Calculate the statutory interest and compensation you are entitled to claim on an overdue invoice under the Late Payment of Commercial Debts (Interest) Act 1998.
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The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses the right to claim statutory interest and compensation on overdue invoices. This applies to all B2B transactions and contracts with public authorities. It does not apply to consumer debts.
The statutory interest rate is 8% above the Bank of England base rate. As of April 2026 the base rate is 4.5%, making the statutory rate 12.5%. This rate is applied on a daily basis to the outstanding invoice amount.
For B2B transactions without an agreed payment term, interest starts 30 days after the later of:
If you have agreed payment terms (e.g. 30 days, 60 days) interest starts the day after the agreed payment date passes.
For public authorities the default payment term is 30 days and interest starts from day 31.
In addition to interest you are entitled to a fixed sum to cover debt recovery costs:
If your actual costs of recovering the debt exceed the fixed compensation amount you can claim the difference, provided the costs are reasonable. This might include solicitor's fees or debt collection agency fees.
You can add the interest and compensation to a new invoice or claim it in a letter to the debtor. You do not need a court order to claim it — simply send a letter or email stating the amount owed including interest and compensation under the Late Payment Act.
If the debtor still refuses to pay you can take the matter to the small claims court for debts up to £10,000 in England and Wales.
While you have a legal right to claim late payment interest, whether you exercise that right is a commercial decision. Claiming interest from a long-standing client may damage the relationship. Many businesses use the threat of claiming interest as leverage to get invoices paid without actually adding the interest to the final amount.