Free tool
Late payment interest calculator
If a business pays your invoice late, the law lets you claim interest at 8% plus the Bank of England base rate, and a fixed sum towards your recovery costs. Work out what you're owed and get a claim letter you can send today. The base rate is 3.75% today.
How statutory interest is worked out
The Late Payment of Commercial Debts (Interest) Act 1998 gives every business the right to charge interest when another business pays late. The rate is 8% a year plus the Bank of England base rate, known as the reference rate. It's simple interest, not compounded, and it runs from the day after the invoice was due until the day it's paid. The daily amount is the invoice value multiplied by the annual rate, divided by 365.
The reference rate is fixed for each debt. For invoices that fell due between 1 January and 30 June, it's the base rate on the previous 31 December; for invoices due between 1 July and 31 December, the rate on 30 June. The calculator looks up the right date for your invoice from the Bank of England's own record of rate changes, and the base rate today is 3.75%.
The £40, £70 and £100 compensation
On top of the interest, the law adds a fixed sum towards the cost of chasing each late invoice: £40 if the invoice is under £1,000, £70 from £1,000 to £9,999.99, and £100 for £10,000 or more. It applies per invoice, so three late invoices of £5,000 earn £70 each. If recovering the debt costs you more than the fixed sum, for example a debt recovery agent's fee, you can claim the reasonable extra cost as well.
A worked example
Say you invoiced £12,000 for work on a job, payment was due on 8 September 2026, and it still hasn't arrived 45 days later. The reference date for that invoice is 30 June 2026, when the base rate was 3.75%, so the statutory rate is 11.75% a year.
- Daily interest: £12,000 × 11.75% ÷ 365 = £3.86 a day
- Interest for 45 days: £173.84
- Fixed compensation for an invoice of £10,000 or more: £100
- Total you can claim today: £273.84, with interest still adding £3.86 a day until you're paid
When you can claim, and when you can't
The Act covers contracts between businesses, including sole traders, for goods and services. Your contract can set its own interest rate instead, but only if it's a "substantial remedy"; a token rate can be overridden by the statutory one. It doesn't apply to consumers. In construction, the Construction Act also sets payment due dates and the notice rules: if the payer didn't serve a valid pay less notice in time, the notified sum is due in full.
Before you send the letter, think about the relationship and your next contract; many subcontractors use the figure as leverage rather than pressing the full claim. To check a contractor before you take the work, see the payment league table and its CR Signals. Pricing a new package? The cash tied up calculator shows how much of your money a job will tie up. Being paid late? Tell us in our anonymous payment survey. The official guidance is on GOV.UK.
Questions
- How much interest can I charge on a late invoice?
- Under the Late Payment of Commercial Debts (Interest) Act 1998 you can charge simple interest at 8% a year plus the Bank of England base rate, unless your contract sets a different remedy that is fair and substantial. With the base rate at 3.75%, that's 11.75% a year for invoices whose reference rate is today's.
- How is the reference rate chosen?
- It's the Bank of England base rate on 31 December for debts that fell due between 1 January and 30 June, and the rate on 30 June for debts that fell due between 1 July and 31 December. It stays fixed for that debt, even if the base rate changes later.
- What are the £40, £70 and £100 compensation sums?
- A fixed sum towards the cost of chasing each late invoice: £40 for invoices under £1,000, £70 for £1,000 to £9,999.99 and £100 for £10,000 or more. It's per invoice, on top of the interest, and you can also claim reasonable recovery costs above it.
- When does the interest start?
- From the day after payment was due under your contract. If no payment date was agreed, the law sets one 30 days after the later of the invoice and the delivery of the goods or services. Interest runs until the day you're paid.
- Does it apply to construction contracts?
- Yes, between businesses. Construction contracts also have the Construction Act payment rules: due dates, payment notices and pay less notices. If no valid pay less notice was served, the notified sum is due in full, and late payment interest runs on it unless the contract provides a substantial remedy of its own.
- Do I need a solicitor to claim?
- No. Many claims are settled with a letter like the one this tool writes. If the debt isn't paid, you can claim the interest and compensation in the small claims court or through adjudication. This page is general information, not legal advice.