Skilful DesignersLate payment interest in the UK (2026)
A business that pays your invoice late owes you simple interest at 11.75% a year (8% plus the 3.75% Bank of England reference rate) for invoices that became overdue between 1 July and 31 December 2026, plus fixed compensation of £40, £70 or £100. The rate is fixed when the invoice becomes late and does not change if the base rate moves later.
The rate for 2026, and what changes in January
| Invoice became late | Reference rate | Statutory rate |
|---|---|---|
| 1 January – 30 June 2026 | 3.75% (31 December 2025) | 11.75% |
| 1 July – 31 December 2026 | 3.75% (30 June 2026) | 11.75% |
| 1 January – 30 June 2027 | Bank Rate on 31 December 2026 | 4% + 8% = 12%, unless the Bank changes rate on 17 December |
The rule comes from the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002: the rate is 8% over the Bank of England rate "in force on the 30th June" or "the 31st December" immediately before interest starts to run. That date is fixed by when the invoice becomes late, so one invoice keeps one rate until it is paid.
The formula
Interest = invoice total × 11.75% × days late ÷ 365
- Find the due date. Use your agreed terms. If you agreed none, it is 30 days after the client received the invoice or the work, whichever is later.
- Count the days late, from the day after the due date to the day you are paid (or today).
- Use the invoice total including VAT.
- Add fixed compensation once per invoice: £40 under £1,000, £70 from £1,000 to £9,999.99, £100 from £10,000.
Worked example
A £2,400 invoice, 54 days late, that became overdue in October 2026: £2,400 × 11.75% × 54 ÷ 365 = £41.72 interest. Add £70 compensation for a total claim of £111.72 on top of the invoice.
Daily interest at 11.75% for common invoice sizes:
| Invoice | Per day | 30 days late, with compensation |
|---|---|---|
| £500 | £0.16 | £44.83 |
| £1,000 | £0.32 | £79.66 |
| £2,500 | £0.80 | £94.14 |
| £5,000 | £1.61 | £118.29 |
| £10,000 | £3.22 | £196.58 |
| £25,000 | £8.05 | £341.44 |
The interest is often small. The fixed compensation and the fact that you know your rights are what get invoices paid. For any amount and dates, use the late payment interest calculator.
Common mistakes
- Recalculating when the base rate moves. Don't. The rate is set once, when the invoice becomes late.
- Claiming against a consumer. The Act only covers business-to-business debts.
- Charging both a contract rate and statutory interest. If your contract has its own rate, that rate replaces statutory interest.
- Compounding. It is simple interest only.
- Charging compensation per reminder. It is once per invoice. You can claim reasonable recovery costs above it if chasing actually cost more.
Next step: how to chase a late invoice, with the wording for each stage.
Sources
- Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, article 4
- GOV.UK: Late commercial payments
- Bank of England: Bank Rate
General information, not legal advice.
Frequently asked questions
What is the statutory late payment interest rate in the UK right now?
11.75% a year for invoices that became overdue between 1 July and 31 December 2026: 8% plus the 3.75% Bank of England rate in force on 30 June 2026. For invoices that become overdue from 1 January 2027, the reference rate is the Bank Rate on 31 December 2026 (4% after the 5 November 2026 rise, unless the Bank changes it again on 17 December).
If the base rate changes while my invoice is still unpaid, does the interest rate change?
No. The rate is fixed by the reference date immediately before interest starts to run (30 June or 31 December), so it is set once, when the invoice becomes late. The 5 November 2026 rise to 4% does not change the rate on an invoice that was already overdue.
When is an invoice legally late if we never agreed payment terms?
30 days after the customer receives the invoice or you deliver the work, whichever is later. If you agreed terms, it is late the day after the agreed date. Between businesses, agreed terms over 60 days must be fair to both sides; for public authorities the limit is 30 days.
Can I charge late payment interest to a private individual?
Not under the Act. It only covers business-to-business debts (sole traders count as businesses). You can charge a consumer interest only if your contract with them says so.
What if my contract sets its own late payment rate?
Then the contract rate applies instead and you cannot claim statutory interest on top. A contract rate must be a substantial remedy; a token rate can be challenged and replaced by the statutory one.
Is late payment interest compound?
No. It is simple interest on the invoice amount, calculated daily. You cannot charge interest on interest.