In short
Yes, under the Late Payment of Commercial Debts (Interest) Act 1998 you can charge interest on a late business-to-business invoice at 8% a year above the Bank of England base rate. For debts falling due in 2026 that is 11.75%. You can also claim £40, £70 or £100 fixed compensation per invoice, without a court order.
Key facts
- Under the Late Payment of Commercial Debts (Interest) Act 1998, statutory interest is 8% a year above Bank of England base rate.
- Interest runs from the contract due date or, if none, 30 days after the later of delivery and receipt of the invoice.
- Fixed compensation is £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more.
- Fixed compensation is due per invoice, not per customer, so three unpaid invoices carry three compensation sums.
- If your recovery costs exceed the fixed sum, you may claim the difference as reasonable recovery costs.
When a business customer fails to pay an invoice on time, most people focus on recovering the original amount owed. What many do not realise is that they are also entitled to claim statutory interest and fixed compensation on top — automatically, without a court order, and without a solicitor.
These rights exist under the Late Payment of Commercial Debts (Interest) Act 1998 and apply to most business-to-business transactions in the UK. They are designed to compensate creditors for the cost and disruption of late payment, and to discourage debtors from using delayed payment as a cash flow strategy at their supplier's expense.
🧮 Free calculator: Use our late payment calculator to work out what you can claim. It applies the correct reference rate for each invoice automatically (the base rate on 31 December or 30 June before the debt fell due).
What is statutory interest on an unpaid invoice?
Statutory interest is interest that accrues automatically on overdue commercial invoices. The rate is 8% per year above the Bank of England base rate.
The base rate used is the one in force on 31 December (for debts falling due between 1 January and 30 June) or on 30 June (for debts falling due between 1 July and 31 December). That rate is fixed for the life of the debt, even if the base rate changes later. The base rate has been 3.75% since 18 December 2025, so an invoice falling due in 2026 carries statutory interest of 11.75% per year.
Interest starts running from the date the payment became late. That is the due date in your contract or, if none was agreed, 30 days after the later of delivery of the goods or services and the customer receiving your invoice.
You do not need a court order to claim it. You do not need a solicitor to calculate it. You add it to the amount owed and include it in your letter before action or any subsequent recovery process.
What is the fixed compensation entitlement?
On top of statutory interest, you are entitled to claim a fixed sum as compensation for the cost of recovering the debt. The amounts are set by the Late Payment Act and depend on the size of the debt:
| Debt size | Fixed compensation |
|---|---|
| Under £1,000 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
These sums are payable per invoice, not per debtor. If a customer has failed to pay three separate invoices, you can claim the fixed compensation amount on each one. No court order is needed — the entitlement arises automatically when a commercial payment becomes late.
Can you claim reasonable recovery costs as well?
Yes, in some cases. If your actual costs of recovering the debt exceed the fixed compensation sum, you may be able to claim the difference as reasonable recovery costs under the Act.
This might include the cost of using a debt recovery service, instructing a professional to pursue the matter, or other reasonable expenses directly attributable to the recovery process. The costs must be reasonable and proportionate — but for larger debts where the fixed £100 sum falls well short of your actual recovery costs, this additional entitlement is worth knowing about.
When can you not claim statutory interest?
Statutory interest under the Late Payment Act does not apply to sales to consumers. Between businesses, the main exception is where your contract already provides its own remedy for late payment.
If your contract already specifies an interest rate for late payment, If your terms of business include a contractual late payment clause, that rate applies instead of the statutory rate — though if the contractual rate is lower, you may be able to argue it is not a substantial remedy and fall back on the statutory rate instead.
A dispute is not an exception. If the customer disputes the work, the amount or the contract, 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). The dispute itself still needs resolving, for example through a neutral decision process if both sides agree.
How to include statutory interest in your recovery process
The practical steps are straightforward.
- Calculate the interest owed. Take the invoice amount and apply the statutory rate: 8% plus the base rate in force on 31 December or 30 June before the debt fell due (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. Our late payment calculator does this for you.
- Add the fixed compensation amount — £40, £70, or £100 depending on the debt size.
- Include both figures in your letter before action alongside the original invoice amount. State clearly that these sums are claimed under the Late Payment of Commercial Debts (Interest) Act 1998.
- If the matter proceeds to a neutral decision process or a court claim, include both figures in your submission.
What if the debt is disputed rather than simply overdue?
If the debtor is not simply ignoring your invoice but is actively contesting it — disputing the work, the contract, or the amount — the first job is to resolve the dispute. Your statutory interest and fixed compensation keep running in the meantime and can be claimed if the debt is found to be owed.
A private neutral decision service like Dispute Neutral is designed for exactly this situation, provided both parties agree to use it. An independent lawyer with at least 15 years' practical experience, acting as an expert, not an arbitrator, reviews the contract, the documents and the written submissions from both sides. They issue a binding written decision within 10 business days of the matter being ready. There is no hearing, and neither side needs a solicitor.
For commercial debts up to £150,000 in England, Wales, and Northern Ireland, it is usually a faster, cheaper and more proportionate route than court.
Statutory interest calculator
Use our standalone late payment calculator for accurate figures. It works out the right reference rate for each invoice automatically, based on the date the debt fell due.
Open the late payment calculator →The calculator applies the base rate in force on 31 December or 30 June before each debt fell due, calculates interest day by day, applies the correct fixed compensation band, and handles multiple invoices.
Frequently asked questions
Does statutory interest apply to all business invoices?
It applies to most business-to-business transactions for the supply of goods or services under a commercial contract. It does not apply to consumer transactions, or where the contract provides its own substantial remedy for late payment. A dispute does not remove the right: if the debt turns out to be owed, interest and compensation run from the original due date.
Which base rate do I use to work out statutory interest?
Use the Bank of England base rate in force on 31 December (for debts falling due 1 January to 30 June) or on 30 June (for debts falling due 1 July to 31 December), and add 8%. That rate is fixed for the life of the debt, even if the base rate changes later. The base rate has been 3.75% since 18 December 2025, so debts falling due in 2026 carry 11.75% a year. For the daily figure, multiply the invoice by the annual rate, divide by 365 and multiply by the number of days late. Our late payment calculator applies the correct reference rate automatically.
Can I claim statutory interest if I have already sent a final demand?
Yes. The entitlement to statutory interest arises from the date the payment became late — not from the date you first chased it. Interest will have been accruing since the invoice became overdue, regardless of when you sent your final demand or letter before action. Include the full calculated amount in any further correspondence or recovery process.
What if my debtor disputes the invoice after I claim statutory interest?
A dispute does not remove your right to statutory interest and compensation. If the debt turns out to be owed, they run from the original due date, not from when the dispute is settled. A dispute delays payment; it does not cancel the interest. A court can reduce interest where the supplier's own conduct makes that fair (section 5 of the Act). The disagreement itself still needs resolving: if both parties agree, a private decision process such as Dispute Neutral can decide what is owed, including interest.
Ready to recover what you are owed?
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