Late PaymentCharging interest on late payments: a plain-English guide
If another business pays you late, UK law lets you add interest and a fixed sum for your trouble — even if your contract never mentioned it. Here's how it works for freelancers and small businesses.
When you can charge interest
The Late Payment of Commercial Debts (Interest) Act 1998 applies when one business sells goods or services to another (including public bodies). A payment is late:
- after the payment date you agreed, or
- if you agreed no date, 30 days after the later of the client receiving your invoice and you delivering the goods or services.
Agreed terms should usually be no more than 60 days for business clients, and 30 days for public authorities. Longer terms between businesses are allowed only if they're fair to both sides.
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.
The consumer exception
None of this applies to private individuals buying for personal use. You can't add statutory interest or fixed compensation to a consumer's bill. Unless your consumer terms set a fair late-payment charge, your route with a consumer is reminders and, if needed, a small claim.
How to calculate it
Statutory interest is 8% a year plus the Bank of England base rate. The base rate used is fixed twice a year:
- payment became late 1 January – 30 June: use the base rate in force on the previous 31 December;
- payment became late 1 July – 31 December: use the base rate in force on the previous 30 June.
The rate stays the same for that debt even if the base rate changes later. For debts that became late from 1 July 2026 to 31 December 2026 the base rate was 3.75%, so the rate is 11.75%.
Worked example
£2,400 invoice, paid 40 days late, at 11.75%:
- Annual interest: £2,400 × 0.1175 = £282.00
- Daily interest: £282.00 ÷ 365 = £0.7726 (about 77p)
- Interest for 40 days: £0.7726 × 40 = £30.90
- Fixed compensation (£1,000–£9,999.99): £70
- Total claim on top of the invoice: £100.90
Fixed compensation bands
| Amount of the debt | Fixed sum |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
You can claim this once for each late payment. You may also claim reasonable costs of recovering the debt beyond that sum.
Reference rates
| Payment became late between | Base rate on | Base rate | Statutory rate |
|---|---|---|---|
| 1 July 2026 – 31 December 2026 | 30 June 2026 | 3.75% | 11.75% |
| 1 January 2026 – 30 June 2026 | 31 December 2025 | 3.75% | 11.75% |
| 1 July 2025 – 31 December 2025 | 30 June 2025 | 4.25% | 12.25% |
| 1 January 2025 – 30 June 2025 | 31 December 2024 | 4.75% | 12.75% |
| 1 July 2024 – 31 December 2024 | 30 June 2024 | 5.25% | 13.25% |
| 1 January 2024 – 30 June 2024 | 31 December 2023 | 5.25% | 13.25% |
| 1 July 2023 – 31 December 2023 | 30 June 2023 | 5.00% | 13.00% |
| 1 January 2023 – 30 June 2023 | 31 December 2022 | 3.50% | 11.50% |
| 1 July 2022 – 31 December 2022 | 30 June 2022 | 1.25% | 9.25% |
| 1 January 2022 – 30 June 2022 | 31 December 2021 | 0.25% | 8.25% |
| 1 July 2021 – 31 December 2021 | 30 June 2021 | 0.10% | 8.10% |
| 1 January 2021 – 30 June 2021 | 31 December 2020 | 0.10% | 8.10% |
| 1 July 2020 – 31 December 2020 | 30 June 2020 | 0.10% | 8.10% |
| 1 January 2020 – 30 June 2020 | 31 December 2019 | 0.75% | 8.75% |
Base rates from the Bank of England. The next rate applies to debts that become late from 1 January 2027 and depends on the base rate on 31 December 2026.
What to send
- Friendly reminder a few days after the due date: invoice number, amount, due date, how to pay.
- Firm reminder about two weeks later: note that the debt is covered by the 1998 Act and that interest and compensation will be added if it stays unpaid.
- Final notice: set out the interest (rate, dates, days), the fixed compensation and the new total, state the daily interest that keeps running, and give a deadline — for example 7 days. Attach an invoice for the extra amount.
- If that fails: consider a letter before action and a claim through Money Claim Online.
Keep copies of everything. If you've agreed a payment plan, don't send a final notice claiming interest without checking what you agreed.
Need the letters to send?
The UK Freelancer Contract Pack has a three-step late payment sequence — friendly reminder, firm reminder and a final notice citing the Late Payment of Commercial Debts (Interest) Act 1998 — plus a services agreement with a late-payment clause, an invoice template and five more Word documents. £15, one payment.
Get the Contract Pack — £15Official sources
- GOV.UK: Late commercial payments — charging interest and debt recovery
- When a payment becomes late
- Interest on late commercial payments
- Claim debt recovery costs
- Bank of England: Bank Rate
General information, not legal advice. Figures checked against GOV.UK and the Bank of England on 1 October 2026. Your contract may set its own late-payment rate instead of the statutory one.