How to charge late-payment interest on an overdue invoice

For eligible business-to-business late payments, current UK guidance describes statutory interest as 8% plus the relevant Bank of England base/reference rate.

The reference rate is fixed for six-month periods, so the rate used for an overdue invoice depends on when the debt became late rather than simply using today's base rate.

The basic simple-interest structure is the unpaid debt multiplied by the annual interest rate, divided by 365, then multiplied by the number of days late.

LatePay Kit performs that calculation for the invoice details you enter and shows the annual rate used, days overdue and estimated interest separately so the calculation is easy to review.

If you agreed a payment date with the customer, that due date is central to the calculation. Where no payment date was agreed, statutory timing rules can apply instead.

Before charging interest, confirm the invoice date, agreed terms, due date and whether there is any genuine dispute about the debt.

Do not assume every overdue invoice qualifies. The statutory regime is aimed at commercial debts, and contractual terms can matter. Current official guidance states that statutory interest cannot be claimed where the contract already provides a different rate of interest.

A genuine dispute, consumer transaction or other unusual circumstance may require a different assessment.

Statutory interest changes with the invoice amount, applicable annual rate and number of days overdue. Fixed recovery compensation is a separate potential charge based on the value of the debt.

Read how the £40, £70 and £100 recovery-compensation bands work.

GOV.UK — Late commercial payments: charging interest and debt recovery ↗

Office of the Small Business Commissioner — Interest calculator guidance ↗

Use the free LatePay Kit eligibility check and calculator to estimate potential interest and fixed compensation for the invoice in front of you.