Take the debt, apply the rate for the half-year in which interest started to run, divide by 365 for a daily figure, then multiply by the number of days since the day after the due date. Then add the fixed sum of £40, £70 or £100. That fixed sum is a separate entitlement and it doesn't depend on how late the payment is.
The short version
- Interest starts the day after the due date, not on it.
- The rate is 8% over the base rate in force on the previous 30 June or 31 December, so it's fixed for a half-year.
- For debts running from 1 July to 31 December 2026, the rate is 11.75%.
- Daily interest is debt times rate divided by 365. It's simple interest, so it doesn't compound.
- Add the fixed sum once for each debt, plus any reasonable recovery costs above it.
The calculation, step by step
The order you work through it in matters, because the rate you use depends on the date the debt started running interest.
- Find the due date. If you agreed a payment date, that's your starting point. If you didn't, the law treats payment as late 30 days after the customer gets the invoice or 30 days after you delivered, whichever is later.
- Start counting from the day after. Section 4(2) says statutory interest starts to run "on the day after the relevant day for the debt". A one-day error costs you almost nothing in money, but it's awkward in a formal notice.
- Identify the half-year. Interest that starts to run between 1 July and 31 December uses the base rate in force on the previous 30 June. Between 1 January and 30 June, it uses the previous 31 December.
- Add 8% to that base rate. For the second half of 2026 the reference rate is 3.75%, giving 11.75% a year.
- Work out your daily amount: the debt times the annual rate, divided by 365.
- Multiply by the days outstanding. Count to the date you were paid, or to the date of the notice you're sending.
- Add the fixed sum to your total: £40 for a debt under £1,000, £70 up to £9,999.99, and £100 for £10,000 or more.
- Add reasonable recovery costs above the fixed sum, if you've incurred them. Section 5A(2A) gives the supplier the difference where reasonable costs exceed the fixed sum.
Two worked examples
Say you invoiced £6,000, due 30 June 2026, and you were paid on 14 August 2026. Interest started to run on 1 July, so you're in the second half of the year and your rate is 11.75%.
| Step | Figure |
|---|---|
| Debt | £6,000.00 |
| Annual interest at 11.75% | £705.00 |
| Daily interest | £1.93 |
| Days from 1 July to 14 August | 45 |
| Interest due | £86.92 |
| Fixed sum (£1,000 to £9,999.99) | £70.00 |
| Total to claim | £156.92 |
Now a smaller one, £600 and twenty days late in the same half-year:
| Step | Figure |
|---|---|
| Debt | £600.00 |
| Daily interest at 11.75% | £0.19 |
| Days late | 20 |
| Interest due | £3.86 |
| Fixed sum (under £1,000) | £40.00 |
| Total to claim | £43.86 |
Look at the second one before you spend an afternoon calculating interest on a £600 debt. On small invoices you've chased quickly, the fixed sum is most of what you can claim and the interest is close to a rounding error.
Four places the calculation goes wrong
Four things trip people up here, and they're all easy to avoid once you know they're coming.
The first is reaching for today's base rate. The rate is set by reference to 30 June or 31 December, so if the Bank of England moves the base rate in the middle of a half-year, the statutory rate on debts already running is unchanged.
The second is counting from the invoice date. Interest runs from the day after the payment date, and where no date was agreed, from the day after the 30-day period ends. Those 30 days themselves run from the later of performance and the customer having notice of the amount.
The third is compounding. Section 1 describes simple interest, so rolling it up monthly overstates what you can claim.
The fourth is charging the fixed sum more than once. GOV.UK is explicit: "You can only charge the business once for each payment." A fixed sum on every reminder isn't something the Act supports.
Putting it on an invoice
Government guidance on charging interest suggests sending a new invoice for the interest instead of adding it to the original one. That keeps the original debt clean if it's later disputed or has to be evidenced, and it gives your customer a separate item they can pay or query on its own.
Show your working on the face of it: the debt, the rate, the reference date that set the rate, the number of days, and the fixed sum on its own line. A notice that shows its working is harder to argue with than a bare total.
Doing it automatically
The arithmetic is simple, and it's the record-keeping that makes this tedious: the rate depends on which half-year each of your debts started running in, and the days outstanding change every day. Payment platforms can apply statutory late fees on a schedule you set, so you're not deciding invoice by invoice whether it's worth the effort.
Worth being straight about the wider picture, though: only 5.9% of businesses had introduced or increased a penalty for overdue payment. Most businesses have the entitlement and never use it, so getting the sum right matters most when you're actually about to put a figure in front of someone.
Common questions
How do you calculate statutory interest on a late invoice? Multiply the debt by the annual rate, divide by 365 for the daily amount, and multiply by the days from the day after the due date. For the second half of 2026 the rate is 11.75%. Then add the fixed sum of £40, £70 or £100.
What rate do I use if the base rate changed since the invoice went late? The rate fixed at the start of the half-year in which interest began to run. A base rate change part way through the half-year does not alter it.
Does interest run from the invoice date or the due date? From the day after the due date. Where no payment date was agreed, from the day after the 30-day period that starts with the later of delivery and the customer having notice of the amount.
Is statutory interest compounded? No, it is simple interest under section 1 of the Act.
Can I claim the £40 or £70 fixed sum more than once on the same invoice? No. GOV.UK states you can only charge the business once for each payment, though reasonable recovery costs above the fixed sum can also be claimed.
Do I have to have mentioned interest in my terms? No. Between businesses the right is an implied term, so it applies whether or not your contract mentions it.
Sources
- 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)
- GOV.UK — claim debt recovery costs on a late commercial payment (accurate as of August 2026)
- GOV.UK — when a commercial payment becomes late (accurate as of August 2026)
- Department for Business and Trade and Small Business Commissioner — late payments research, the 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.
