Between businesses, an invoice is late on the payment date you agreed, or 30 days after the customer receives it (or after you deliver, if later) when you agreed none. From the day after, you can claim statutory interest at 8% above the Bank of England base rate, currently 11.75% a year, plus fixed compensation of £40, £70 or £100 and reasonable recovery costs. None of it needs to be in your contract, and the reforms now going through Parliament aren't law yet.
In this article
The short version
- Between businesses, an invoice is late on the agreed date, or 30 days after the customer gets it if no date was agreed.
- You can claim statutory interest at 8% over base rate (11.75% now), plus £40, £70 or £100 and reasonable recovery costs.
- None of it needs to be in your contract, but it doesn't apply to consumers.
- Recovery runs from reminders to a letter before claim and a small claims court claim up to £10,000.
- The 60-day cap and mandatory interest are in a bill, not law, and wouldn't start before 2027.
When does an invoice become late?
Start with whatever payment date you and your customer agreed. If you agreed one, the invoice is late the day after it.
If you didn't agree a date, the law sets one for you: payment is late 30 days after the customer receives your invoice, or 30 days after you deliver the goods or finish the service if that's later. So the clock doesn't run from the date printed on the invoice. If you invoice weeks after finishing a job, it runs from when the customer got the invoice.
Two limits sit on top of an agreed date:
- A public authority has to pay within 30 days.
- Between businesses, an agreed term longer than 60 days is cut back to 60 unless the longer term isn't grossly unfair to you, the supplier. A 90-day term isn't automatically void, but it has to stand up on that test.
These rules come from the Late Payment of Commercial Debts (Interest) Act 1998, and they only apply between businesses (including sole traders, partnerships and the professions) and to public authorities. If your customer is a private individual, the Act doesn't help you, and any late fee depends on a fair term you agreed with them in advance.
What can you claim on a late invoice?
Once a business invoice is late, you're entitled to three things on top of the debt itself. The Act writes them into every business contract automatically, so a customer can't avoid them by pointing out that your terms never mentioned interest.
| Entitlement | How much | Worth knowing |
|---|---|---|
| Statutory interest | 8% above Bank of England base rate, simple interest, charged daily | 11.75% a year at today's 3.75% base rate |
| Fixed compensation | £40 under £1,000, £70 from £1,000 to £9,999.99, £100 from £10,000 | Once per invoice, not per reminder |
| Reasonable recovery costs | What it reasonably cost you to recover the debt, beyond the fixed sum | Needs evidence, such as an agency's or solicitor's charges |
The interest rate is fixed for each half-year. Debts where interest starts to run between 1 July and 31 December use the base rate in force on the 30 June before; debts starting between 1 January and 30 June use the rate on the 31 December before. With the base rate at 3.75% on 30 June 2026, an invoice that goes late before 1 January 2027 keeps the 11.75% rate until it's paid, whatever the Bank of England does in November.
Your own terms can change the picture. If your contract sets its own late payment interest rate, that rate applies instead of the statutory one, as long as it's a substantial remedy for late payment. A token rate, say 2% a year, risks being void, in which case statutory interest applies after all. You can't claim both. And a court can reduce the interest you claim if your own conduct contributed, for example if you invoiced the wrong amount or ignored a reasonable query.
When you do claim, send a separate invoice for the interest and compensation, quoting the original and showing your working. It keeps the original debt clean and gives your customer something specific to pay. No VAT is charged on statutory interest.
How do you recover an unpaid invoice?
Most late invoices get paid after a reminder or two, so the first job is making sure reminders go out on time, every time. The later steps cost more and take longer:
- Reminders by email, text or phone, ideally with a link the customer can pay from straight away.
- A final notice, setting out the debt, the interest and compensation you're claiming, and a date.
- A letter before claim. For a limited company, allow a reasonable time to reply, which is 14 days in a straightforward case. For an individual or sole trader, the Pre-Action Protocol for Debt Claims applies and gives them 30 days.
- A county court money claim (in England and Wales). Claims up to £10,000 normally go to the small claims track, where you're expected to represent yourself and can't usually recover legal costs. Court fees run from £35 for claims up to £300 to £455 for claims up to £10,000, and 5% of the whole claim for larger claims. You add the interest and compensation to the claim.
- For a company that owes you more than £750 and doesn't dispute it, a statutory demand, which can lead to a winding-up petition if it's ignored for three weeks. That's a serious step and worth taking advice on first.
You generally have six years from the date payment was due to bring a claim in England and Wales. If a debt won't be paid, you can reclaim the VAT you paid on it through VAT bad debt relief once it's six months overdue and written off in your VAT accounts.
The cheapest step to get right is the first one. Working out interest and raising a second invoice for every slow payer also takes time, and it tends to get put off. Adfin takes that admin off your plate. Reminders go out over email, SMS and WhatsApp on the schedule you set, and its collection agents can charge statutory interest on overdue business invoices for you, within rules you approve. You choose the grace period and which customers are exempt.
What the late payment reforms would change
The government's Commercial Payments Bill would make bigger changes, but it's still going through Parliament and isn't law. As introduced, it would:
- cap payment terms at 60 days for larger businesses paying smaller suppliers, with limited exceptions; the government has said this would start no earlier than 2027
- make statutory interest mandatory, so contracts could no longer replace it with a different rate or remedy
- give the Small Business Commissioner powers to investigate, adjudicate disputes and fine persistent late payers
A further step down to 45 days was consulted on and isn't being taken forward for now. Until the Bill passes and its measures are brought into force, the rules in this guide are the ones that apply. Separately, large companies already have to report on their payment practices, and that duty doesn't apply to small businesses.
Common questions
When is a business invoice legally late in the UK? On the payment date you agreed. If you agreed none, 30 days after the customer receives the invoice or you deliver, whichever is later.
What is the statutory late payment interest rate? 8% above the Bank of England base rate, which is 11.75% a year for invoices that go late between 1 July and 31 December 2026. It's simple interest, charged daily.
Do I need late payment terms in my contract to charge interest? No. Between businesses the right is implied into every contract by the Late Payment of Commercial Debts (Interest) Act 1998.
Can I charge late payment interest to consumers? Not under the Act, which covers business and public authority customers only. With a consumer you'd need a fair term agreed in advance.
Is the 60-day maximum payment term law? Not yet. It's in the Commercial Payments Bill, which is still in Parliament, and the government has said the cap would start no earlier than 2027.
How much does it cost to take a customer to the small claims court? The court fee depends on the claim: from £35 for up to £300 to £455 for up to £10,000. You can add statutory interest and compensation to the claim.
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
- GOV.UK - Late commercial payments: charging interest and debt recovery (accurate as of October 2026) https://www.gov.uk/late-commercial-payments-interest-debt-recovery
- 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
- GOV.UK - Make a court claim for money: court fees (accurate as of October 2026) https://www.gov.uk/make-court-claim-for-money/court-fees
- UK Parliament - Commercial Payments Bill [HL] (accurate as of October 2026) https://bills.parliament.uk/bills/4128
- Adfin - Credit control (accurate as of October 2026) https://www.adfin.com/credit-control
