Late Payment Interest Calculator
Calculate statutory interest and compensation under the Late Payment of Commercial Debts Act 1998. Currently 13.25% per year (8% + 5.25% BoE base rate).
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Frequently asked questions
What is the Late Payment of Commercial Debts Act?▾
The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses the statutory right to charge interest on late payments from other businesses and the public sector. It does not apply to consumer debts.
What interest rate can I charge for late payment?▾
You can charge 8% above the Bank of England base rate. As of 2025, the base rate is 5.25%, making the total statutory interest rate 13.25% per year (calculated daily on the outstanding amount).
What is the fixed compensation for late payment?▾
In addition to interest, you can claim fixed compensation: £40 for debts under £1,000, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more.
When does late payment interest start?▾
Interest starts from the day after the agreed payment date. If no payment date was agreed, it starts 30 days after the invoice date or delivery of goods/services (whichever is later).
Can I charge late payment interest on consumer invoices?▾
No. The statutory right to late payment interest applies only to business-to-business and business-to-public-sector transactions. For consumer debts, different rules apply.
Do I need to include late payment terms on my invoices?▾
While not legally required, it is good practice to include your payment terms, the statutory interest rate, and the compensation amount on your invoices. This can encourage timely payment.
Can I claim reasonable debt recovery costs?▾
Yes. If the fixed compensation does not cover your actual costs of recovering the debt, you can claim reasonable additional costs. You must be able to justify these costs if challenged.
Does this override my contract payment terms?▾
Your contract can specify different payment terms, but they must be fair. If your contract tries to exclude the right to interest entirely, the statutory right overrides it.
How do I actually claim late payment interest?▾
Add the interest and compensation to a follow-up invoice or statement. If the debtor does not pay, you can pursue it through the small claims court (for debts under £10,000) or county court.
Is late payment interest taxable?▾
Yes. Late payment interest received is treated as income for tax purposes and should be declared on your tax return or included in your company accounts.