Under the Late Payment of Commercial Debts (Interest) Act, businesses can charge statutory interest on an overdue invoice to another business, plus a fixed compensation fee - and this right exists automatically, even if your contract or invoice never mentioned it.
How the statutory interest rate is calculated
Statutory interest is calculated at 8% plus the Bank of England base rate at the time the debt became overdue, applied to the outstanding amount, per year (so pro-rated for however many days the invoice has been overdue). The base rate component moves with the Bank of England's own rate, so the exact percentage is worth checking on gov.uk rather than assuming a fixed number.
The fixed compensation fee
Debts up to £999.99: £40 fixed compensation
Debts from £1,000 to £9,999.99: £70 fixed compensation
Debts of £10,000 or more: £100 fixed compensation
This fee is charged per invoice, on top of the statutory interest - it is not a substitute for it. You are entitled to claim it the moment an invoice becomes overdue, without having to prove any actual cost of chasing the payment.
Does this apply to consumer invoices?
No - the Late Payment of Commercial Debts Act applies to business-to-business transactions only. If you invoice individual consumers rather than other businesses, this specific right does not apply, though other consumer credit and contract law may still be relevant.
Should you actually charge it?
For a client you want to keep, charging statutory interest on a first, minor lapse can feel disproportionate - many businesses reserve it for genuinely persistent late payers, or mention it as a stated consequence in a formal reminder rather than applying it automatically every time. Either way, having the legal right in reserve is worth knowing about, since simply mentioning it in a follow-up email is often enough to get a stalled payment moving.
Can I charge interest on a late invoice without it being in my contract?
Yes, for business-to-business debts - the Late Payment of Commercial Debts Act gives you this right automatically, regardless of whether your contract or invoice mentioned it.
How much interest can I charge on an overdue invoice?
Does statutory late payment interest apply to invoices sent to individuals?