Late Payment Interest Calculator
If a business owes you money, you are entitled to statutory interest at 11.75% and a fixed sum of compensation on top. You do not need it written into the contract, and most people never claim it.
Rates last checked 11 September 2026
What you are entitled to #
Two separate things, and you get both. This is the Late Payment of Commercial Debts legislation, and it applies between businesses automatically.
- Statutory interest at 8 percentage points above the Bank of England base rate, which is currently 11.75%.
- A fixed sum of compensation, scaled to the size of the debt.
| Debt | Fixed compensation |
|---|---|
| Up to £999.99 | £40.00 |
| £1,000 to £9,999.99 | £70.00 |
| £10,000 or more | £100.00 |
The fixed sum is once per invoice, not once per reminder. If recovering the debt genuinely costs you more than that, for example in legal fees, you can claim the reasonable excess on top.
When an invoice becomes legally late #
If you agreed a payment date, the debt is late the day after it. If no date was agreed, the law fills the gap: payment is late 30 days after the customer receives the invoice, or after the goods or service are delivered, whichever happens later.
Agreed terms are normally up to 30 days for a public authority and up to 60 days between businesses. Longer terms are possible but have to be fair to both sides, which means a large customer cannot simply impose 120 day terms and rely on them.
You do not need it in the contract #
This is the part most people do not know. Statutory interest is a right in law between businesses. It applies whether or not your terms mention interest, and whether or not the customer agreed to it.
A contract can set its own late payment rate instead, but only if that rate is a substantial remedy. A token rate written in specifically to avoid the statutory one can be set aside, and the statutory rate applied in its place.
The right does not lapse because you did not invoice it immediately. Interest accrues daily from the day the debt became late, and you can claim it later.
Searches for late payment interest HMRC mean two different things #
A late payment interest calculator HMRC users are looking for is usually this second one: a late payment interest HMRC calculator for tax, not for a customer debt. HMRC late payment interest is charged on tax paid after its due date and is a completely separate calculation from the one above. If you are here about tax rather than an unpaid customer, the figures are in corporation tax payment and deadlines and paying Self Assessment.
Why it matters more in construction #
Long payment terms and slow settlement are structural in construction, and subcontractors absorb most of it. The reverse charge made it worse: before 2021 a subcontractor at least held the VAT on an invoice until the quarterly return, and that float is gone.
The practical value of this calculation is rarely the money. It is that a statement showing £11.27 a week accruing on an overdue invoice changes the conversation from a favour being asked to a cost being incurred. Many businesses put the figure on the statement and then waive it when payment lands.
If the amounts are large and the customer is slow by habit, the reverse charge guide covers the cash flow side, and moving to monthly VAT returns is worth considering if you are permanently in repayment.
What this calculator does not do #
It calculates simple interest on a single debt at the current rate. It does not compound, because statutory interest does not compound. It does not handle a rate that changed partway through the period, which happens when the base rate moves during a long overdue period, nor part payments that reduce the balance over time.
For a long-running or disputed debt, or one heading to court, the calculation needs to be done period by period rather than in one line.
Common questions #
What is the late payment interest rate?
Statutory interest on a commercial debt is 8% above the Bank of England base rate, which at the current base rate of 3.75% is 11.75%. It applies between businesses and you do not need it written into the contract.
How much compensation can I charge?
A fixed sum on top of the interest: £40 for a debt up to £999.99, £70 from £1,000 to £9,999.99, and £100 at £10,000 or more. It is charged once per invoice, not once per chase.
When does an invoice legally become late?
If you agreed a payment date, the day after it. If you did not agree one, the law makes it 30 days after the customer receives the invoice or the goods or service are delivered, whichever is later.
Do I need the contract to mention interest?
No. Statutory interest is a legal right between businesses and applies whether or not the contract says anything. A contract can set its own rate instead, but only if that rate is a substantial remedy for late payment. A token rate can be struck down and the statutory rate applied anyway.
Is this the same as HMRC late payment interest?
No. HMRC charges its own rate on unpaid tax, which is base rate plus 4 percentage points. Statutory interest on a commercial debt is base rate plus 8. They are different regimes: one is for tax you owe HMRC, the other for money a customer owes you.
Can I claim interest and still keep the customer?
Charging it and having the right to charge it are different decisions. Many businesses put the figure on the statement to show what is accruing and then waive it when payment arrives. The right does not expire just because you did not invoice it immediately.