On an unpaid business invoice you've got three separate things to claim, not one: statutory interest, a fixed sum, and reasonable recovery costs above that fixed sum. Most businesses never claim any of the three, and the ones that do usually stop at the first. This guide covers what each is worth, when it starts, and how you put the three together into a claim that holds up.
The short version
- Statutory interest, a fixed sum and reasonable recovery costs are three separate entitlements on the same debt.
- All three are implied into your contract, so they apply even if your terms don't mention them.
- Interest starts the day after the relevant day, at the rate fixed for that half-year.
- The fixed sum is £40, £70 or £100 by debt size, once for each payment.
- A court can reduce or remove statutory interest where your own conduct as supplier makes it appropriate under section 5.
The three entitlements
| What | How much | Where it comes from |
|---|---|---|
| Statutory interest | 8% over the base rate fixed for the half-year, simple interest | Sections 1 and 6 of the 1998 Act, with the rate set by the 2002 Order |
| Fixed sum | £40, £70 or £100 by debt size, once for each payment | Section 5A(1) and (2) |
| Reasonable recovery costs | The difference where your reasonable costs exceed the fixed sum | Section 5A(2A) |
The third one is the least used and, on a debt of any size, often the largest. It's there because the fixed sums are small and were never intended to cover what a serious recovery effort costs you.
All three attach to a "qualifying debt". That broadly means a debt for goods or services under a commercial contract between businesses. You don't have to say anything in your terms for any of them to apply, because section 1 makes statutory interest an implied term, and section 5A(3) treats the fixed sum as part of that same implied term.
When interest starts to run
Section 4 does the work here, and it's more precise than "30 days from the invoice".
Interest starts on the day after the "relevant day". Where you agreed a payment date, that date is your relevant day. Where you didn't, the relevant day is the last day of a 30-day period that begins with the later of two things: the day you performed your side of the deal, and the day your customer had notice of the amount owed.
Two limits apply on top of a date you've agreed. Where your customer is a public authority, the relevant day cannot fall later than 30 days. Where your customer isn't a public authority and the agreed date falls beyond 60 days, section 4(2E) pulls it back to 60 days, unless the agreed day "is not grossly unfair to the supplier" under section 4(2F).
That last subsection is the one commonly misread. A 90-day term isn't automatically void. It stands where it is not grossly unfair, judged on the circumstances.
What the fixed sum covers, and what it does not
The fixed sum arrives automatically once interest begins to run. You don't have to have demanded interest first, and nothing in section 5A conditions it on you having sent a reminder.
| Debt | Fixed sum |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
GOV.UK adds the limit: "You can only charge the business once for each payment." So if you're adding a monthly fixed sum to an ageing debt, the Act doesn't support that.
The unit is worth noting. The Act attaches the fixed sum to a qualifying debt rather than to an invoice as such. Where one of your invoices creates one debt they amount to the same thing, and where a single payment covers several of your invoices the position is less obvious.
Recovery costs above the fixed sum
Section 5A(2A) is short and useful: where the reasonable costs of recovering the debt are not met by the fixed sum, you're entitled to the difference as the supplier. GOV.UK describes the same right as claiming "for reasonable costs each time you try to recover the debt".
In practice this covers the evidenced cost of pursuing the debt: a debt collection agency's charges, or the cost of professional help. What it won't stretch to is a round-number administration fee you apply because an invoice went past due, since the test is what the recovery reasonably cost you.
So keep a record of what you did, by whom and at what cost, from the moment a debt starts to look serious, and then if you do claim, every line you put in front of the customer has a date and a figure behind it.
When a court can take interest away
Section 5 allows a court to remit statutory interest, in whole or in part, where the conduct of the supplier makes it appropriate. So your entitlement isn't unconditional. If you delivered late, invoiced the wrong amount, or ignored a reasonable query and then claimed interest for the delay, you may find your claim reduced.
The practical version of this is unglamorous. Your strongest interest claim rests on a clean file: the work delivered, the invoice correct and sent, receipt confirmed, reminders on record.
After judgment
If your debt reaches judgment, statutory interest under the 1998 Act gives way to interest on the judgment debt, set at 8% a year by the Judgment Debts (Rate of Interest) Order 1993. That rate has been unchanged since 1993, so it can sit above or below the commercial rate depending on where the base rate is. At a 3.75% base rate the commercial rate of 11.75% is the higher of the two.
Presenting the claim
A claim that shows its working is harder to dispute. The way to lay yours out is to give the debt, the payment date and why that's your relevant day, the date interest started to run, the reference date that fixed the rate, the days outstanding, the fixed sum, and any recovery costs separately.
Government guidance suggests issuing a new invoice for the interest rather than adding it to the original. That keeps your principal clean and gives your customer something specific to pay.
One judgement call is worth making early: are you claiming to be paid, or claiming to make a point? Interest on a small invoice you chased quickly is a few pounds, and the fixed sum is most of the value. On a large debt that's run for months, the three entitlements together can add up to a serious number.
Common questions
What can you claim on a late paid invoice in the UK? Three things on a business debt: statutory interest at 8% over the base rate, a fixed sum of £40, £70 or £100 by debt size, and reasonable recovery costs where they exceed the fixed sum.
Do I need to have warned the customer before claiming interest? No. Nothing in section 5A requires a prior demand. The entitlement arises once statutory interest begins to run.
Can I claim the fixed sum on every reminder I send? No. GOV.UK states it can be charged once for each payment. Reasonable recovery costs above the fixed sum are the route for the wider cost of chasing.
Can a court refuse to award statutory interest? Yes. Section 5 allows a court to remit statutory interest in whole or part where the supplier's conduct makes that appropriate.
What interest applies once I have a judgment? Judgment debts carry interest at 8% a year under the 1993 Order, in place of statutory interest under the 1998 Act.
Does a 90-day payment term override all of this? Not automatically. Where the customer is not a public authority, an agreed date beyond 60 days is pulled back to 60 unless it is not grossly unfair to the supplier. For a public authority the relevant day cannot fall later than 30 days.
Sources
- legislation.gov.uk — Late Payment of Commercial Debts (Interest) Act 1998 (accurate as of August 2026)
- legislation.gov.uk — Judgment Debts (Rate of Interest) Order 1993 (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.
