If your customer is another business, statutory interest is 8% above the Bank of England base rate, which makes it 11.75% a year for any debt that became late between 1 July and 31 December 2026. The part most articles get wrong is that the rate is fixed for the half-year and doesn't move with the base rate, and you can claim the fixed sum of £40, £70 or £100 on top of it.
The short version
- Statutory interest is 8% over the base rate, and under section 1 of the Late Payment of Commercial Debts (Interest) Act 1998 it's simple interest, not compound.
- The base rate used is the one in force on the previous 30 June or 31 December, not today's, under article 4 of the 2002 Order.
- For a debt that became late in the second half of 2026 that gives 11.75%, and it stays 11.75% for the whole half-year.
- You can also claim a fixed sum of £40, £70 or £100 by debt size.
- The right applies between businesses only, and your contract can displace it if it offers a substantial remedy instead.
The rate, and the half-year that sets it
The Act sets statutory interest as an implied term in your contract, and leaves the rate to be set by order. The order currently in force is the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, and article 4 is worth reading closely:
"The rate of interest for the purposes of the Late Payment of Commercial Debts (Interest) Act 1998 shall be 8 per cent per annum over the official dealing rate in force on the 30th June (in respect of interest which starts to run between 1st July and 31st December) or the 31st December (in respect of interest which starts to run between 1st January and 30th June) immediately before the day on which statutory interest starts to run."
Two consequences follow, and you'll rarely see either of them spelled out.
There are only two rates a year. Whichever base rate was in force on 30 June applies to every debt that starts running interest between 1 July and 31 December. So if the Bank of England moves the base rate in September, the statutory rate on your debt doesn't change.
And what fixes your rate is the day interest started to run on that particular debt, so two invoices to the same customer can carry different rates if one of yours went late in June and the other in July.
| Interest starts to run | Base rate that applies | Statutory rate |
|---|---|---|
| 1 January to 30 June | The rate in force on the previous 31 December | That rate plus 8% |
| 1 July to 31 December | The rate in force on the previous 30 June | That rate plus 8% |
The Bank of England base rate was 3.75% on 30 June 2026 and it's been held at 3.75% since, so if your debt started running interest at any point in the second half of 2026 it carries 11.75% a year.
The fixed sum on top
Once statutory interest begins to run, you also get a fixed sum, and it doesn't depend on how long the debt has been late:
| Debt | Fixed sum |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
GOV.UK puts one limit on what you can claim: "You can only charge the business once for each payment." The less well-known part is in section 5A(2A) of the Act, and it says that where your reasonable recovery costs exceed the fixed sum, you're entitled to the difference as well. GOV.UK phrases the same point as being able to "claim for reasonable costs each time you try to recover the debt".
On a small invoice the fixed sum is usually worth more to you than the interest. If you're paid three weeks late on a £600 invoice, the interest is a little over £4 and the fixed sum is £40.
When your contract changes the answer
Your contract can displace statutory interest, but only on terms. Section 8 makes a term void where it purports to exclude the right, "unless there is a substantial contractual remedy for late payment of the debt". Where you and your customer have agreed a remedy that is substantial, the debt carries that remedy instead of statutory interest.
Section 9 then defines the test, and it's set up to favour the agreed term: a remedy counts as substantial unless it is both insufficient to compensate or deter, and it would not be fair or reasonable to allow it to displace the statutory right. Both limbs have to fail. Relevant circumstances are judged at the time the terms were agreed, and the factors include the relative bargaining strength of the parties and whether the term was imposed by one on the other.
The practical reading: a contract rate of 2% a year is unlikely to survive as a substantial remedy. A rate close to the statutory one probably will, and if you've agreed one, GOV.UK is clear that you cannot then claim statutory interest instead.
Who can claim it
The right runs between businesses. GOV.UK describes statutory interest as what "you can charge if another business is late paying for goods or a service", so an invoice you send to a consumer falls outside it, and any interest you charge there depends on your contract terms and on those terms being fair.
Where your customer is a public authority, the position is tighter: a lower contractual interest rate cannot be used, and the payment period itself cannot run past 30 days, under section 4(2D) of the Act.
Whether to charge it at all
The entitlement is automatic and you don't have to mention it in your contract, but almost nobody uses it. Government research found that only 5.9% of businesses had introduced or increased a penalty for overdue payment on their sales invoices, in research for DBT and the Small Business Commissioner. That figure covers penalties generally rather than statutory interest specifically, and it's the best available indication of how rarely the right is used.
There's a reasonable case for stating the position rather than invoicing small amounts of interest early. Naming the entitlement in a formal notice tends to carry more weight than adding £4 to your reminder, and it keeps your options open. If you do decide to charge, government guidance is to send a new invoice for the interest.
Common questions
How much interest can you charge on a late payment in the UK? Between businesses, 8% above the Bank of England base rate. For a debt that started running interest between 1 July and 31 December 2026 that is 11.75% a year, using the 3.75% base rate in force on 30 June 2026.
Is the rate the base rate today or the base rate when the invoice went late? Neither exactly. It's the base rate in force on the 30 June or 31 December before interest started to run on that debt, and it then applies for that whole half-year.
Is statutory interest simple or compound? Simple. Section 1 of the Act describes a qualifying debt as carrying "simple interest".
Can I charge interest if my contract says nothing about it? Yes, between businesses. The right is an implied term, so it applies whether or not your contract mentions interest.
Can a customer's terms remove my right to interest? Only where they provide a substantial remedy for late payment instead. A term that excludes the right without offering a substantial alternative is void under section 8.
Can I charge interest to a consumer customer? The statutory right covers business to business debts, so for a consumer you're relying on your own contract terms, and those terms have to be fair.
Sources
- legislation.gov.uk — Late Payment of Commercial Debts (Interest) Act 1998, section 1 (accurate as of August 2026)
- legislation.gov.uk — Late Payment of Commercial Debts (Interest) Act 1998, section 4 (accurate as of August 2026)
- legislation.gov.uk — Late Payment of Commercial Debts Regulations 2002, article 4 (accurate as of August 2026)
- Bank of England — the interest rate, Bank Rate (accurate as of August 2026)
- GOV.UK — claim debt recovery costs on an unpaid invoice (accurate as of August 2026)
- DBT and the Small Business Commissioner — late payments research, impact on the UK economy (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.
