United Kingdom · GBP · Late payment
Late payment interest calculator and claim letter for the UK
Work out the statutory interest and fixed sum on late-paid business invoices, to the penny, then download an interest invoice and a claim letter that cite the Late Payment of Commercial Debts (Interest) Act 1998.
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Claiming interest on a late business invoice
If another business pays you late, the law gives you a right to interest and a fixed sum without having to put it in your contract. Enter each overdue invoice, its amount and the date it was due. Papertern works out the statutory interest to the penny, adds the fixed sum for each invoice, and makes an interest invoice and a claim letter that cite the Act.
Questions
What does the Act say?
The Late Payment of Commercial Debts (Interest) Act 1998 gives a business that supplies goods or services to another business (or to a public authority) the right to charge statutory interest and a fixed sum when the customer pays late. Both sides must be acting in the course of a business, and the Act does not cover every kind of contract.
How is the interest worked out?
It is simple interest, not compound. The annual rate is 8% plus the Bank of England Bank Rate in force on a reference date: 31 December before, for interest that starts to run from 1 January to 30 June, and 30 June before, for interest that starts from 1 July to 31 December. The rate is then fixed for the life of the debt. Interest starts the day after the payment was due, and each day is one 365th of the year: amount owed x annual rate x days late / 365.
What is the fixed sum?
A fixed sum towards your debt recovery costs, charged once for each payment: £40 for a debt up to £999.99, £70 for a debt of £1,000 to £9,999.99, and £100 for £10,000 or more. If your reasonable recovery costs are more than the fixed sum, the Act lets you claim the difference too; this tool does not work that out.
What if my contract sets its own interest rate?
A contract interest rate replaces statutory interest only where it is a “substantial remedy” for late payment (section 8 of the Act). A term that simply excludes statutory interest has no effect. Read your contract, and get advice if you are unsure, before you claim.
Does this work for public authorities?
Yes, the Act covers public authorities (section 2(7)). What differs is the payment period, which must usually be within 30 days rather than 60, and gov.uk says a lower contract rate cannot be used with a public authority.
Are the new Commercial Payments Bill rules included?
No. The Commercial Payments Bill has not yet become law, so this tool follows the 1998 Act. The tool has a switch for the new rules, and it stays off until they come into force.
Is this legal advice?
No. Papertern gives general information only. Bank Rate changes and the law can change, so check the official sources before you rely on a figure, and get advice for a large or disputed debt.