You can charge interest on a late invoice whether or not your contract says so, at 8% above the Bank of England base rate, plus a fixed sum of £40 to £100 towards the cost of chasing it. Most small businesses never do, and the reason is usually that the sum looks harder than it is.
The right comes from the Late Payment of Commercial Debts (Interest) Act 1998. It applies automatically between businesses, and to public authorities, without needing to be written into the contract and without the customer having to agree. On a £4,800 invoice paid 75 days late, that is about £186 you are entitled to and probably did not ask for.
There is one trap, and it is the reason this calculator exists. The base rate used is not today’s. It is the rate in force on the 30 June or 31 December immediately before the debt fell late, and it then holds for that whole six-month period even if the Bank moves rates in between. Calculators that use the live base rate will give you the wrong figure on any older invoice, and that is most of the ones you will find. This one shows you which reference rate it used, and on what date it was set, so the figure stands up when the other side queries it.
2026/27 tax year
Rates checked 17 August 2026
How this is worked out
Statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 is eight percentage points above the Bank of England base rate. It applies automatically between businesses — you do not need it written into the contract, and you do not need the other side to agree.
The base rate used is not today’s. It is the rate in force on the 30 June or 31 December immediately before the debt fell late, and it then holds for that entire six-month period even if the Bank moves rates in the middle of it. Most online calculators use the live base rate and are therefore wrong. This one shows you which reference rate it applied and why.
Interest runs from the day after payment was due to the day it is paid, at the daily rate of the annual figure divided by 365.
On top of interest you can claim a fixed sum for the cost of chasing the debt: £40 on an invoice under £1,000, £70 up to £9,999.99, and £100 at £10,000 or more. It is one fixed sum per overdue invoice, so five late invoices carry five of them.
The figures it uses
- Statutory interest: Bank of England base rate plus 8 percentage points
- Reference base rate: the rate in force on the preceding 30 June or 31 December, fixed for six months
- Current reference rate: 3.75% base, so 11.75% for debts falling late in 2026
- Fixed sum compensation: £40 under £1,000, £70 to £9,999.99, £100 at £10,000 and over
- Daily interest: the annual rate divided by 365
All figures checked against HMRC, gov.uk and Bank of England sources on 17 August 2026. This is general information, not tax advice — for anything with real money on it, put it past your accountant.
Questions
How much interest can I charge on a late invoice?
Between businesses, statutory interest is 8% above the Bank of England base rate. With the reference base rate at 3.75%, that is 11.75% a year for a debt that became late in 2026. On a £5,000 invoice, that is about £1.61 for every day it stays unpaid.
Do I need a late payment clause in my contract to charge interest?
No. The right arises from statute for commercial debts, so it applies even where the contract is silent. The exception works the other way round: if your contract sets its own interest rate, that rate displaces the statutory one, and a contract rate that is not a substantial remedy can be challenged.
What is the fixed sum compensation for late payment?
£40 for a debt under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. It is compensation for the cost of recovering the debt, claimable per overdue invoice on top of interest, and if your actual reasonable recovery costs are higher you can claim the difference as well.
How far back can I claim late payment interest?
A simple contract debt in England and Wales is normally recoverable for six years from the date it fell due, and interest can be claimed alongside it. The calculator covers reference periods back to 2020 for that reason.
Does statutory interest apply to public sector customers?
Yes. Public authorities are subject to the same regime, and are required to pay within 30 days rather than the 60 that applies by default between businesses. What you cannot do is agree a reduced rate of statutory interest with a public authority.
Other Smart SME tools
- Cost of an Employee Calculator What a hire really costs once NI, pension and holiday are counted.
- Company Car Tax Calculator BIK and salary sacrifice on an electric company car, against the petrol or diesel it replaces.
- Budget Impact Calculator What the April 2026 changes added to your wage bill and your tax.