Late Payment Interest FAQs
What interest can I charge on late invoices?
For B2B debts, the Late Payment of Commercial Debts (Interest) Act gives a statutory right to 8% + Bank of England base rate · no contract clause needed. Interest runs from the day after the due date, or 30 days after invoice/delivery where no terms were agreed. The reference base rate fixes each 1 January and 1 July.
What is the fixed compensation?
Per overdue invoice: £40 (under £1,000), £70 (£1,000-£9,999.99), £100 (£10,000+) · on top of interest, automatically. A client sitting on ten £800 invoices owes £400 of compensation before a penny of interest. You can also claim reasonable recovery costs above these amounts.
Do I need a contract clause?
No · the right exists by default in B2B transactions. Contracts can substitute their own remedy only if it is substantial; token clauses designed to dodge the Act fail. Consumer debts are different: you need a contract term, or court-ordered 8% interest when suing.
Will charging it damage relationships?
Use it as leverage, not revenue: a polite letter showing the accruing statutory amounts with an offer to waive if paid in 7 days moves invoices to the top of the pile. Habitual late payers are pricing your patience · quoting the Act reprices it. Reserve actual enforcement for ex-clients and lost causes.
How far back can I claim?
Six years in England and Wales (five in Scotland) · and crucially, you can claim on invoices that were PAID late historically, not just outstanding ones. Auditing a big customer's payment history and invoicing the statutory amounts has recovered five-figure sums for small suppliers.
For informational purposes only · Not legal advice · Late Payment of Commercial Debts (Interest) Act 1998: 8% + BoE base (fixed 1 Jan / 1 Jul), compensation £40/£70/£100 per invoice · B2B only · Simple (not compound) interest