Late payment fees in the UK: what you can charge and how interest is calculated
If another business pays you late, UK law lets you add a fixed fee and statutory interest. Here are the amounts, how the interest calculation works step by step, three worked examples, and the limits, such as no claim against homeowners.
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Two things you can add to a late invoice
GOV.UK says you can claim interest and debt recovery costs if another business is late paying for goods or a service. There are two separate parts: statutory interest, which grows the longer the invoice is unpaid, and a fixed sum for the cost of recovering the debt, charged once per late payment.
The fixed late payment fee
| Amount of debt | Fixed sum you can charge |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
These amounts are set by late payment legislation, and you can only charge the business once for each payment. If you are the supplier, you can also claim reasonable costs each time you try to recover the debt.
How the interest is calculated
Statutory interest is 8% plus the Bank of England base rate for business-to-business transactions. You cannot claim it if your contract sets a different rate of interest. The sum is the same each time:
- Annual rate = 8% + base rate.
- Annual interest = amount owed × annual rate.
- Daily interest = annual interest ÷ 365.
- Interest to date = daily interest × days overdue.
The base rate is not today's rate: it is the one in force on 30 June (for interest that starts to run between 1 July and 31 December) or on 31 December (for interest that starts between 1 January and 30 June). Interest starts the day after the due date. For invoices that fell due in 2026 the reference rate is 3.75%, which makes the annual rate 11.75%. We checked the Bank of England figure on 15 October 2026. If you would rather not do the sums, the late payment interest calculator does them and writes the letter for you.
Three worked examples
| Example 1 | Example 2 | Example 3 | |
|---|---|---|---|
| Invoice amount | £800.00 | £2,500.00 | £12,000.00 |
| Days overdue | 30 | 45 | 60 |
| Annual interest at 11.75% | £94.00 | £293.75 | £1,410.00 |
| Interest per day | £0.26 | £0.80 | £3.86 |
| Interest to date | £7.73 | £36.22 | £231.78 |
| Fixed fee | £40.00 | £70.00 | £100.00 |
| Total to claim (invoice + interest + fee) | £847.73 | £2,606.22 | £12,331.78 |
The daily figures are rounded for display. The interest to date is worked from the unrounded daily amount (for example £800 × 0.1175 ÷ 365 × 30 = £7.726, which rounds to £7.73), so multiplying the rounded daily figure will give a slightly different total.
The fee is a flat amount, so on a small invoice it is a big share. On £800 the £40 fee is five times the first month's interest. That is why the fee matters more than interest for most subcontractors.
Who you can and cannot charge
- Business customers: the scheme applies. This includes agencies, main contractors and limited companies.
- Homeowners and other private customers: the statutory scheme is for commercial payments, so you rely on terms you agreed in writing. See chasing a homeowner for payment.
- When the contract sets a different rate: GOV.UK says you cannot claim statutory interest.
When is an invoice late? If you agreed a date, it must usually be within 30 days for public authorities or 60 days for business transactions (longer than 60 must be fair to both). If you did not agree a date, GOV.UK says payment is late 30 days after the customer gets the invoice or you deliver the goods or provide the service, if that is later. See payment terms and late payment.
How to ask for it
GOV.UK says to send a new invoice if you decide to add interest to the money you are owed. Put the fee and interest on that invoice or a separate one, quote the dates and the rate, and write a short covering message. Our reminder and final demand letter templates have wording you can paste. Many subcontractors choose to ask only for the invoice at first and keep the fee and interest to use if the client keeps delaying. That is your choice.
If the client still does not pay, see how to chase an unpaid invoice and Money Claim Online. For CIS work, the guide to late payment interest for subcontractors covers the extra points.
This is general information, not legal advice.
Frequently asked questions
How much can I charge for a late payment in the UK?
Interest of 8% plus the Bank of England base rate, plus a fixed sum of £40 (debts up to £999.99), £70 (£1,000 to £9,999.99) or £100 (£10,000 or more), for business-to-business payments.
Can I charge a late payment fee to a homeowner?
The statutory scheme covers commercial payments. For a homeowner you rely on terms you agreed in writing, so the fee is only enforceable if your agreement says so.
How do I calculate late payment interest?
Multiply the amount owed by 8% plus the base rate, divide by 365 for the daily amount, then multiply by the days overdue. Add the fixed fee.
Do I get the fixed fee every time?
You can charge it once for each late payment, not once for every reminder.
Do I have to send a new invoice for the interest?
GOV.UK says to send a new invoice if you decide to add interest to the money you are owed.
Sources
- Late commercial payments: charging interest and debt recovery – GOV.UK
- Charging interest on late commercial payments – GOV.UK
- Claim debt recovery costs on late payments – GOV.UK
- Bank Rate – Bank of England
This guide is general information, not legal, tax or financial advice. Rules and rates change, so check the linked GOV.UK pages for the current position.