Late Payment Interest Calculator UK — Statutory Interest (Base + 8%)

Your right to charge interest on late commercial payments

If another business owes you money for goods or services and pays late, you have a legal right to charge interest and claim compensation — even if your contract does not mention it. This right comes from the Late Payment of Commercial Debts (Interest) Act 1998, as amended. It exists to protect suppliers (especially small businesses) from the cash-flow damage caused by customers who pay late.

This is fundamentally different from interest charged by HMRC on overdue tax. HMRC late-payment interest applies to amounts you owe the government (such as Self Assessment, VAT, Corporation Tax or PAYE) and is set separately. The calculator on this page is for commercial debts between businesses — unpaid invoices owed to you by your customers. If you are looking for interest on overdue tax, use our HMRC late payment interest calculator instead.

There are two separate things you can claim on a late invoice: statutory interest (a percentage of the debt that grows each day it stays unpaid) and a one-off fixed-sum compensation for the cost of chasing the money. You can claim both on the same invoice. Our calculator works out both figures from the official GOV.UK method.

How statutory interest works (base rate + 8%)

Statutory interest on a late commercial payment is set at the Bank of England base rate plus 8 percentage points for business-to-business transactions. As of June 2026 the Bank of England base rate is 3.75% (the Monetary Policy Committee voted to hold it at the meeting ending 17 June 2026), which makes the statutory interest rate 11.75% per year.

Statutory interest is simple interest — it is calculated on the original overdue amount and is not compounded. It begins to accrue the day after the debt becomes overdue and continues until the day the debt is paid. The daily amount is worked out as:

Tip for invoicing: because the base rate can change, GOV.UK applies the base rate that was in force on the relevant reference date. For a debt that becomes late between 1 January and 30 June, the base rate in force on 31 December is used; for a debt that becomes late between 1 July and 31 December, the rate in force on 30 June is used. For most short overdue periods the figure produced by this calculator at the current 3.75% base rate will match the amount you can claim. If the base rate changes, simply update the base-rate field above.

Fixed-sum compensation for recovery costs

On top of statutory interest, the legislation lets you claim a fixed sum to cover the cost of recovering a late commercial debt. The amount is set by law and depends on the size of the debt. You can claim it once per unpaid invoice.

If the reasonable costs you actually incur in recovering the debt are higher than this fixed sum — for example, fees for a debt collection agency or a solicitor — you are entitled to claim the difference on top of the fixed amount. Keep evidence of those costs.

When does it apply? (B2B only, and when a payment is "late")

Business-to-business only. Statutory interest and fixed compensation apply only to commercial transactions — debts owed by one business to another, including sole traders acting in business and public authorities. They do not apply to private consumers. If a member of the public owes you money, your remedy lies in your contract terms and consumer law, not in this Act.

When a payment becomes late. If you agreed a payment date, the payment is late the day after that date. If you did not agree a date, the law treats the payment as late 30 days after the later of: the date your customer received the invoice, or the date you delivered the goods or completed the service.

Maximum agreed terms. Where you do set payment terms, they must usually be no more than 30 days for public authorities or 60 days for other businesses, unless a longer period is expressly agreed and is not grossly unfair to you as the supplier. Terms that are grossly unfair can be challenged.

How to claim interest and compensation on a late invoice

You do not need a court order or a clause in your contract to charge statutory interest — the right is automatic. In practice, the most effective approach is:

1. Work out the figures. Use the calculator above to total the statutory interest, daily rate and fixed compensation as at today's date.
2. Send a written demand. Issue a polite but firm letter or email stating the original debt, the days overdue, the statutory interest accrued (and the daily rate so the figure keeps rising until they pay), and the fixed-sum compensation. Reference the Late Payment of Commercial Debts (Interest) Act 1998.
3. Keep accruing daily interest. Because statutory interest continues to build each day, quote the daily amount so the debtor sees the cost of further delay.
4. Escalate if needed. If payment is still not made, you can use a formal letter before action, a debt recovery agency, or the Money Claim Online service (small claims) to pursue the debt, interest and costs.

Many suppliers choose to charge statutory interest selectively to preserve customer relationships, but the legal right exists for every qualifying late commercial payment.

Worked example

Suppose you invoiced a business customer £5,000 for completed work, with payment due 30 days after the invoice. The customer pays 30 days late. With the Bank of England base rate at 3.75%, the statutory interest rate is 11.75%. The calculation is:

So on a £5,000 invoice paid a month late you are entitled to claim £118.29 in interest and compensation on top of the debt. Enter your own figures in the calculator above to see your result instantly.