Late payment: what you can claim and how to work it out

When a business customer pays you late, you’re entitled to more than the invoice. The Late Payment of Commercial Debts (Interest) Act 1998 gives you three things:

1. Interest at 8% a year above the Bank of England base rate. With the base rate at 3.75% on 30 June 2026, that’s 11.75% a year on any invoice that became overdue between 1 July and 31 December 2026.
2. A fixed sum for the cost of chasing: £40 on an invoice under £1,000, £70 from £1,000 to £9,999.99, and £100 from £10,000. You can claim it once per invoice.
3. Reasonable recovery costs on top of that, if chasing the debt has cost you more.

It applies when you sell to another business, not to consumers. If your contract sets a different interest rate, you can’t claim statutory interest; the contract’s rate applies.

The sum is simple, and you only need four numbers: the amount owed, the rate, the days late and the fixed-sum band.

Interest = amount owed × 11.75% ÷ 365 × days late.

Take a £5,000 invoice paid 60 days late. The interest is £5,000 × 11.75% ÷ 365 × 60 = £96.58. Add the £70 fixed sum for an invoice of that size, and the customer owes you £166.58 on top of the £5,000.

That’s £1.61 for every day the invoice sits unpaid.

If you agreed a payment date, the invoice is late the day after it. If you didn’t agree one, it’s late 30 days after the customer received the invoice or the goods, whichever is later. Between two businesses, agreed terms should usually be no more than 60 days, and longer only if that’s fair to both of you. Public authorities should usually pay within 30 days.

Most owners don’t claim. They worry the customer will walk. That’s a fair worry, and you don’t have to claim every time. Whether to claim is your choice.

What works is to say it early and calmly. Put a line on every invoice saying statutory interest and the fixed sum apply to late payment. Then the first time you mention it isn’t a threat; it’s a reminder of terms they’ve already seen.

When an invoice does go late, a short letter is enough. Name the invoice, the amount, the days late, the interest and the fixed sum, and give a date to pay by.

We don’t give legal advice. If a customer disputes the debt, or the amount is large, speak to your adviser before you send anything.

In May 2026 the government put the Commercial Payments Bill (announced as the Small Business Protections Bill) before Parliament. It would cap payment terms at 60 days, make the interest charge on late payment mandatory, ban retention payments in construction contracts, and give the Small Business Commissioner powers to settle payment disputes, investigate persistent late payers and fine them. It started in the House of Lords and has passed second reading (9 June), committee stage (21 July) and report stage (15 September). Third reading is scheduled for 20 October 2026; then it goes to the House of Commons. It isn’t law yet, and no start date has been set. The government puts the cost of late payment at £11 billion a year and says it closes 38 businesses a day.

Checked 9 October 2026. The Bill is before Parliament and not yet law.

If a larger customer, one with 50 or more staff, is paying you late now, the Office of the Small Business Commissioner already offers free help: it contacts the customer and asks them to settle.

Interest helps you recover what late payment costs. It doesn’t stop the chasing. Late payment is a major obstacle for 36% of construction firms, and a business it hits spends 86 hours a year chasing.

That’s the problem our first fix takes off your hands: reminders go out on their own before, on and after the due date, replies get sorted, and each morning you see one list of who owes what.

• GOV.UK: Late commercial payments: charging interest and debt recovery
• Late Payment of Commercial Debts (Interest) Act 1998, legislation.gov.uk
• Bank of England: Bank Rate
• GOV.UK: Largest crackdown on late payments in over 25 years as landmark Bill enters Parliament (19 May 2026)
• Department for Business and Trade: Longitudinal Small Business Survey 2024
• London Economics for DBT and the Office of the Small Business Commissioner, 2025
• Office of the Small Business Commissioner: Have a late payment with a large company? Contact us
• UK Parliament: Commercial Payments Bill [HL], stages
• House of Lords Library: Commercial Payments Bill [HL]: Progress in the Lords (27 August 2026)