In short
Multiply the invoice amount by the statutory rate, divide by 365 to get a daily figure, then multiply by the number of days late. For debts falling due in 2026 the rate is 11.75% (3.75% base rate plus 8%), fixed for that debt. A £17,500 invoice 97 days late carries about £546 interest, plus £100 compensation.
Key facts
- Daily interest equals the invoice amount times 11.75%, divided by 365, for debts falling due in 2026.
- The rate is fixed per debt: base rate on 31 December for debts due January to June, 30 June otherwise.
- Worked example: £17,500 due 1 January 2026 and 97 days late gives about £546 interest plus £100 compensation.
- A £50,000 overdue invoice gathers about £16.10 interest a day at 11.75%.
- Interest runs from the date payment became late, not from when you first chased or learned of the Act.
Most businesses chasing an overdue invoice focus on recovering the original amount. What many do not realise is that UK law entitles them to significantly more than that — and they can claim it automatically, without a court order, and without a solicitor.
Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can add statutory interest and fixed compensation to overdue commercial invoices as a matter of right. These amounts accrue from the date the invoice became late, not from the date you first chased it.
- What is the Late Payment of Commercial Debts Act?
- Statutory interest: which rate applies and how it works
- Fixed compensation: the £40, £70 and £100 sums
- Reasonable recovery costs
- How to include these amounts in your recovery process
- When statutory interest does not apply
- What if the invoice is overdue and disputed?
- A worked example
- FAQs
Statutory interest rate for debts falling due in 2026: 11.75% per year. That is the Bank of England base rate of 3.75% (in force since 18 December 2025) plus 8%. The rate is fixed for each debt when it falls due and does not change if the base rate moves later.
What is the Late Payment of Commercial Debts Act?
The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses an automatic statutory right to claim interest, fixed compensation, and reasonable recovery costs on overdue commercial invoices. It applies to contracts for the supply of goods or services between businesses — business-to-business transactions — where the buyer has failed to pay on the agreed date.
It does not apply to consumer transactions. A dispute does not take an invoice outside the Act: if the debt turns out to be owed, interest and compensation run from the original due date. The Act was designed to address a systemic problem: large businesses using extended payment terms and delayed payment as a form of free credit at their suppliers' expense.
Statutory interest: which rate applies and how it works
Statutory interest on overdue commercial invoices is charged at 8% per year above the Bank of England base rate.
The base rate used is the one in force on a fixed reference date: 31 December for debts falling due between 1 January and 30 June, and 30 June for debts falling due between 1 July and 31 December. Once set, the rate stays fixed for the life of that debt. The base rate has been 3.75% since 18 December 2025, so debts falling due in 2026 carry statutory interest of 11.75% per year.
Interest accrues from the date the payment became late. Under the Late Payment Act, a payment becomes late either on the date specified in the contract, or — if no date is specified — 30 days after the later of delivery of the goods or services and the customer receiving the invoice.
Daily interest formula:
Daily interest = Invoice amount × 11.75% ÷ 365
11.75% applies to debts falling due in 2026. For other debts, use 8% plus the base rate on the relevant 31 December or 30 June.
Example — £25,000 invoice falling due in 2026:
- Annual interest: £25,000 × 11.75% = £2,937.50
- Daily interest: £2,937.50 ÷ 365 = about £8.05 per day
Example — £50,000 invoice overdue for 90 days:
- Annual interest: £50,000 × 11.75% = £5,875
- Daily interest: £5,875 ÷ 365 = about £16.10 per day
- Interest for 90 days: £5,875 × 90 ÷ 365 = £1,448.63
These amounts are claimable on top of the original invoice. They do not require a court order. They accrue automatically from the date the payment became late.
Later changes to the Bank of England base rate do not change the rate on an existing debt. Each debt keeps the rate set by the base rate on the 31 December or 30 June before it fell due, however long it stays unpaid. Our late payment calculator applies the correct reference rate automatically.
Fixed compensation: the £40, £70 and £100 sums
In addition to statutory interest, you are entitled to claim a fixed compensation sum for the cost of recovering the debt:
| Invoice amount | Fixed compensation |
|---|---|
| Under £1,000 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
These amounts are payable per invoice — not per debtor. If a customer has failed to pay three separate invoices, you can claim fixed compensation on each one independently. Three invoices of £15,000 each entitle you to £300 in fixed compensation alone — before statutory interest is calculated.
Fixed compensation accrues automatically from the date the payment became late. It does not require a court order.
Reasonable recovery costs
If your actual costs of recovering the debt exceed the fixed compensation sum, the Late Payment Act allows you to claim the difference as reasonable recovery costs. This might include the cost of using a professional debt recovery service or other costs directly attributable to recovery. The costs must be reasonable and proportionate, but for larger invoices where the £100 fixed sum falls significantly short of actual recovery costs, this additional entitlement is worth pursuing.
How to include these amounts in your recovery process
- Calculate the interest owed. Take the invoice amount and apply the statutory rate for that debt (11.75% for debts falling due in 2026). Divide by 365 for the daily figure and multiply by the number of days the invoice has been overdue. Do not round the daily figure before multiplying. Our late payment calculator does this for you.
- Identify the fixed compensation sum. Apply £40, £70, or £100 depending on the size of each invoice. Multiply by the number of overdue invoices if there are several.
- Include both in your letter before action. State the original invoice amount, the statutory interest calculated to the date of the letter, and the fixed compensation sum. Reference the Late Payment of Commercial Debts (Interest) Act 1998 explicitly. State that interest continues to accrue at the daily rate until payment is received.
- Update the figures if the matter proceeds. If your claim moves to a neutral decision process or a court claim, recalculate the interest to the date of your submission (or of the hearing, if the matter goes to court). The total owed increases every day the invoice remains unpaid.
When statutory interest does not apply
Sales to consumers. The Act only covers contracts between businesses.
Where your contract specifies a different rate. If your terms of business include a contractual late payment interest clause, that rate applies instead of the statutory rate — unless it is so low as not to constitute a substantial remedy, in which case you may be able to fall back on the statutory rate.
A dispute is not an exception. If the debtor disputes the work done, the amount charged, the quality, or whether payment has fallen due, and the debt turns out to be owed, statutory interest and fixed compensation still run from the original due date. A dispute delays payment; it does not remove the right. A court can reduce interest where the supplier's own conduct makes that fair (section 5 of the Act).
If your debtor is actively contesting the invoice, the next step is to resolve the underlying dispute, keeping your interest claim in the figures. If both parties agree, a private neutral decision process resolves the disagreement directly and produces a binding decision on what is owed, including interest. See our unpaid invoice recovery guide for the full picture.
What if the invoice is overdue and disputed?
In practice, debtors sometimes raise a dispute only after a letter before action or formal demand — as a tactic to delay or complicate recovery. A late-raised dispute does not automatically make the invoice non-recoverable, but it does mean you need a process that can assess the underlying disagreement fairly.
For commercial debts up to £150,000 in England, Wales, and Northern Ireland, a private neutral decision process at Dispute Neutral is designed for exactly this situation, provided both parties agree to use it. Both parties submit their documents and written case. An independent lawyer with at least 15 years' practical experience, acting as an expert, not an arbitrator, reviews everything and issues a binding decision within 10 business days of the matter being ready. There is no hearing, and neither side needs a solicitor.
For the full picture on your recovery options, see our guides on recovering unpaid invoices without court or solicitors and debt recovery without solicitors.
A worked example: what you can actually claim
Invoice: £17,500 for professional services
Payment due date: 1 January 2026
Date of letter before action: 8 April 2026 (97 days overdue)
Statutory interest rate: 11.75% (base rate of 3.75% on 31 December 2025, plus 8%)
| Item | Calculation | Amount |
|---|---|---|
| Original invoice | — | £17,500.00 |
| Annual interest | £17,500 × 11.75% | £2,056.25 |
| Daily interest | £2,056.25 ÷ 365 | about £5.63/day |
| Interest for 97 days | £2,056.25 × 97 ÷ 365 | £546.46 |
| Fixed compensation | Invoice > £10,000 | £100.00 |
| Total claimable | £18,146.46 |
That is £646.46 above the original invoice amount, claimable without a court order. Interest is worked out on the unrounded daily figure.
Frequently asked questions
Does the statutory interest rate change when the Bank of England base rate changes?
Not for an existing debt. Each debt carries 8% above the base rate in force on 31 December (for debts falling due 1 January to 30 June) or 30 June (for debts falling due 1 July to 31 December), and that rate stays fixed until the debt is paid. A base rate change only affects debts falling due in later half-years. The base rate has been 3.75% since 18 December 2025, so debts falling due in 2026 carry 11.75%.
Can I claim statutory interest on invoices that were already overdue before I knew about the Late Payment Act?
Yes. The interest accrues from the date the payment became late — not from the date you first claimed it or became aware of your entitlement. If an invoice became overdue six months ago, you are entitled to six months of accrued interest at the applicable rate, plus the fixed compensation sum.
Does the debtor have to agree to pay the statutory interest and compensation?
No. These amounts are a statutory entitlement — they arise automatically by operation of law when a commercial payment becomes late. You assert the entitlement in your letter before action and include it in any subsequent recovery process. A court or neutral would apply the same entitlement in any formal determination.
What if my contract has its own late payment terms?
If your contract specifies a late payment interest rate, that rate applies instead of the statutory rate. However, if the contractual rate is significantly lower than the statutory rate, you may be able to argue it does not constitute a substantial remedy — in which case the statutory rate can apply instead. Draft clauses for future contracts are available in the Include us section of the site.
Can I claim statutory interest and compensation on a disputed invoice?
Yes, if the debt turns out to be owed. Interest and compensation run from the original due date, not from when the dispute is resolved. A dispute delays payment; it does not remove the right. A court can reduce interest where the supplier's own conduct makes that fair (section 5 of the Act). The dispute itself still needs resolving through a process designed for that purpose. See our unpaid invoice recovery guide for the full picture.
Ready to recover what you are owed — including the interest?
If your invoice is overdue or disputed and both you and your customer want a clear, binding decision, including on statutory interest and compensation, Dispute Neutral is designed for commercial debts up to £150,000 in England, Wales, and Northern Ireland.
Start a matter →Private • Fixed fees • Binding decision within 10 business days of the matter being ready