Short answer: On a qualifying B2B contract, the Late Payment of Commercial Debts (Interest) Act 1998 lets you charge simple interest at 8% above the Bank of England reference rate on a late invoice, from the day after it fell due until it is paid. The daily amount is the debt × rate ÷ 365. You can also claim fixed compensation of £40, £70 or £100 per invoice.
Statutory interest on late commercial debts
On a qualifying business-to-business contract, the Late Payment of Commercial Debts (Interest) Act 1998 can give you statutory interest when an invoice is paid late. The usual rate is 8% above the Bank of England base rate.
Interest is a right where the Act applies, not a collection guarantee. Confirm when the invoice is legally late before adding figures to a demand or letter before action.
What you can usually claim
- Simple statutory interest at 8% plus Bank of England base rate
- Fixed late payment compensation of £40, £70 or £100
- Reasonable justified recovery costs
Adding interest does not collect the invoice
If reminders have failed, upload the unpaid invoice. A partner can demand principal, interest and compensation. The fee is 15% of what is recovered, payable only when you have been paid (no collection, no fee). We introduce the file; recovery is not guaranteed.
How to calculate statutory interest
Statutory interest is simple interest, not compound. Work it out in three steps:
- Find the reference rate. This is the Bank of England base rate in force on 30 June (for debts that became late between 1 July and 31 December) or on 31 December (for debts that became late between 1 January and 30 June). It stays fixed for that debt.
- Add 8% to the reference rate to get the annual statutory rate.
- Calculate daily interest: invoice amount × annual rate ÷ 365. Multiply by the number of days the invoice has been late.
Example method: for an invoice of £5,000 with a reference rate of 4%, the statutory rate is 12%. Daily interest is £5,000 × 12% ÷ 365, which is about £1.64. After 60 days late, interest is about £98.63. Use the actual reference rate that applies to your invoice; this example is only to show the arithmetic.
When the Act applies
- The contract is for the supply of goods or services.
- Both parties are acting in the course of business. Consumer sales are excluded.
- The contract does not already provide a substantial remedy for late payment. A contractual interest rate can replace statutory interest only if it is a real remedy; a token rate can be overridden.
When interest starts
Interest runs from the day after the agreed payment date. If no date was agreed, it runs from 30 days after the later of delivery of the goods or services and the customer receiving the invoice. Agreed payment periods longer than 60 days between businesses must be fair to the supplier. See when a commercial invoice is legally late.
How to claim it
State on your final demand or letter before action that you are claiming statutory interest under the 1998 Act, show the rate and start date, and give a running daily figure. Keep the calculation honest: overstating the sum in a pre-action letter undermines your position. If the matter goes to court, you can include statutory interest in the claim.
Part payments and disputes
If the customer pays part of the invoice, interest continues on the balance from the date of the part payment. If part of an invoice is genuinely disputed, interest can still run on the undisputed part. Keep a simple running schedule showing each payment, the balance and the interest so far; it makes your figures easy to check and harder to challenge.
Interest and customer relationships
You do not have to claim statutory interest, and some businesses waive it to keep a good customer. It is still worth stating your right to it in your terms, so that customers know late payment has a cost. If you later need to escalate, the interest is part of the debt the partner can pursue.
Frequently asked questions
What is the statutory interest rate on late commercial payments?
8% above the Bank of England reference rate, which is the base rate on 30 June or 31 December depending on when the debt became late.
Is statutory interest simple or compound?
Simple. Calculate it daily as the debt multiplied by the annual rate divided by 365.
Can I claim statutory interest from a consumer?
No. The 1998 Act applies only where both parties are acting in the course of business.
Can I claim interest and compensation together?
Yes. On a qualifying contract, fixed compensation of £40, £70 or £100 per invoice is in addition to statutory interest.
Does claiming interest mean the invoice will be paid?
No. Interest is a right, not a collection method. If reminders fail, you can upload the invoice and we introduce it to a partner agency. The fee is 15% of what is recovered, payable only when you have been paid.