Between businesses, yes, and you don't need anything in your contract to do it. What the law gives you is statutory interest plus a fixed sum of £40, £70 or £100. It stops short of letting you invent an administration fee, and an invented fee is where most disputes about late payment charges start.
The short version
- Two entitlements exist on a business debt: statutory interest, and a fixed sum by debt size.
- Both apply automatically as an implied contract term, with no need to mention them in your terms.
- A flat "late fee" of your own choosing is only enforceable if it's in the contract, and even then it interacts with the statutory right.
- You can claim reasonable recovery costs above the fixed sum, and that's the legitimate route to recovering real admin time.
- For a consumer customer the statutory right does not apply, so you're relying on fair contract terms.
The two things you can charge
The first is statutory interest. On a business to business debt this runs at 8% over the Bank of England base rate. The rate is fixed for each half-year by reference to the base rate on the preceding 30 June or 31 December, and that puts it at 11.75% a year for debts that started running interest between 1 July and 31 December 2026.
The second is a fixed sum. Once interest starts to run, you get a separate entitlement:
| Debt | Fixed sum |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
Neither needs to be written into your terms. The Act implies both into the contract, so a customer who tells you "your terms do not mention interest" hasn't got an answer.
Admin fees you set yourself
If you add a flat administration charge when an invoice goes overdue and your contract doesn't provide for it, the charge has no statutory footing. Nothing in the Act creates a general power to charge a fee for the inconvenience.
A legitimate route to the same place does exist, though. Section 5A(2A) entitles you to the difference where your reasonable costs of recovering the debt exceed the fixed sum, and GOV.UK describes this as being able to "claim for reasonable costs each time you try to recover the debt". The word doing the work is "reasonable": actual, evidenced cost of recovery, not a round number chosen because it looks discouraging.
The practical difference matters when your debt ends up in front of a judge. Interest and fixed sums under the Act are straightforward to evidence, but a £75 admin fee that appeared on the third reminder invites an argument you didn't need to have.
If your contract does specify a rate
Where you've agreed a contractual interest rate, that rate applies instead of the statutory one, and GOV.UK is direct about it: "You cannot claim statutory interest if there's a different rate of interest in a contract."
Section 8 sets the limit on that. It makes a term void so far as it purports to exclude the statutory right, "unless there is a substantial contractual remedy for late payment of the debt". Section 9 sets the test for substantial, and it leans towards upholding the agreed term: a remedy counts as substantial unless it is both insufficient to compensate or deter late payment, and it would be unfair or unreasonable to let it displace the statutory right.
So a contract rate set well below the statutory one is on weak ground, and a rate close to it is likely to stand. Either way, agreeing a rate closes off the statutory alternative, and that's worth knowing before you draft terms that quietly reduce your own position.
Consumers and public authorities
Statutory interest is a business to business right. GOV.UK frames it as what you can charge "if another business is late paying for goods or a service", so an invoice you send to a private individual falls outside it, and any charge you make then depends on your own terms being fair and clearly agreed.
With a public authority the position runs the other way. A lower contractual interest rate cannot be used, and the payment period itself cannot fall later than 30 days, under section 4(2D).
Whether to charge at all
The entitlement exists whether or not you use it, and most businesses don't. Government research put the proportion that had introduced or increased an overdue payment penalty at 5.9%. That covers penalties generally rather than statutory interest alone, and it's the clearest available indication of how rarely the right is exercised.
A middle position tends to work better than either extreme. Instead of adding small amounts of interest to early reminders, the approach that holds up is to state the entitlement in your terms and in any formal notice, then work it out properly once a debt gets serious enough that you're ready to act on it. A stated position carries weight. A £3 charge on a reminder mostly generates a reply about the £3.
The other thing worth saying is that a fee responds to a late payment and it doesn't prevent one. Invoices set to collect automatically are paid 98.0% of the time with 0.9% going overdue, against 90.8% paid and 5.3% overdue when collected on demand (Adfin platform data, requests created in the seven months to the end of January 2026). A direct debit mandate is usually behind the first figure.
Common questions
Can you charge late payment fees on overdue invoices in the UK? On a business to business debt, yes. You can charge statutory interest at 8% over the base rate and claim a fixed sum of £40, £70 or £100 depending on the size of the debt. Both apply automatically.
Do I need a clause in my terms to charge interest? No. Between businesses the right is implied into the contract by the Late Payment of Commercial Debts (Interest) Act 1998.
Can I charge a flat administration fee instead? Only if your contract provides for it, and even then it interacts with the statutory right. The route the Act provides is reasonable recovery costs above the fixed sum, and that has to be actual cost rather than a round number.
How much is the fixed sum? £40 for a debt under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. It can be charged once for each payment.
Can I charge a late fee to a consumer? The statutory right applies between businesses, so with a consumer you're relying on your own contract terms, and those terms have to be fair.
Does charging a fee make a client pay faster? There is no reliable evidence either way, and Adfin doesn't hold data that would settle it. What is measurable is that invoices set to collect automatically go overdue far less often than invoices collected on demand.
Sources
- legislation.gov.uk — Late Payment of Commercial Debts (Interest) Act 1998, section 4 (accurate as of August 2026)
- Department for Business and Trade and Small Business Commissioner — late payments research, impact on the UK economy (accurate as of August 2026)
- GOV.UK — claim debt recovery costs on an unpaid invoice (accurate as of August 2026)
This article explains how the late payment rules work and is not legal advice. The statutory interest rate is fixed for each half-year by reference to the Bank of England base rate on 30 June or 31 December, so check which half-year your debt falls in before you calculate. Last updated August 2026.
