UK law gives you an automatic right to interest and a fixed compensation payment on overdue commercial invoices. Most small businesses never claim it.
Under the Late Payment of Commercial Debts (Interest) Act 1998 you can charge statutory interest at 8% above the Bank of England base rate, plus a fixed compensation sum of £40, £70 or £100 depending on the size of the debt. You can also claim reasonable debt recovery costs above that sum.
This applies automatically between businesses. You do not need it written into your contract, and the other side cannot refuse it. If no payment terms were agreed, the default is 30 days from delivery or from the invoice, whichever is later.
The commercial reality is that many suppliers never invoke it for fear of damaging the relationship. Even so, the right exists, and mentioning it in a chase, calmly and accurately, often moves an invoice up the queue.
Commercial debts between businesses only.
Here is exactly what the tool does with your numbers.
Statutory interest is simple, not compound. It runs from the day after payment was due until the day the debt is paid.
interest = debt × (base rate + 8%) ÷ 365 × days late
| Size of debt | Compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
The compensation is per invoice, not per chase, and is payable on top of interest. If your reasonable costs of recovering the debt exceed the fixed sum, you can claim the difference as well.
The Act uses a reference rate fixed twice a year, not whatever the base rate happens to be today: the rate in force on 31 December applies to debts becoming late in the following January to June, and the rate on 30 June applies to July to December. The tool leaves the base rate editable so you can enter the correct reference rate for your period.
Statutory interest is 8% above the Bank of England base rate for business-to-business debts, under the Late Payment of Commercial Debts (Interest) Act 1998. It is simple interest, calculated daily from the day after payment was due.
You can also claim a fixed compensation sum of £40, £70 or £100 depending on the size of the debt, plus reasonable recovery costs above that amount.
No. The right to statutory interest and compensation applies automatically to commercial transactions between businesses. It exists whether or not your contract mentions it.
A contract can set its own interest rate instead, but only if that rate is a substantial remedy for late payment. A term that removes the right or sets a token rate can be challenged.
On the day after the agreed payment date. If you agreed no payment terms, the default period is 30 days, running from whichever is later: the date the customer received the goods or services, or the date they received the invoice.
Agreed terms between businesses should not normally exceed 60 days unless both parties expressly agree and it is not grossly unfair to the supplier.
No. The Act covers commercial debts between businesses, and between businesses and public authorities. It does not apply to consumers.
For consumer debts you can only charge interest if your contract with them provides for it, and the rate must be fair and clearly disclosed before they buy.
Built by Veris Labs
These calculators are a small, public version of what we do. The Veris Labs suite covers marketing and delivery, and where nothing off the shelf fits, we build it around your business instead.
