Most UK freelancers don't know this: you have a legal right to charge interest and claim compensation on every late invoice. It's not optional generosity from your client — it's the law.
The Late Payment of Commercial Debts (Interest) Act 1998 gives you automatic entitlements that apply even if your contract doesn't mention them. Here's exactly how it works and how to use it.
The interest rate is fixed at 8% above the Bank of England base rate. It's calculated on a daily basis from the day after the payment was due.
The base rate that applies is the rate on the day the debt becomes late — not the current rate. If the base rate changes while the debt is outstanding, the original rate still applies to that debt.
For a more detailed breakdown, use our Late Payment Interest Calculator.
On top of interest, you're entitled to a fixed sum of compensation for each late invoice:
| Invoice amount | Compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 — £9,999.99 | £70 |
| £10,000+ | £100 |
You can also claim reasonable recovery costs if they exceed the fixed compensation — for example, debt collection agency fees or solicitor's costs.
You invoiced £3,000 with 14-day payment terms. The client pays 45 days late.
That's money the client legally owes you on top of the original invoice.
Before work starts, make your payment terms clear. Include a clause like:
This doesn't create the right (you already have it by law), but it makes clients aware of the consequences.
When following up on a late invoice, mention the Act specifically:
This is often enough to prompt payment. Most clients don't want the hassle of fighting a statutory entitlement.
If the invoice remains unpaid after two or three reminders, include the calculated interest and compensation in your final demand letter.
If you proceed to small claims court, you can claim the original amount plus all accrued interest and compensation. Courts routinely award statutory interest on commercial debts.
A contract can substitute different payment terms, but they must provide a "substantial remedy" for late payment. If the alternative terms are significantly worse than statutory provisions, they can be challenged as unfair.
A contract term that says "no interest on late payments" is likely unenforceable. The Act was specifically designed to prevent larger businesses from imposing unfair terms on smaller suppliers.
Yes — and they have stricter rules. Public bodies must pay within 30 days and cannot contractually extend this period. The same interest rate and compensation apply.
You can choose not to charge it, but you can't be forced to waive it in advance. If a client asks you to sign a contract waiving statutory interest, that clause may be unenforceable.
This is the most common concern. In practice:
The Getting-Paid Toolkit includes invoice templates with built-in late payment clauses, chase email sequences, final demand letters, and a complete recovery system — all compliant with UK law.
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