Yes, if the client is a business. Your fees to a company, partnership or self-employed client are covered by the Late Payment of Commercial Debts (Interest) Act 1998, so you can charge statutory interest (currently 11.75% a year) plus £40 to £100 of fixed compensation, even if your engagement letter says nothing about it. For private clients, such as an employee who pays you to do their tax return, you need an interest term in the engagement letter.
In this article
The short version
- Fees to business clients carry statutory interest and fixed compensation automatically.
- Private clients fall outside the Act, so you need a fair interest term in the engagement letter.
- A low contract rate in the letter can weaken your position.
- Liens are limited by professional body rules; check your institute's guidance.
- Resigning doesn't cancel the fee or stop interest running.
Do the late payment rules cover accountancy fees?
The 1998 Act applies to contracts for goods or services where both sides are acting in the course of a business, and it defines business to include a profession. So when you bill a limited company, a partnership or a sole trader for work on their business, your fee note is a commercial debt like any other.
That gives you two charges once a fee is late, with nothing needed in your engagement letter:
- Statutory interest at 8% above the Bank of England base rate. With the base rate at 3.75%, that's 11.75% a year, charged daily.
- Fixed compensation once per fee note: £40 under £1,000, £70 from £1,000 to £9,999.99, and £100 on £10,000 or more.
Take a £3,000 year-end fee paid 60 days after it was due. The interest comes to £57.95 and the compensation to £70, so you could claim £127.95 on top of the fee.
The fee is late once the payment date in your engagement letter has passed. If you didn't set one, it's late 30 days after the client receives your invoice or you finish the work, whichever is later.
A client who isn't in business falls outside the Act. An employee who pays you to do their self-assessment return, or a pensioner whose affairs you look after, is a consumer, so any interest depends on a fair term they agreed in advance.
What your engagement letter should say
Because the Act applies even when your letter says nothing, you don't need an interest clause for business clients. Practices can get caught out by adding one that weakens their position.
If your letter sets its own late payment rate, that rate replaces statutory interest, and it has to be a substantial remedy for late payment. A clause offering 1% or 2% a year risks being void, in which case statutory interest applies anyway, but it invites an argument you didn't need. You also can't use both: if you charge interest at your contract rate, you can't then claim statutory interest on the same fee.
A letter that does its job on payment usually covers:
- the fee basis, in terms the client can check (fixed fee or hourly rates, and what could make the fee rise)
- a payment date, so you're not relying on the 30-day default
- an interest term for private clients, who aren't covered by the Act
- your right to stop work if fees go unpaid, with notice
- how the client will pay, if you want fees collected by direct debit from the start
Can you hold records or stop work until you're paid?
A lien, the right to keep a client's papers until you're paid, is narrower than its reputation. Professional body rules limit it. The CIOT and ATT rules, for example, put documents that must be available for public inspection, Companies Act accounting records and VAT records outside a lien, and ask members to weigh whether holding papers is proportionate before they do it. ICAEW publishes its own guidance for members. In practice, you're usually left holding your own working papers, not the records your client needs to file.
Stopping work is the other option, and the professional rules expect you to give reasonable notice first. Telling a client you'll stop acting unless payment arrives by a set date can be enough to move a stalled fee. Resigning doesn't cancel what's owed: the fee stays payable, and interest keeps running until it's paid.
Check your own institute's current rules, and take advice, before you hold papers or cease to act.
How to get fees paid before interest comes into it
Interest is a remedy for a fee that's already late. It's usually less work to make lateness less likely in the first place.
If you send proposals through Socket, Adfin puts the direct debit mandate inside the proposal, so your client agrees the fee and sets up the mandate in the same step, and later fees are collected on the due date without anyone chasing. For clients who pay by invoice, Adfin's AI Customer Agents chase over email, SMS and WhatsApp on the schedule you set, from your own email domain, and can charge statutory interest on business clients' overdue fees within rules you set. You can waive it for the long-standing client you'd rather not charge, and every payment is matched back to the invoice in Xero or QuickBooks.
Common questions
Can accountants charge interest on late fees without a clause in the engagement letter? Yes, for business clients. The 1998 Act implies statutory interest and fixed compensation into every business contract, including professional services.
What interest rate can an accountant charge on unpaid fees? 8% above the Bank of England base rate, which is 11.75% a year for fees that go late between 1 July and 31 December 2026.
Can I charge interest on a private client's unpaid tax return fee? Only under a fair term in your engagement letter. Private clients who aren't in business fall outside the Late Payment Act.
Is it risky to put a low interest rate in the engagement letter? It can be. A contract rate replaces statutory interest only if it's a substantial remedy, so a token rate may be void and invites dispute.
Can I keep a client's records until they pay? Only within your professional body's rules, which put statutory records such as Companies Act accounting records and VAT records outside a lien. Check your institute's guidance first.
Does resigning from a client cancel the unpaid fee? No. The fee stays payable after you cease to act, and statutory interest keeps running until it's paid.
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
- ATT and CIOT - Professional Rules and Practice Guidelines (accurate as of October 2026) https://www.att.org.uk/sites/default/files/PRPG%20%28Update%201.1.2021%29%20-%20Final.pdf
- ICAEW - Exercising liens (accurate as of October 2026) https://www.icaew.com/technical/tas-helpsheets/ethics/exercising-liens
- ACCA - Fee disputes and negligence (accurate as of October 2026) https://www.accaglobal.com/gb/en/technical-activities/technical-resources-search/2021/march/Fee-disputes-and-negligence.html
- Adfin - Socket integration (accurate as of October 2026) https://www.adfin.com/integrations/socket
