UK Late Payment Interest 2026: Rates, Fixed Fees and How to Claim
Late payment is not just an inconvenience — in the UK it is a statutory right with a fixed formula, a fixed fee, and a court-backed route to enforcement. This guide sets out exactly what you can charge, how the rate is worked out, and the order of steps that keeps your claim enforceable.
- Statutory interest is Bank of England Bank Rate + 8 percentage points — and the rate that applies is the one in force on your invoice's due date, not today's.
- A fixed debt recovery fee is also due: £40 / £70 / £100, based on the size of the unpaid debt, payable on top of the interest.
- You do not need a contract clause. The 1998 Act applies automatically to qualifying commercial debts, and the customer cannot waive it in advance.
- Interest runs from the due date automatically — you do not have to send a demand letter to start it, though sending one is nearly always worth doing.
- The 8-week window is the practical deadline. Miss it and interest stops being automatically enforceable under the Act.
1. What the 1998 Act actually covers
The governing law is the Late Payment of Commercial Debts (Interest) Act 1998, reinforced for compensation caps and small suppliers by the Enterprise and Regulatory Reform Act 2013. In plain terms: if you are a business and another business owes you money for goods or services, the Act gives you a right to interest and to a fixed sum for recovery costs.
It is a right, not a favour. The Act applies even when your contract says nothing about late payment, and it is precisely for that reason that the right cannot be excluded or waived before the debt arises. Once the debt exists, the parties can agree a different arrangement — which is exactly why a clear invoice payment term is still worth writing.
Who it does not protect
- Consumer debts. The Act is for business-to-business and business-to-consumer commercial debts, not ordinary consumer credit. Trying to apply statutory interest to a consumer agreement exposes you to unfair-terms rules under the Consumer Rights Act 2015.
- Contracts governed by a different regime — bills of exchange, and most regulated credit agreements.
- Disputed debts. The whole framework assumes the debt is not genuinely disputed. Disputed amounts must be carved out, and you should keep claiming on the undisputed part.
- Public bodies in some contexts — the Act treats certain debts to public authorities differently, and the EU Late Payment Directive has its own regime for those.
Practical note: if your customer is a limited company and it enters insolvency, statutory interest and the fixed fee are usually an unsecured claim and rank behind preferential creditors. Claiming early matters — a solvent-but-slow customer is worth far more than an insolvent one.
2. The two things you can charge
| Remedy | Basis | Notes |
|---|---|---|
| Statutory interest | Bank Rate + 8 percentage points | Simple interest, accruing daily from the due date until payment |
| Fixed debt recovery fee | Tiered by debt size | Compensates you for the administrative cost of chasing — not a profit margin |
| Actual loss (court) | Proven financial damage | Separate claim, capped fixed sum of £100,000 does not limit this |
The tiered fixed fee is fixed by statute and is not negotiable upward by the Act, though your contract can provide a different sum where that is more generous to you:
- Up to £999.99 — £40
- £1,000 to £9,999.99 — £70
- £10,000 or more — £100
The £100,000 figure is the statutory cap on that fixed compensation amount, introduced by the 2013 Act for contracts from 1 October 2015. It is a cap on the fixed sum only. Your right to interest is unaffected, and you can still pursue proven consequential loss through the courts.
3. How the interest rate is set — and why the date matters
The rate is 8 percentage points above the Bank of England Bank Rate. This is the single most misunderstood point in UK late payment practice, so be precise about it:
Interest is simple interest, not compound. It is calculated on the principal debt, day by day, from the due date to the date of payment — it does not restart or re-base. If part of the debt is paid, interest is recalculated on the reduced principal from the payment date.
Because the rate must be looked up by due date, hand calculation is error-prone. Use the Late Payment Calculator — pick the invoice due date, and it uses the correct statutory reference rate for that half-year rather than today's headline rate.
4. Worked example: an £8,000 invoice, 99 days late
Assume a single invoice for £8,000 of services, due date 1 July 2026, still unpaid at 8 October 2026.
Two things to note. First, the fixed fee band is set by the debt size, not by the interest — £8,000 sits in the £70 band. Second, the interest is calculated on the principal only, never on the fixed fee or on previously accrued interest. If Bank Rate on 1 July 2026 was, for example, 4.00%, the rate would be 12.00% and interest would be £260.27 instead — which is why you must look up the actual rate rather than assume.
5. The 8-week route: when the Act stops protecting you automatically
Statutory interest and the fixed fee are conventionally recoverable for a limited window: eight weeks from the due date, extendable to 12 months where the buyer has never disputed that the debt exists. After that period ends, the Act no longer makes the claim automatically enforceable and you must go to court.
This is where most small businesses lose money, and it is almost always procedural rather than legal: a friendly chase, no diary entry, and by month three the clean statutory route has gone. Put the eight-week date in your diary the moment an invoice goes unpaid, and treat a formal claim as a scheduled step rather than a last resort.
Sending a demand letter does not start or stop the clock, and interest accrues whether or not you send one. But a letter that is factual, dated and specific does three useful things: it records that the debt is not disputed, it creates evidence of your reasonable attempts to recover, and it very often produces payment without any cost to you.
6. Small suppliers: protection even with no written term
One of the more useful changes for small businesses is that small limited companies can rely on the 1998 Act's remedies when supplying goods or services, even where the buyer has not agreed to pay on a particular date. A large customer cannot simply order with a 90-day informal term and expect the protections to disappear.
Because of that, a precise payment date on the invoice is still worth stating in writing — it fixes the due date unambiguously, which is the anchor for the entire calculation. Write it as a specific date, not "30 days from invoice", because ambiguity in the due date is the most common reason an otherwise valid claim is disputed.
7. What to do, step by step
- Confirm the due date in writing. Pull the invoice and the payment term. If the contract is silent, rely on the statutory default and record the date you consider due.
- Check for a genuine dispute. Resolve or formally carve it out. An undisputed part can still be claimed.
- Diary the 8-week date (and the 12-month outer limit if there has been no dispute).
- Look up the Bank Rate for the due date and calculate interest with the Late Payment Calculator — or run the same figures for EU customers with the Late Payment Directive guide.
- Add the fixed fee from the correct band.
- Send a factual demand letter quoting the invoice, the due date, days overdue, the statutory rate applied, the interest accrued and the fixed fee, with a deadline for payment and the consequence of non-payment.
- Escalate to a formal claim before 8 weeks elapse if the deadline passes — usually a letter before action, which is usually enough.
- Keep the paperwork. Contract, invoices, delivery evidence, correspondence. That record is the claim.
Validate the payer's bank details before you rely on them for a large recovery — a free IBAN check takes seconds and rules out a misdirected payment. Where the payer is VAT-registered, you can also confirm their VAT number through the VIES VAT validator before escalating.
8. UK late payment compared with the EU position
| Point | UK (1998 Act) | EU (Directive 2011/7/EU) |
|---|---|---|
| Interest rate | Bank Rate + 8 pp | ECB main refinancing rate + 8 pp (or 6 pp for SMEs) |
| Automatic with no contract term | Yes, for commercial debts | Yes, for commercial debts |
| Fixed recovery amount | £40 / £70 / £100 (capped £100,000) | Not prescribed by the Directive |
| Compensation for proven loss | Yes, via the courts | Yes, plus a minimum for public authorities |
| Late-payment period | 8 weeks, extendable to 12 months | 60 days unless otherwise agreed |
If you invoice across both jurisdictions, run the figures twice. The rate reference, the fixed sum and the late-payment period all differ, and using the wrong one is the easiest way to lose a claim that would otherwise succeed. Full EU detail: EU Late Payment Directive 2011/7/EU explained.
Generate a formal demand letter
Fill in the figures and print or save this as a PDF. Everything is generated in your browser — nothing is uploaded, stored or sent. The letter cites the 1998 Act by name and sets out the interest, the fixed recovery fee and the total, so the arithmetic is already done for you.
This template is general information, not a legal document drafted for your case. Check it before sending, and take advice if the debt is disputed.
Frequently Asked Questions
What is the statutory late payment interest rate in the UK?
Under the Late Payment of Commercial Debts (Interest) Act 1998 you may charge 8 percentage points above the Bank of England Bank Rate in force at the time the invoice became due. Because Bank Rate moves, the rate that applies to your invoice is the one from its due date — not today's rate. Interest is simple, accrues daily, and is calculated on the principal debt only.
Can I charge late payment interest without a contract clause?
Yes, in most cases. The Act applies automatically to qualifying commercial debts, so interest and the fixed fee are payable even if your contract or invoice is silent. The right cannot be waived by the customer in advance, though the parties can agree different terms once the debt exists.
What is the fixed debt recovery fee in the UK?
£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. It compensates you for the administrative cost of recovery and is payable in addition to the interest. The statutory amount is capped at £100,000 for large debts.
How long do I have to make a late payment claim in the UK?
The default period is eight weeks from the due date, extendable to 12 months where the buyer has not disputed that the debt exists. After that you must issue a claim through the court system. Interest keeps accruing throughout, whether or not you sent a demand letter.
Can I claim more than £100,000 for a late payment?
The £100,000 cap applies only to the fixed statutory compensation for recovery costs. You can still claim all the interest that has accrued, and you can bring a separate court claim for actual financial loss caused by the late payment, subject to the ordinary limitation period.
Sources
- Late Payment of Commercial Debts (Interest) Act 1998 — legislation.gov.uk
- Enterprise and Regulatory Reform Act 2013 — £100,000 cap and small-supplier provisions
- Late payment of commercial debts — GOV.UK guidance
- Bank of England Bank Rate history — lookup the rate for your due date
Disclaimer: General information only, not legal or financial advice. Statutory figures and the applicable Bank Rate should be confirmed for your specific debt before you rely on them. Corrections are logged in the changelog.