If a customer hasn't paid you on time, UK law already gives you the right to charge them interest — automatically, whether you mentioned it on your invoice or not. Here's exactly how much, and how to claim it.
If you're a UK tradesperson chasing an unpaid invoice, there's a good chance you don't realise you're entitled to more than just the original amount. Under the Late Payment of Commercial Debts (Interest) Act 1998, every business-to-business transaction in the UK automatically carries the right to charge statutory interest on late payments — plus a fixed compensation amount on top.
Most tradespeople never claim it. Most customers don't know it exists. Here's the breakdown.
You can charge 8% above the Bank of England base rate on the outstanding amount, calculated daily from the date payment became due, plus a fixed compensation fee of £40, £70, or £100 depending on the size of the debt.
As of June 2026, the Bank of England base rate is 3.75%, which means the total statutory interest rate is currently 11.75% per year on any overdue commercial invoice.
The formula looks like this:
Interest = Amount Owed × 11.75% × (Days Late ÷ 365)
Then you add the fixed compensation amount on top, based on the size of the original debt:
| Debt Amount | Fixed Compensation |
|---|---|
| Under £1,000 | £40 |
| £1,000 – £9,999 | £70 |
| £10,000 or more | £100 |
Invoice amount: £1,800
Days overdue: 45 days
Interest: £1,800 × 11.75% × (45 ÷ 365) = £26.07
Fixed compensation: £70 (debt is between £1,000–£9,999)
That might not sound like a huge amount on a single invoice — but if you're chasing several late payments a year, as 81% of UK tradespeople currently are, it adds up fast. It's also a genuinely useful piece of leverage: mentioning statutory interest in a payment chase letter signals you know your rights, and customers who've been dragging their feet often pay up simply to avoid the conversation escalating.
Don't want to do the maths yourself? Enter your invoice amount and days overdue, and we'll calculate exactly what you're owed in seconds.
Calculate What I'm Owed →No. This is one of the most common misconceptions among tradespeople. The right to charge statutory interest exists automatically under UK law for any business-to-business transaction, regardless of whether it was written into your original invoice or contract terms.
That said, mentioning it upfront — in your quote, invoice, or contract — makes it easier to enforce and signals to customers from the start that late payment has real consequences. If you don't currently include it, it's worth adding a simple line to your invoice template going forward.
This is where it gets slightly more nuanced. The Late Payment of Commercial Debts Act applies specifically to business-to-business transactions. If your customer is a private homeowner rather than a business, the statutory right doesn't automatically apply in the same way — though you can still include late payment interest terms in your contract, which then becomes enforceable as part of your agreed terms.
This is exactly why having a proper written contract before starting domestic work matters — it lets you set your own late payment terms rather than relying on statutory defaults that may not apply.
Got the numbers — now get the letter that gets you paid. Generate a professional demand letter referencing the exact interest you're owed, free, in 30 seconds.
Generate My Letter →Yes — it's tied to the Bank of England base rate, which is reviewed roughly every six weeks. The 8% statutory margin stays fixed, but the base rate component can move. Always check the current rate before sending a formal claim.
Both apply together. You're entitled to the calculated interest and the fixed compensation amount on top of the original invoice — they're not alternatives to each other.
You're legally entitled to it under UK law, so it can be included as part of any small claims court action. In practice, many customers pay once they realise the claim is legally backed rather than risk it being added to a court judgment.
Some businesses include their own custom "late fee" clauses in contracts, which is different from statutory interest. Statutory interest is the legal default; a custom late fee clause is something you'd need to have explicitly agreed in your contract terms.
This article provides general information based on UK statutory rates as of June 2026 and does not constitute legal advice. For complex disputes or high-value claims, consult a solicitor.