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Statutory Interest on Invoices: UK Rules, Rates and Examples

Business owner calculating interest on an overdue invoice

If another business pays you late, you can charge statutory interest on the invoice: 8% a year on top of the Bank of England base rate, plus a fixed sum of £40, £70 or £100 depending on the size of the debt. The right applies to business-to-business sales and does not need to be written into your terms. This guide shows when it starts, how to calculate it, what you can add and how to ask for it without wrecking the customer relationship.

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TL;DR

  • Statutory interest is 8% plus the Bank of England base rate, charged on late payments between businesses, not on consumer sales.
  • With no agreed date, an invoice is late 30 days after the customer receives it (or after delivery, if later).
  • Daily interest = invoice amount x annual rate / 365. Multiply by the days late.
  • You can add fixed compensation of £40, £70 or £100 by debt size, plus reasonable recovery costs.
  • No claim if the contract sets a different, substantial interest remedy, or if the payment was late because of a genuine dispute.

Table of Contents

What statutory interest on an invoice is

Statutory interest is a legal right created by the Late Payment of Commercial Debts (Interest) Act 1998. When a business, charity or public body buys goods or services from you and pays after the due date, you can add interest to what they owe. The rate is 8% plus the Bank of England base rate, so it moves when the base rate moves.

The right is automatic. UK businesses can charge it whether or not their contract mentions it. Official guidance for small businesses says the right cannot be excluded unless the contract contains a substantial alternative remedy for late payment.

Three limits matter in practice:

If you want the longer walk-through of charging it, see our guide on how to charge interest on a late invoice.

When an invoice becomes late

Interest only runs once the invoice is overdue, so the due date comes first. If you and your customer have agreed a payment date or credit period, that date applies. If nothing was agreed, the official position is that payment is late 30 days after the customer receives the invoice or, if later, 30 days after the goods are delivered or the service is provided.

That is why the payment terms printed on every invoice matter. A clear “payment due within 14 days” line gives you an earlier trigger date than the 30-day default, and it removes arguments about when the clock started. For a deeper look at the mechanics, this explainer on how to automate invoice processing covers how due dates are captured and tracked.

There is a ceiling on what you can agree. Agreed terms are generally limited to 60 days between businesses. Longer terms are possible if both sides expressly agree and the term is not grossly unfair to the supplier.

Keep proof of the date

You will need to show when the invoice was sent and when it was due. A saved copy of the sent email, with its timestamp, is the simplest evidence. Our guide on how to keep a copy of every invoice you send covers the habit.

How to calculate the interest

The method is simple arithmetic. The official steps: work out the annual interest at your rate, divide by 365 for daily interest, then multiply by the number of days the invoice is late.

Three steps for calculating statutory interest

Which base rate? The Small Business Commissioner’s calculator uses a fixed reference point for each half of the year. For payments due from 1 January to 30 June, it uses the base rate on 31 December. For 1 July to 31 December, it uses the rate on 30 June. Check the current base rate on the Bank of England website on the reference date before you calculate.

A worked example

A worked example

The base rate below is a made-up figure to show the sums. Use the real reference-date rate for your own invoice.

You invoice a customer £5,000 for a kitchen fit. The invoice is 30 days overdue. Suppose the base rate on the reference date was 4%.

  1. Statutory rate: 8% + 4% = 12% a year.
  2. Annual interest: £5,000 x 12% = £600.
  3. Daily interest: £600 / 365 = £1.64 (rounded from £1.6438).
  4. Interest for 30 days: £1.6438 x 30 = £49.32.
  5. Fixed compensation: £70, because the debt falls between £1,000 and £9,999.99.

The customer owes the original £5,000, plus £49.32 interest and £70 compensation, so £5,119.32. Interest keeps building at about £1.64 a day until the invoice is paid.

Invoice amount 30 days late at 12% a year Fixed compensation Total added
£500 £4.93 £40 £44.93
£2,000 £19.73 £70 £89.73
£5,000 £49.32 £70 £119.32
£12,000 £118.36 £100 £218.36

The 12% rate is illustrative, as above. The sums show something worth knowing: on small invoices the fixed sum is bigger than the interest for weeks, and the interest only becomes significant as the delay lengthens.

Fixed compensation and recovery costs

Interest is not the only thing you can add. For each late invoice, you can charge a fixed sum based on the size of the debt. The government sets it at £40 for debts up to £999.99, £70 for £1,000 to £9,999.99 and £100 for £10,000 or more. Suppliers can also claim reasonable costs each time they try to recover the debt.

Two practical points follow:

  • The fixed sum is set per invoice, so several late invoices from one customer can each carry their own.
  • “Reasonable costs” means real, evidenced costs of chasing. Keep a note of what you spent and why.

Public bodies use these rights too. Brentwood Borough Council, for example, states that it claims interest, compensation and reasonable recovery costs when an invoice becomes overdue. It is a reminder that this is routine, lawful credit control rather than an aggressive step.

Putting statutory interest on your invoices and reminders

You do not have to wait until an invoice is late to mention your rights. Some businesses include the possibility of statutory charges in their standard payment reminders before applying them. A sensible order looks like this:

  1. On the invoice: state the due date, your payment terms and that you reserve the right to charge statutory interest and compensation under the 1998 Act.
  2. A few days before the due date: a friendly reminder with the invoice attached.
  3. On the day after it falls due: a polite chase asking for a payment date.
  4. After a further week or so: a firmer email showing the interest and fixed sum that have built up, and the total now owed.

If you want ideas on wording and timing, this piece on payment reconciliation steps shows how matching payments to invoices keeps reminders accurate, so you never chase someone who has already paid.

When the amount is still not paid, the Small Business Commissioner’s guidance says to send a new invoice stating the amount owed and the payment due date, and to reference the invoice that remains unpaid or was paid late. For the full escalation path, see our step-by-step guide to recovering unpaid invoices.

Keep the relationship in mind

Many small businesses hesitate to claim interest because they worry about the customer. Framing helps: you are applying the terms the law gives every supplier, not penalising a person. A calm email with the sum and a payment date usually lands better than silence followed by anger. You can also choose to waive the interest for a good customer who pays promptly after one reminder, while keeping the right for next time.

Time limits and where the rules apply

Do not leave it for years. Statutory interest claims have a six-year limitation period in England, Wales and Northern Ireland. Scotland has its own limitation rules, so if your customer or contract sits there, take advice from a solicitor or an adviser such as your local Citizens Advice before relying on the six-year figure.

The rules are also under review. The government has announced measures that would require commercial contracts to include statutory interest set at 8% above the base rate, alongside new powers for the Small Business Commissioner. Check GOV.UK for the position when you claim, as the details can change.

Before a formal claim, do your own calculation or ask a professional. The Commissioner’s own guidance says businesses should make independent calculations or seek advice before formal claims, because contract terms, rates and compounding can vary.

Perspective: why we built interest into the chase

Most of the small businesses we talk to know statutory interest exists. Very few claim it. The reason is not nerve, it is admin: you need the due date, the right base rate, the days late and the correct fixed sum, for every overdue invoice, while you are also doing the actual job.

That is the gap Execore is designed to close. You Bcc your Execore address on the invoices you already send, from the tools you already use, and we keep track of what is outstanding. When an invoice goes overdue, we draft the chase email for you, including the statutory late-payment interest and compensation calculations.

Nothing is sent until you approve it in the review queue. We think that matters: you stay in control of tone, and you decide whether to claim, waive or soften. There is no bank connection and no new invoicing system to learn. You simply get a clearer view of who owes you what, and a draft that is ready to go.

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Try it on your own overdue invoices

If you would rather not do the sums by hand each time, Execore captures outgoing invoices when you Bcc a unique address, then drafts overdue chase emails with the interest and compensation worked out, for you to review and approve. There is a Free plan, and the Business plan is £29 per month. You can compare them on the pricing page or see how it works on the Execore homepage.

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If cash flow is the bigger worry, our guide to cash flow visibility shows how to see incoming and outgoing money for the weeks ahead, and our list of ways to get paid faster covers prevention.

FAQ

Can I charge statutory interest if my terms do not mention it?

Yes. The right to statutory interest on late business payments is automatic, so it does not depend on your terms. It stops being available if your contract gives a different, substantial remedy for late payment, such as its own interest rate. Mentioning it on your invoices is still good practice, as it sets expectations early.

Does statutory interest apply to sole traders and freelancers?

It applies to you as a supplier when you sell goods or services to another business, charity or public body, whatever your own legal form. It does not apply when your customer is a private individual buying as a consumer. Freelancers invoicing agencies and companies can use it.

Can I claim interest on top of the £40, £70 or £100?

Yes. The fixed sum and the interest are separate. The fixed amount depends on the size of the debt, and interest builds daily at 8% above the base rate. You can also claim reasonable costs of recovering the debt, provided you can show what they were.

What if the customer says the invoice is disputed?

A genuine dispute changes things, because interest and compensation cannot be charged where the late payment was due to a dispute. Settle the disputed point first, in writing if you can. Where you hold a large sum or the facts are tangled, speak to a solicitor or the Small Business Commissioner’s office before you press a claim.

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