Late Payment Interest Calculator

Under the Late Payment of Commercial Debts (Interest) Act 1998, UK businesses have a statutory right to charge interest and claim compensation when another business pays an invoice late. The statutory interest rate is the Bank of England base rate plus 8 percentage points per annum. Interest accrues from the day after the agreed payment date (or 30 days after delivery of goods/services or receipt of invoice, whichever is later, if no payment terms were agreed).

In addition to interest, you can claim a fixed compensation amount based on the size of the unpaid debt: £40 for debts up to £999.99, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more. You can also claim reasonable recovery costs—such as the cost of sending reminder letters or instructing a debt collection agency—if the fixed compensation does not cover them.

Interest is calculated as: Debt amount × (Base rate + 8%) ÷ 365 × Number of days overdue. Contract terms can specify a different interest rate, but it must be a substantial remedy—if a contract sets an unreasonably low rate, the statutory rate can still be invoked. These rights apply to all business-to-business transactions and to public authority debts. They do not apply to consumer debts (business-to-consumer).

Statutory late payment interest under Late Payment of Commercial Debts (Interest) Act 1998. Businesses can charge statutory interest on late commercial invoices — 8% above Bank of England base rate (currently 8% + 4.5% = 12.5% in May 2026). Applies automatically to overdue B2B invoices, no need to specify in contract. Calculation: (overdue amount × 12.5%) ÷ 365 × days late.

Compensation fees on top of interest. Under the same Act, businesses can claim fixed compensation per overdue invoice: £40 for amounts up to £1,000; £70 for £1,000-£10,000; £100 for over £10,000. PLUS reasonable debt collection costs. So a £5,000 invoice 30 days overdue can charge: £5,000 × 12.5%/365 × 30 = £51 interest + £70 compensation = £121 in claimable charges.

Notice and demand process. (1) Send polite payment reminder 7-14 days past due. (2) Send formal demand citing the Late Payment Act — specify interest and compensation. (3) Send 'final demand before legal action' 30 days later. (4) Money claim online (£35 court fee for under £300, scaling up). Most disputes settle at stage (3). UK businesses pay 30% of B2B invoices late on average — the Act is your protection.

Personal/consumer debts — different rules. The Late Payment Act applies to B2B only. Consumer debt: interest can only be charged if specified in your terms and conditions (usually 'court interest' rate of 8% under Judgments Act 1838 if you win court action). Late penalty: must be reasonable. Avoid 'unfair commercial practices' (CPR 2008) which prohibits aggressive debt collection.