Late payment interest UK: statutory interest and compensation

Chasing a business customer who hasn't paid is one of the worst parts of running a small business. UK law gives you something to chase with: under the Late Payment of Commercial Debts (Interest) Act 1998, you can claim interest and a fixed sum of compensation when another business pays you late.

This guide explains when a payment counts as late, how the statutory interest rate is set (and what it is in 2026), the fixed compensation amounts, and how to put a late payment clause on your invoices. The free invoice generator includes the clause by default.

Who it covers

The Act covers commercial debts — money one business owes another for goods or services. So it's for your invoices to other businesses, whether you trade as a sole trader, a partnership or a company, not for invoices to private individuals.

When is a payment late?

A payment is late when it isn't made by the agreed due date. If you and your customer never agreed payment terms, the payment is due 30 days after the later of:

• the date of the invoice, or
• the date you delivered the goods or services.

That's why it pays to put clear terms on every invoice. Invoice Native offers due on receipt, 7, 14, 30 and 60 days, or a custom date, and defaults to 30 days to match the statutory default.

The statutory interest rate

Statutory interest is 8% a year above the Bank of England base rate. The base rate used is fixed at a reference date, depending on when the debt became late:

The base rate has been 3.75% since 18 December 2025, and the Bank held it there on 17 September 2026. So both reference dates for 2026 (31 December 2025 and 30 June 2026) give 3.75%, and statutory interest is:

The rate for debts that become late in early 2027 depends on the base rate on 31 December 2026, so check GOV.UK then.

Fixed compensation

On top of interest, you can claim a fixed sum of compensation for the cost of chasing the debt. It depends on the size of the debt:

A worked example

You invoice a business customer £2,400 on 30-day terms, and they pay 30 days after the due date. The debt became late in 2026, so the rate is 11.75%.

So the customer could owe around £93 on top of the invoice. The figures here are a rough guide — GOV.UK's late payment guidance explains how to work out and claim the exact amount.

For small, short delays the interest is modest, but the fixed compensation often matters more, and the fact that you can charge both is a useful nudge.

Putting a late payment clause on your invoice

Telling customers up front that you know your statutory rights can help invoices get paid on time. A short clause under your payment terms is enough. Invoice Native's late payment clause is on by default for UK invoices and reads:

We will charge interest and compensation on late payments under the Late Payment of Commercial Debts (Interest) Act 1998.

You can switch it off for a customer you'd rather not remind — but it costs nothing to leave it on.

Good habits that go with it:

• Put a due date on every invoice, not just "payment terms apply".
• Send invoices promptly, since the 30-day default runs from the invoice or delivery.
• Make paying easy: correct bank details (the account name exactly as your bank holds it), plus a payment link if you have one.
• Chase politely but on time, and keep a note of when you did.

What's coming: the Commercial Payments Bill

The Commercial Payments Bill was introduced on 19 May 2026 and was in the House of Lords at the time of writing. As proposed, it would:

• set a 60-day maximum payment term;
• make late payment interest mandatory;
• ban retentions in construction contracts.

It is not yet law. Until it is, the rules above apply. We'll update this page if it's passed.

Checklist

• ✅ A due date or clear payment terms on every invoice
• ✅ Late payment clause under your terms
• ✅ Interest at 8% above base rate (11.75% for debts late in 2026)
• ✅ Fixed compensation of £40, £70 or £100, by debt size
• ✅ Correct bank details and an easy way to pay