Late payment interest calculator: statutory interest and fixed sums

How the calculation works

The Late Payment of Commercial Debts (Interest) Act 1998 gives a business the right to statutory interest and fixed sum compensation when another business pays late. It applies in England and Wales, Scotland and Northern Ireland, to contracts between businesses only: a sole trader buying for their business counts as a business, a consumer does not.

Interest runs from the day after the due date until payment. If no payment date was agreed, the invoice is late 30 days after the later of the date the customer received the invoice and the date the goods or services were delivered.

The rate is 8% above the Bank of England's reference rate (Bank Rate): the rate in force on 31 December applies to interest that starts running between 1 January and 30 June, and the rate in force on 30 June to interest that starts between 1 July and 31 December (Rate of Interest Order 2002, article 4). The rate is fixed by the day interest starts and does not change for that debt. Bank Rate was 3.75% on 31 December 2025 and on 30 June 2026, so the statutory rate is 11.75% for debts falling due in 2026.

Statutory interest is simple interest, calculated per day: amount owed × rate × days late ÷ 365. On top of it, fixed sum compensation is due once per invoice as soon as interest runs (section 5A): £40 for a debt under £1,000, £70 from £1,000 to £9,999.99, £100 from £10,000. You can also claim reasonable recovery costs above that sum.

• If your contract sets its own late payment interest, statutory interest does not apply, provided the contractual remedy is a 'substantial remedy'.
• Consumer customers: the Act does not apply, so there is no statutory interest or fixed sum.
• GOV.UK suggests sending a new invoice if you decide to add interest.
• The Commercial Payments Bill (60-day maximum terms, interest that cannot be excluded) is not law yet: it is not applied here.

Official sources

• GOV.UK — Late commercial payments: charging interest and debt recovery
• legislation.gov.uk — Late Payment of Commercial Debts (Interest) Act 1998
• legislation.gov.uk — Late Payment Act 1998, section 5A (fixed sum compensation)
• legislation.gov.uk — Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002
• Bank of England — Official Bank Rate history
• UK Parliament — Commercial Payments Bill [HL] (not yet law)

Rules checked on 20 October 2026. Free tool for information only: it is not legal or tax advice. The rules are checked against the official sources listed on this page; check your own situation before acting.

Frequently asked questions