it: government research found only 5.9% of businesses had introduced or increased a penalty for late payment. It shows how rarely the right is used, but it doesn't change whether it applies.
The objection with no factual answer is the commercial one: "charge us this and we'll go elsewhere." The law can't settle that one, so it's a decision for you.
Waive it or hold firm?
Being entitled to the charge and insisting on it are separate decisions. On a £600 invoice paid three weeks late, the interest is a little over £4 and the compensation is £40, which may be less than the cost of the email thread about it.
Waiving tends to make sense for a long-standing client who pays well and slipped once, or where there's an unresolved issue with your own work. Holding firm tends to make sense for a client who's been late on several invoices in a row, or one who tells you they pay everyone late as a matter of course.
If you waive it, say so in writing and attach a condition, because a client who sees a charge quietly disappear may assume it was never real. Something like this works:
"I'll waive the interest and the £70 compensation on invoice 1042 this time, as long as it's settled by Friday. They'll apply as normal on future invoices, so if our payment terms don't suit your payment run, let me know and we'll agree dates that do."
That makes it a decision you made, ties it to a date and invites the client to fix the timing. Waiving every time, on the other hand, can turn into a longer payment term you never meant to give.
Keeping track of who you've waived and who you haven't is hard to do by hand across a whole client list. Adfin keeps that list for you: once you switch late fees on, statutory interest goes on every overdue business invoice unless you've waived it for that customer, so the charge applies to every slow payer except the ones you've chosen to exempt. Its collection agents keep chasing the invoice itself over email, SMS or WhatsApp within rules you approve.
If the client still won't pay
Put it in writing once, with the numbers worked out: the invoice, the amount, the interest to date, the compensation and a deadline. Government guidance is to send a separate invoice for the interest, and the Small Business Commissioner has a free calculator to check your figures.
If the invoice itself is still unpaid, you can claim the interest and compensation with it in a county court money claim, which you can start online in England and Wales. Claims up to £10,000 normally go to the small claims track, and the court fee depends on the amount: £205 for a claim between £3,000.01 and £5,000, for example. Before you issue, send a letter before claim and give a limited company a reasonable time to reply, usually 14 days.
If the invoice has been paid and only the interest is in dispute, mediation is likely to be more proportionate than court. Take advice if the sums are large or the client disputes the original invoice.
Common questions
Can a client refuse to pay late payment interest? They can decline to pay, but that doesn't remove the entitlement. Between businesses, statutory interest and fixed compensation apply whether or not the client agrees.
Do I need interest in my terms for it to apply? No. The right is implied into every business contract. If your terms set your own rate, you claim that instead of statutory interest.
What if my client's terms say they don't pay interest? A term removing the right is void unless it gives you a substantial remedy for late payment instead. Ask to see the clause.
Should I waive late payment interest to keep a client? Sometimes. If you do, put it in writing, make it conditional on a payment date and say it will apply as normal next time.
Can I claim interest after the invoice has been paid? Yes. The interest and compensation are a separate debt, so paying the invoice doesn't cancel them, though pursuing them alone may not be worth the cost.
How do I recover interest a client won't pay? Send a written claim with the figures worked out, then include it in a county court money claim if the invoice is still unpaid. Claims up to £10,000 normally go to the small claims track.
Sources
- legislation.gov.uk - Late Payment of Commercial Debts (Interest) Act 1998 (accurate as of October 2026) https://www.legislation.gov.uk/ukpga/1998/20/contents
- GOV.UK - Late commercial payments: interest on late commercial payments (accurate as of October 2026) https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt
- GOV.UK - Make a court claim for money: court fees (accurate as of October 2026) https://www.gov.uk/make-court-claim-for-money/court-fees
- Small Business Commissioner - Interest calculator (accurate as of October 2026) https://www.smallbusinesscommissioner.gov.uk/help-and-guidance/interest-calculator/
- Department for Business and Trade - Late payments research: impact on the UK economy (accurate as of October 2026) https://www.gov.uk/government/publications/late-payments-research-impact-on-the-uk-economy
