How to Calculate Statutory Interest on Late Invoices (UK 2026 Guide)

Updated February 2026 | 18-minute read

If a client hasn't paid your invoice on time, you're legally entitled to charge interest — and most freelancers don't know this.

Under the Late Payment of Commercial Debts (Interest) Act 1998, you can claim:

• 8% interest per year (currently 8% + Bank of England base rate)
• Fixed compensation fee (£40-100 depending on invoice value)
• Reasonable debt recovery costs (if you hire a solicitor or debt collector)

This guide shows you exactly how to calculate what you're owed, when you can claim it, and how to actually collect it.

What Is Statutory Interest?

Statutory interest is the legal right to charge interest when a business pays you late. It's automatic — you don't need it written in your contract (though it helps).

Who can claim it:

• ✅ Freelancers, sole traders, limited companies
• ✅ Anyone supplying goods or services to another business
• ✅ Works for B2B transactions (business to business)

Who can't claim it:

• ❌ Consumer transactions (selling to individuals, not businesses)
• ❌ Public sector contracts (different rules apply)
• ❌ If your contract explicitly waives this right (rarely happens)

How Much Interest Can You Claim?

The statutory interest rate for late commercial payments in 2026 is:

This rate changes when the Bank of England changes the base rate (usually every few months). Check current Bank of England base rate.

Fixed Compensation Fees

On top of interest, you can claim a fixed compensation fee:

Invoice Amount	Fixed Compensation
Under £1,000	£40
£1,000 - £9,999.99	£70
£10,000+	£100

This is a one-time fee per invoice, not a daily charge. You claim it once when the payment is late.

When Does Interest Start?

Interest starts accruing from the day after the payment was due. Here's how payment dates work:

If Your Invoice Has Payment Terms

Example: "Payment due within 30 days"

• Invoice date: 1 January 2026
• Payment due: 31 January 2026
• Interest starts: 1 February 2026

If Your Invoice Doesn't State Payment Terms

By law, payment is due within 30 days of:

• The date you delivered the goods/services, OR
• The date the customer received your invoice (whichever is later)

If Your Contract Says Something Different

Your contract can specify longer payment terms (e.g. "60 days"), but it CANNOT:

• Set terms longer than 60 days (unless both parties are large enterprises)
• Waive your right to statutory interest entirely
• Set unfair payment terms that grossly deviate from normal practice

How to Calculate Statutory Interest (Step-by-Step)

Here's the formula:

Worked Example

Let's say:

• Invoice amount: £3,500
• Payment terms: 30 days
• Invoice date: 1 December 2025
• Payment due date: 31 December 2025
• Actual payment date: 15 March 2026 (74 days late)
• Interest rate: 12.5% (8% + 4.5% base rate)

Step 1: Calculate days late

From 1 January 2026 (day after due date) to 15 March 2026 = 74 days

Step 2: Apply the formula

Step 3: Add fixed compensation fee

Invoice is £3,500 (£1,000-£9,999 bracket) = £70 fee

Total you can claim:

How to Claim Statutory Interest (Professionally)

Most clients pay up when they realise you know your legal rights. Here's the escalation path:

Step 1: Polite Reminder (Day 7 Overdue)

Don't mention interest yet — assume it's an admin error.

Step 2: Firmer Follow-Up (Day 14 Overdue)

Still polite, but state the consequences clearly.

Step 3: Statutory Interest Warning (Day 30 Overdue)

Now you're serious. Include the exact calculation.

Key point: Show them the exact calculation. Most clients pay at this stage because they realise you're serious.

Step 4: Letter Before Action (Day 45 Overdue)

This is your final warning before legal action. Send it by recorded delivery.

Step 5: Small Claims Court (Day 60+)

If they still don't pay, you can file a claim online via Money Claim Online:

• Costs £35-455 (depending on claim amount)
• Court fees are added to what they owe
• Takes 4-6 months usually
• You'll likely win if you have evidence (invoice, contract, proof of delivery)

Most clients settle before court once they get the claim notice.

Can You Add Interest to Your Invoice Up Front?

Yes — and you should. Add a late payment clause to your terms:

Print this on every invoice. It warns clients up front and makes enforcement easier.

What If They Still Won't Pay?

If you've tried everything and they're ignoring you:

1. Check if they're solvent: Search Companies House for recent accounts. If they're insolvent, you might not recover anything.
2. Use a debt collection agency: They take 10-25% commission but handle the hassle. Try National Debtline for free advice first.
3. Write them off: Sometimes it's not worth the stress. Claim it as a bad debt expense on your tax return and move on.

Common Questions

Do I need to warn clients about interest before charging it?

No — statutory interest is automatic. But warning them (Step 3 above) usually gets faster payment.

Can I charge interest if my invoice didn't mention it?

Yes. The Late Payment Act applies even if your invoice says nothing about interest.

What if my contract says "interest-free credit for 60 days"?

That's fine — interest starts after 60 days. But if the contract says "no interest ever," that clause is likely unenforceable (you can still claim statutory interest).

Can I charge compound interest?

No — statutory interest is simple interest only. It doesn't compound daily.

What if they paid part of the invoice?

You can charge interest on the outstanding balance only. Adjust your calculation based on the unpaid amount.

Can I charge more than 12.5% interest?

Only if your contract specifies a higher rate AND the client agreed to it. But statutory interest (12.5%) is your minimum right.

Prevention: Stop Late Payments Before They Happen

The best way to handle late payments is to prevent them:

• Set clear payment terms up front (in contract + on invoice)
• Invoice immediately after delivering work (don't wait weeks)
• Make payment easy (offer card payments, bank transfer, PayPal — whatever they prefer)
• Send polite reminders before the due date ("Just a heads-up, invoice due Friday")
• Check client credit before big projects (Companies House, credit reports)
• Request deposits for large jobs (50% upfront reduces risk)

Key Takeaways

• ✅ You have a legal right to 12.5% interest + £40-100 fee on late B2B invoices
• ✅ Interest starts the day after payment was due
• ✅ Most clients pay when you mention statutory interest (they don't want legal action)
• ✅ You don't need it in your contract (but it helps to include it)
• ✅ Small claims court is a realistic option for amounts up to £10,000

Related Resources

• Late Payment Interest Calculator — calculate your exact entitlement
• Freelancer Late Payment Email Sequence — step-by-step templates
• Invoice Email Pack — 12 ready-to-use recovery templates
• Gov.uk: Late Commercial Payments — official guidance

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This guide is for informational purposes only and does not constitute legal advice. Interest rates and compensation fees are accurate as of February 2026 but subject to change. Always verify current Bank of England base rate before calculating interest.