If your customer is a business, you can charge statutory interest at 8% above the Bank of England base rate, which is 11.75% a year for invoices that go late before 1 January 2027. On top of that you can add fixed compensation of £40, £70 or £100 depending on the invoice size, plus any reasonable recovery costs above that sum. You don't need any of it in your contract.
In this article
The short version
- Statutory interest is 8% above the Bank of England base rate: 11.75% a year now.
- The rate is fixed for each half-year, so it doesn't change while an invoice is outstanding.
- Add fixed compensation of £40, £70 or £100, once per invoice.
- Reasonable recovery costs above the fixed sum can be claimed with evidence.
- A substantial contract rate replaces statutory interest; a court can reduce interest for your own conduct.
How much is statutory interest?
Under the Late Payment of Commercial Debts (Interest) Act 1998, a late business invoice carries interest at 8% above the Bank of England base rate. With the base rate at 3.75%, that's 11.75% a year. It's simple interest, so it doesn't compound, and it builds daily from the day after the payment was due until the day you're paid.
The rate doesn't follow the base rate up and down while your invoice is outstanding. It's fixed for each half-year:
- If interest starts to run between 1 July and 31 December, you use the base rate in force on the 30 June before.
- If it starts between 1 January and 30 June, you use the base rate on the 31 December before.
The base rate was 3.75% on 30 June 2026, so any invoice that goes late in the second half of 2026 carries 11.75% for as long as it stays unpaid, even if the Bank of England changes the rate in November. Invoices that go late from January 2027 will use whatever the base rate is on 31 December 2026.
If you didn't agree a payment date, the invoice becomes late 30 days after your customer receives it, or 30 days after you deliver the work if that's later, and interest runs from then.
What you can add on top of the interest
Once interest starts to run, you're also entitled to a fixed sum of compensation for the cost of chasing:
- £40 on an invoice under £1,000
- £70 from £1,000 to £9,999.99
- £100 on £10,000 or more
You can claim it once per invoice, however long the payment drags on, so adding £40 to every reminder isn't something the Act allows. You don't have to have warned your customer first either.
If recovering the debt costs you more than the fixed sum, you can claim the difference as reasonable recovery costs. That means real, evidenced costs, such as a collection agency's or a solicitor's charges, not a round-number admin fee. Keep a record of what you spent and when, so each figure has something behind it.
Here's what the claim looks like on three invoices each paid 30 days late at 11.75%:
| Invoice | Interest for 30 days | Fixed compensation | Total claim |
|---|---|---|---|
| £600 | £5.79 | £40 | £45.79 |
| £4,500 | £43.46 | £70 | £113.46 |
| £15,000 | £144.86 | £100 | £244.86 |
On smaller invoices, the compensation is worth far more than the interest. On larger invoices, or ones that stay unpaid for months, the interest soon overtakes it.
When the amount changes
Your contract can replace statutory interest with its own late payment rate, as long as that rate is a substantial remedy for late payment. If you've agreed one, you charge your contract rate and can't claim statutory interest as well. A very low rate, such as 2% a year, risks being treated as no remedy at all, in which case the statutory rate applies instead. With a public authority, you can't agree a lower rate than the statutory one.
The amount can also be cut by a court. If your own conduct contributed to the delay, for example you invoiced the wrong amount or left a reasonable query unanswered, a court can reduce or remove the interest you claim. A clean file helps: the work delivered, a correct invoice, proof it was received and your reminders on record.
None of this applies to consumers. If your customer is a private individual, you can only charge late interest under a fair term they agreed to in advance.
How to claim it
Government guidance is to send a new invoice for the interest instead of adding it to the original. Quote the original invoice number and show the working: the amount, the due date, the rate, the days late and the compensation on its own line. The Small Business Commissioner has a free calculator if you want to check your figures.
Doing that by hand for every slow payer takes time, and it's easy to let it slide when the week gets busy. Adfin works the interest out for you. Once a business invoice passes its due date and any grace period you've set, statutory interest is added and the existing payment link shows the up-to-date total, so there's no second invoice to raise. You can waive it for customers you'd rather not charge, and leave the follow-ups to Adfin's AI Customer Agents, which chase over email, SMS and WhatsApp within rules you approve.
Common questions
What is the statutory interest rate for late payment in the UK? 8% above the Bank of England base rate. With the base rate at 3.75%, that's 11.75% a year for invoices that go late between 1 July and 31 December 2026.
Is late payment interest simple or compound? Simple. It's calculated daily on the unpaid invoice amount and doesn't compound.
Does the rate change if the Bank of England changes the base rate? Not for invoices already late. The rate is fixed by the base rate on the 30 June or 31 December before interest started to run.
How much compensation can I add to a late invoice? £40 under £1,000, £70 from £1,000 to £9,999.99, and £100 on £10,000 or more, once per invoice.
Can I charge interest if my contract doesn't mention it? Yes, if your customer is a business. The right is implied into every business contract by the 1998 Act.
Can I charge statutory interest and my own contract rate together? No. If your contract sets a substantial late payment rate, that rate applies instead of statutory interest.
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
- legislation.gov.uk - The Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, article 4 (accurate as of October 2026) https://www.legislation.gov.uk/uksi/2002/1675/article/4/made
- 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 - Late commercial payments: claim debt recovery costs (accurate as of October 2026) https://www.gov.uk/late-commercial-payments-interest-debt-recovery/claim-debt-recovery-costs
- Bank of England - Interest rates and Bank Rate (accurate as of October 2026) https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
- Small Business Commissioner - Interest calculator (accurate as of October 2026) https://www.smallbusinesscommissioner.gov.uk/help-and-guidance/interest-calculator/
