How to Add Late Payment Interest to Invoice

If a customer or client pays late, you may need to add late payment interest to invoice payments in a clear and professional way. This can help compensate your business for the delay and encourage faster payment, especially when overdue invoices affect your cash flow.

In the UK, late payment interest may be added in certain business-to-business situations. The amount you can charge may depend on your contract terms, invoice terms, the type of customer, the due date, and whether statutory interest applies.

This guide explains how to add late payment interest to an invoice, what details to include, and how to calculate the interest amount clearly.

Check whether the invoice is actually overdue

Before adding interest, first check whether the invoice is definitely overdue. Look at the payment terms you agreed with the customer.

For example, your invoice or contract might say:

• Payment due within 7 days
• Payment due within 14 days
• Payment due within 30 days
• Payment due on a specific calendar date
• Payment due after completion of work
• Payment due after receipt of invoice

You should only calculate late payment interest after the payment due date has passed. If the invoice is not yet overdue, it is usually better to send a polite payment reminder instead.

Check your contract or payment terms

Before you add late payment interest to an invoice, check your written terms. Your contract may already explain what happens if payment is late.

Look for wording about:

• Late payment interest
• Overdue invoice charges
• Payment deadlines
• Debt recovery costs
• Contractual interest
• Statutory interest
• Dispute procedures

If your contract includes a specific interest rate, that rate may apply instead of statutory interest. If your contract does not include a different rate, statutory interest may be relevant for qualifying business-to-business debts.

For more detail, read our guide on Statutory Interest vs Contractual Interest in the UK.

Understand statutory late payment interest

For UK business-to-business commercial debts, statutory interest is commonly calculated as the Bank of England base rate plus 8%. This means the statutory rate can change when the Bank of England base rate changes.

For example, if the Bank of England base rate is 5.25%, the statutory late payment interest rate would be:

5.25% + 8% = 13.25% per year

The basic formula is:

Invoice amount × annual interest rate × overdue days ÷ 365

If you want a full breakdown of the formula, read our UK Late Payment Interest Formula Explained guide.

Calculate the number of overdue days

The next step is to calculate how many days the invoice is overdue.

For example:

• Invoice amount: £1,000
• Payment due date: 1 March
• Payment date or calculation date: 31 March
• Overdue days: 30 days

The number of overdue days matters because interest usually grows day by day. A 10-day delay will produce a smaller interest amount than a 60-day delay.

Make sure the dates are accurate before adding interest to your invoice.

Calculate the late payment interest amount

Once you know the invoice amount, annual interest rate, and overdue days, you can calculate the interest.

Example:

• Invoice amount: £1,000
• Annual interest rate: 13.25%
• Overdue days: 30

Calculation:

£1,000 × 13.25% × 30 ÷ 365 = £10.89

In this example, the late payment interest is £10.89.

The updated amount due would be:

Original invoice: £1,000
Late payment interest: £10.89
Total now due: £1,010.89

For a quicker estimate, you can use our UK Late Payment Interest Calculator.

Decide whether to issue a new invoice or updated invoice

If you decide to add interest to the money owed, it is often sensible to send a new invoice or updated invoice showing the added interest clearly. GOV.UK also notes that you should send a new invoice if you decide to add interest to the money you are owed.

This helps the customer understand:

• The original invoice amount
• The original invoice number
• The due date
• The interest rate used
• The number of overdue days
• The interest amount
• The updated total due

Clear invoice records can also help if the payment dispute continues.

What to include on the updated invoice

When adding late payment interest to an invoice, include enough detail so the customer can understand the calculation.

Your updated invoice could include:

• Original invoice number
• Original invoice date
• Original due date
• Original amount outstanding
• Number of days overdue
• Interest rate used
• Late payment interest amount
• Updated total amount due
• Payment deadline
• Payment instructions
• Contact details for questions

Avoid vague wording. The clearer the invoice, the easier it is for the client to check and pay.

Example invoice wording

You can use simple wording like this:

“Late payment interest has been added to invoice [Invoice Number], which was due on [Due Date]. The invoice is [Number] days overdue. Interest has been calculated at [Interest Rate] per year, giving an interest amount of [Interest Amount]. The total amount now due is [Updated Total].”

Another shorter version:

“Please note that late payment interest of [Interest Amount] has been added to this overdue invoice. The total amount now due is [Updated Total].”

Keep the wording professional and factual.

Send a reminder email with the updated invoice

After preparing the updated invoice, send a short email explaining what has changed. Attach the updated invoice and clearly ask for payment.

Example email:

Subject: Updated invoice including late payment interest

Hi [Client Name],

I am following up regarding invoice [Invoice Number], which was due on [Due Date] and remains unpaid.

As the invoice is now overdue, late payment interest has been added. The updated total amount due is [Updated Total].

Please find the updated invoice attached. Could you please arrange payment by [New Deadline Date]?

If payment has already been made, please send over the payment confirmation.

Kind regards,
[Your Name]

For more email examples, see our Overdue Invoice Reminder Email Template UK guide.

Keep a clear record

When you add late payment interest to an invoice, keep a clear record of:

• Original invoice
• Updated invoice
• Payment terms
• Contract or agreement
• Email reminders
• Dates of follow-up
• Interest calculation
• Any client responses

This can help if the client questions the amount or if you need to escalate the matter later.

Good records are especially important for small businesses that deal with regular overdue invoices. You can read more in our guide on Late Payment Interest for Small Businesses in the UK.

Common mistakes to avoid

When adding late payment interest to an invoice, avoid these common mistakes:

• Adding interest before the invoice is overdue
• Forgetting to check the contract terms
• Using the wrong interest rate
• Using the wrong number of overdue days
• Not explaining how the interest was calculated
• Pasting unclear charges onto the invoice
• Sending aggressive or unclear payment messages
• Forgetting to update the total amount due
• Not keeping a copy of the updated invoice

A careful and transparent approach is usually more effective than a confusing or confrontational one.

Should you always add late payment interest?

Not always. Sometimes a polite reminder is enough, especially if the client usually pays on time and the delay is short.

You may want to consider:

• How late the invoice is
• The client relationship
• Whether the payment delay is a one-off issue
• Whether the amount is significant
• Whether your contract terms are clear
• Whether the client has raised a genuine dispute

For regular late payers or larger invoices, adding interest may be more appropriate. For small delays, a reminder email may be the better first step.

Final thoughts

Knowing how to add late payment interest to an invoice can help UK businesses, freelancers, and service providers manage overdue payments more professionally.

Before adding interest, check the due date, contract terms, interest rate, and number of overdue days. Then calculate the amount clearly, issue an updated invoice, and explain the change in a professional follow-up email.

For quick estimates, use our UK Late Payment Interest Calculator to calculate possible interest based on the invoice amount, overdue days, and interest rate.

This article is for general information only and is not legal advice. If the debt is large, disputed, or complex, consider speaking to a qualified professional.