Freelancers & small businesses · Late Payment Act

How much interest can you charge on a late invoice?

When another business pays you late, the law lets you add statutory interest — 8% plus the Bank of England base rate — plus a fixed sum towards your costs. Put in what you're owed and how late it is to see exactly what you can now claim.

Your unpaid invoice

For a business-to-business debt with no interest rate written into the contract. Nothing is sent anywhere; this runs entirely in your browser.

Amount owed the unpaid invoice total (the debt the interest is charged on)

Days late days since payment became overdue (30 days after the invoice if you agreed no other date)

Bank of England base rate 3.75% as of 1 August 2026 — change it if the applicable rate is different

What you're allowed to charge

For late commercial payments between businesses, the Late Payment of Commercial Debts (Interest) Act 1998 lets you charge statutory interest of 8% above the Bank of England base rate on the money you're owed. At today's 3.75% base rate that's 11.75% a year. Interest accrues daily: take the annual figure, divide by 365, and multiply by the number of days late.

On top of the interest you can claim a fixed sum towards the cost of recovering the debt — once per late payment:

Debt up to £999.99 — you can charge £40
Debt of £1,000 to £9,999.99 — £70
Debt of £10,000 or more — £100

Only if there's no rate in the contract

You can't claim statutory interest if a different rate of interest is written into your contract — that agreed rate applies instead. Statutory interest is the fallback the law gives you when nothing else was set, and it can't be undercut in a contract with a public authority.

When the clock starts

If you agreed a payment date, the debt is late — and interest starts — the day after it passes
If you didn't agree a date, the default is 30 days after the customer gets the invoice, or the goods/service, whichever is later
The base rate that applies is the one in force on 30 June (for debts that become late between 1 July and 31 December) or 31 December (for 1 January–30 June), fixed for that six months
If you decide to add interest, send a new invoice for the interest and the fixed sum

More free tools

Freelance day rate →Work out what to charge so late payers don't wreck your year. VAT calculator →Add or strip 20% VAT from an invoice, to the penny. Tax bill calculator →Your whole Self Assessment bill for 2026/27. Side hustle tax →Do you need to register — and pay what? Am I in MTD? →When Making Tax Digital starts for you.

Common questions

Can I charge interest on a late invoice?

Yes. If another business pays you late and your contract doesn't set its own interest rate, you can charge statutory interest of 8% plus the Bank of England base rate on what you're owed, under the Late Payment of Commercial Debts (Interest) Act 1998.

How much interest can I charge on an unpaid invoice?

Statutory interest is 8% above the Bank of England base rate. With the base rate at 3.75% (1 August 2026) that is 11.75% a year. It builds up daily — the annual amount divided by 365, times the number of days the payment is late.

When can I start charging late payment interest?

From the day after the payment was due. If you agreed a due date, use that. If you didn't agree one, the debt is late 30 days after your customer receives the invoice or the goods or service, whichever is later.

Can I charge a fixed fee as well as interest?

Yes. On top of the interest you can claim a fixed sum for recovery costs — £40 for a debt under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. You can charge it once per late payment.

Does this apply to customers who aren't businesses?

No. Statutory interest under the 1998 Act covers business-to-business commercial debts. Late payment by a private consumer is governed by different rules and any interest term in your own contract.

Do I add VAT to late payment interest?

No. Statutory interest and the fixed compensation aren't payment for a supply of goods or services, so they fall outside the scope of VAT — you don't add VAT on top of them.

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