UK · EU · US · InternationalLate payment interest: what you can actually claim
Short answer: on a business to business debt you are entitled to interest at 11.75 per cent a year and a fixed sum of £40 to £100 per invoice, whether or not your contract mentions interest. Most businesses never claim either. Our letter before action claims both, from £595.
The right exists without a contract clause
The Late Payment of Commercial Debts (Interest) Act 1998 implies a term into commercial contracts between businesses. You do not need to have written anything about interest, and the debtor does not need to have agreed to it. It applies to qualifying debts for goods or services between businesses, and between a business and a public authority.
The rate, and how it is actually fixed
Statutory interest is eight percentage points above the Bank of England base rate. The base rate is 3.75 per cent, which makes the statutory rate 11.75 per cent a year.
The detail most people get wrong is that the rate is not tracked daily. It is fixed by reference to the base rate in force on 30 June for interest that starts to run between 1 July and 31 December, and on 31 December for interest starting between 1 January and 30 June. A debt falling due in September 2026 therefore uses the June rate for its whole life, even if the base rate moves afterwards. It is simple interest, not compound.
The fixed sum people forget
Section 5A gives separate fixed compensation for the cost of recovering each late invoice, on top of interest: £40 where the debt is under £1,000, £70 where it is £1,000 to £9,999.99, and £100 where it is £10,000 or more. It is per invoice, not per debtor, so twelve unpaid monthly invoices at £8,000 each carry £840 in fixed compensation before a penny of interest. Where reasonable recovery costs exceed the fixed sum, the Act allows the difference to be claimed as well.
When interest starts running
From the day after the agreed payment date. If no date was agreed, thirty days after the later of receipt of the invoice, delivery of the goods, or completion of the service. Parties can agree longer terms, but a term beyond sixty days between businesses is open to challenge as grossly unfair to the supplier.
What defeats the claim
A contractual interest rate in your own terms displaces the statutory rate, so check your terms before relying on the Act. A rate set deliberately low to sidestep the statutory one can be struck down for failing to provide a substantial remedy. The Act does not apply to consumer contracts.
Why it changes the negotiation
Interest at 11.75 per cent on a £40,000 debt is £12.88 a day. Put that figure in the letter, alongside the fixed compensation, and the arithmetic of delay becomes visible to the person who has to authorise payment. That is usually what moves it.
Common questions
Do I need interest in my contract to claim it?
No. The Act implies the right into business to business contracts automatically. A contractual rate in your own terms will displace it, so check what your terms say first.
What is the rate right now?
11.75 per cent a year, being the Bank of England base rate of 3.75 per cent plus eight percentage points. The rate for a given debt is fixed by reference to the base rate on the preceding 30 June or 31 December, not the rate on the day you claim.
Can I claim interest and the fixed sum together?
Yes. They are separate entitlements under the same Act, claimable on the same invoice, plus reasonable recovery costs above the fixed sum.
Does claiming interest damage the relationship?
In a first chaser it sometimes does. In a solicitor's letter before action it rarely does, because by that stage the relationship has already been tested by the non payment.
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