If you invoice another UK business and they pay late, you are entitled to charge interest at 11.75% — and you do not need a late payment clause in your contract to do it. The right is statutory. It applies by default.
Most freelancers and small suppliers never claim it. Partly because the number is buried in a 1998 Act, partly because nobody wants to be the awkward one. But the reforms landing through 2026 are pushing this from an obscure right towards something closer to standard practice, so it is worth knowing exactly what you are owed before you decide to waive it.
Three things, not one
When a commercial invoice goes past its due date, the Late Payment of Commercial Debts (Interest) Act 1998 gives you three separate entitlements. People tend to know about the first and forget the other two.
Statutory interest runs at the Bank of England base rate plus eight percentage points. Fixed compensation is a flat sum per overdue invoice: £40 if the debt is under £1,000, £70 from £1,000 to £9,999.99, and £100 at £10,000 or above. Reasonable recovery costs are claimable on top, but only the portion exceeding that fixed sum, and only if you genuinely incurred them.
The rate, and the bit that catches people out
As of the second half of 2026, the base rate sits at 3.75%, which puts statutory interest at 11.75%.
Here is the part that is genuinely counter-intuitive: the rate is fixed in six-month blocks, and it is set by the base rate on a reference date, not by whatever the base rate happens to be while the invoice is sitting unpaid.
- For debts that become late between 1 January and 30 June, use the base rate as it stood on 31 December of the previous year.
- For debts that become late between 1 July and 31 December, use the base rate as it stood on 30 June of that year.
That reference rate then applies for the entire six-month block, even if the Bank moves the base rate in the middle of it. So an invoice that went overdue in August 2026 is on the 30 June 2026 reference rate for its whole life — a later cut or rise does not change it.
Working it through
The formula is simple interest, not compound:
(debt × annual rate × days late) ÷ 365
Take a £2,400 invoice that was paid 45 days after its due date, at 11.75%:
- £2,400 × 11.75% = £282.00 for a full year
- £282.00 × 45 days = £12,690, ÷ 365 = £34.77 in interest
- Plus fixed compensation, and £2,400 falls in the middle band: £70.00
Total claimable on top of the invoice: £104.77. The interest alone is modest; the fixed sum is what makes small invoices worth pursuing, and it is per invoice, so a client sitting on six of them owes six fixed sums.
What is changing
The UK government has described its 2026 late payment package as the toughest crackdown in more than 25 years. The headline measures are a maximum payment term of 60 days on qualifying businesses, with a stated intention to reduce it over time, alongside stronger enforcement powers, mandatory interest on overdue invoices, and steeper penalties for repeat offenders.
The practical shift for a small supplier is not the rate. It is that interest moves from something you awkwardly raise to something that is simply expected to be applied — which makes it considerably easier to charge without it reading as an escalation.
If you are not in the UK
The mechanism is UK-specific, but the direction is not. New York's Freelance Isn't Free Act and California's Freelance Worker Protection Act both require a written contract above certain thresholds and payment by the agreed date, or within 30 days where none was set. Clients who pay late can be liable for double damages. The numbers differ; the principle that late payment carries a statutory cost does not.
Should you actually charge it?
Honestly: often not, and that is a legitimate call. A good client who slipped once is worth more than £104.77, and leading with statutory interest on a first-time overdue invoice will read as aggressive.
Where it earns its place is with the client who is consistently 30 or 45 days late and has learned that nothing happens when they are. Putting a line on the invoice stating that statutory interest applies to overdue amounts — before anything is overdue — changes the default without any confrontation at all. Most of the value here is deterrent, not recovery.
The one situation where you should claim it without hesitation is a debt you have already written off emotionally. If a client has gone quiet on a six-month-old invoice, the interest and the fixed sum are already yours. You are not asking for a favour.
Know which invoices are actually overdue
Billvy shows you what is sent, paid and overdue on one dashboard, with payment terms on the invoice itself — so the date a debt became late is never a guess. Free to start, no card required.
Start freeFrequently asked questions
Do I need a late payment clause in my contract to charge statutory interest?
No. It applies automatically to business-to-business and business-to-public-sector invoices. A contract can substitute its own substantial remedy, but a contract that says nothing does not remove the right.
Can I claim interest on an invoice that was paid late months ago?
Generally yes. The entitlement arises when the debt becomes late, not when you get round to claiming it, and commercial debts in England and Wales are normally subject to a six-year limitation period. Apply the rate that was in force when that invoice became late — not today's.
Is statutory interest compounded?
No. Simple interest on the original overdue amount, for the days it was late. It does not accrue on itself.
Sources
Rates and thresholds checked September 2026. Statutory interest changes with the Bank of England base rate every six months, so verify the current figure before relying on it. This is general information, not legal or financial advice.