What the legislation is for
The Late Payment of Commercial Debts (Interest) Act 1998 introduced a statutory interest regime for qualifying commercial debts. The framework has been amended over time and is supported by later regulations covering late commercial payments.
In practical terms, the rules can affect when a business payment becomes late, the interest that may be charged and the fixed recovery compensation that may be available.
When a commercial payment becomes late
If a payment date has been agreed, that date is the starting point for deciding whether the payment is late. Where no payment date has been agreed, GOV.UK sets out statutory timing rules based on the invoice and the delivery of the goods or service.
Payment terms, the type of customer and the circumstances of the transaction can matter, so the due date should be checked before calculating any additional amount.
Statutory interest
Current GOV.UK guidance describes statutory interest for qualifying business-to-business late payments as 8% plus the relevant Bank of England base rate. A different contractual interest provision can affect whether statutory interest is available.
LatePay Kit shows the annual rate, days overdue and estimated interest separately so you can see how the calculation is built rather than receiving only a final total.
Fixed recovery compensation
The late-payment framework also provides fixed recovery sums for qualifying commercial debts. Current GOV.UK guidance uses bands of £40, £70 and £100 depending on the amount of the debt.
The fixed sum is distinct from statutory interest, which is why the calculator presents it as a separate figure.
2026 update: the Commercial Payments Bill
Parliament is considering a Commercial Payments Bill that proposes changes to the UK late-commercial-payment regime. As of August 2026, the Bill has completed House of Lords committee stage and has not received Royal Assent, so its proposed measures should not be treated as rules already in force.
LatePay Kit continues to base its calculator on the current published rules. If legislation changes, the calculator and this guidance will need to be reviewed before any new rules are applied.
Do not treat the rules as automatic
The existence of a late invoice does not by itself establish that every statutory charge applies. Contractual terms, genuine disputes, the nature of the transaction and other facts can change the position.
UK commercial-payment policy can also change. Check current official guidance before adding interest or recovery compensation to a demand or taking a formal recovery step.
Official sources
Apply the rules to your invoice
Use the free LatePay Kit calculator to check the basic eligibility questions and estimate potential statutory interest and recovery compensation for an overdue commercial invoice.
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