UK Late Payment Interest Calculator

Chasing late-paying clients is one of the most common frustrations for UK small business owners. Under the Late Payment of Commercial Debts (Interest) Act 1998, you have a legal right to charge statutory interest and a fixed compensation fee on overdue business-to-business invoices. This calculator works out exactly how much you could claim.

How to use the late payment interest calculator

Enter the overdue invoice amount, the current Bank of England base rate, and the number of days the payment has been overdue. The calculator adds 8% to the base rate to get your statutory annual interest rate, works out the interest owed for the number of days overdue, and adds the fixed compensation fee that applies to your debt size.

How the calculation works

Statutory interest is calculated as the debt amount multiplied by the annual rate (base rate plus 8%), divided by 365 to get a daily rate, then multiplied by the number of days overdue. On top of that, the Act sets a fixed compensation fee based on the size of the debt: £40 for debts under £1,000, £70 for debts from £1,000 up to £9,999.99, and £100 for debts of £10,000 or more. Both the interest and the compensation fee can be claimed together.

Worked example

Say you are owed £2,500 on an invoice, the Bank of England base rate is 4%, and the payment is 30 days overdue. Your statutory annual rate is 4% + 8% = 12%. Daily interest is £2,500 × 12% ÷ 365 = £0.82, so 30 days of interest comes to around £24.66. Since the debt falls between £1,000 and £9,999.99, you can also add a fixed compensation fee of £70, bringing the total you could claim to around £2,594.66.

Who this applies to

Statutory interest under the Act applies to debts between UK businesses, including sole traders, limited companies and partnerships, where goods or services were supplied under a commercial contract. It does not apply to consumer debts, and it does not override a contract that already sets out a substantial alternative remedy for late payment, so it is worth checking your own terms and conditions first.

Common mistakes people make

A common mistake is forgetting that the rate changes over time, since the Bank of England base rate moves with Monetary Policy Committee decisions; using today's rate for a debt that became overdue many months ago can give an inaccurate figure. Another mistake is forgetting to add the fixed compensation fee on top of interest, which is a separate entitlement under the Act rather than an alternative to interest. It is also worth remembering this calculator gives an estimate: for a formal legal claim, keep clear records of the invoice date, agreed payment terms and the exact date payment became overdue.

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If you run a limited company, our corporation tax calculator works out what you owe HMRC on your profits, and our dividend vs salary calculator compares take-home pay between the two. To understand your pricing and margins, our break-even calculator and profit margin calculator are useful next steps. For a wider look at managing tax as a small business owner, see our self-employed tax guide.