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Late payment interest calculator, statutory interest and compensation
Calculate what you can charge on an overdue commercial invoice under the Late Payment of Commercial Debts (Interest) Act 1998: Bank of England base rate plus 8 percentage points, plus fixed compensation.
- Interest = unpaid amount × annual rate × days overdue ÷ 365.
- The statutory rate is the Bank of England base rate plus 8 percentage points, fixed for the whole six month period in which the debt became late.
- Fixed compensation is added once per late invoice: 40 pounds below 1,000 pounds, 70 pounds from 1,000 to 9,999.99 pounds and 100 pounds from 10,000 pounds.
What is the statutory late payment interest rate?
The Bank of England base rate plus 8 percentage points for business to business debts. The rate is set using the base rate on 31 December or 30 June and stays fixed for that six month period.
Can I claim interest and compensation together?
Yes. Statutory interest and the fixed sum of 40, 70 or 100 pounds are both claimable, and you can add reasonable recovery costs above the fixed sum.
Do I need a clause in my terms to charge it?
No. The Late Payment of Commercial Debts (Interest) Act 1998 applies automatically to commercial contracts, though stating it on the invoice makes collection easier.
Does statutory interest apply to consumers?
No, it covers business to business and public sector contracts. For consumers you need a fair contractual interest clause.
Is VAT charged on late payment interest?
No. Interest and compensation are outside the scope of VAT, so raise them without VAT on a separate statement or invoice line.