Debt recovery guide · Adding pressure
Can you charge interest on late payments? Yes — here's how much
If a business owes you money, the law says yes: statutory interest at 8% plus the Bank of England base rate, plus fixed compensation of £40–£100 per invoice, under the Late Payment of Commercial Debts (Interest) Act 1998. No contract clause required, no permission needed — it exists precisely so that paying you late stops being free credit.
The statutory route (business debtors)
Interest runs from the day after payment was due — or 30 days after invoice/delivery where no date was agreed — at 8% plus the base rate fixed each 30 June and 31 December. Compensation is banded by invoice size: £40 under £1,000, £70 to £9,999.99, £100 from £10,000.
You can claim on invoices going back six years (five in Scotland), even ones eventually paid late. Our late payment calculator computes the exact figures and drafts wording to send.
Contractual and court-awarded interest
If your terms specify an interest rate, that 'substantial contractual remedy' generally applies instead of the statutory scheme — check your own terms before demanding.
For debts outside the commercial scheme (for example, money lent personally), a court can award interest — typically 8% simple — when it gives judgment, so interest still belongs in your demand letters as fair warning.
Why bother claiming it
Two reasons: it changes debtor behaviour (delay now has a price tag), and it funds the recovery — the add-ons on a mid-sized debt often cover most of a collection agency's fee, whether that's a fixed fee, commission or hybrid arrangement.
Where this fits in the bigger picture
This is one step of a well-trodden path — demands, statutory add-ons, professional recovery, court, enforcement. The complete debt recovery guide walks the whole process, and the late payment calculator works out what you can add to a commercial debt today.
Related situations
General information, not legal advice.