How to Calculate Late Payment Interest on UK Invoices

If a UK business invoice is paid late, you may be able to charge statutory late payment interest. This is especially useful for small businesses, freelancers, contractors, and service providers who need a simple way to estimate how much interest may be added to an overdue invoice.

In the UK, late payment interest for business debts is commonly calculated using the Bank of England base rate plus 8%. This is often referred to as statutory interest on late commercial payments.

What is UK late payment interest?

UK late payment interest is interest that may be charged when a business customer does not pay an invoice by the agreed due date. It is designed to encourage prompt payment and help businesses recover some of the cost of waiting for overdue money.

For business-to-business invoices, the statutory interest rate is usually:

Bank of England base rate + 8%

This means the rate is not always fixed, because the Bank of England base rate can change over time. Before making a claim or relying on a calculation, you should always check the latest base rate and review your contract terms.

Late payment interest formula

The basic formula for calculating UK late payment interest is:

Interest = Invoice amount × Annual interest rate × Days overdue ÷ 365

Where:

Invoice amount means the unpaid invoice balance.

Annual interest rate means the Bank of England base rate plus 8%.

Days overdue means the number of days between the invoice due date and the payment date.

Example calculation

For example, imagine a UK business invoice of £1,000 is 30 days overdue.

If the Bank of England base rate is 5.25%, the statutory annual interest rate would be:

5.25% + 8% = 13.25%

The estimated interest would be:

£1,000 × 13.25% × 30 ÷ 365 = £10.89

So the total amount including interest would be approximately:

£1,010.89

This is only a simple estimate, but it helps show how statutory interest can be calculated on overdue UK invoices.

When can you charge late payment interest?

Late payment interest usually applies when a business invoice has not been paid by the agreed due date. If there is no agreed payment date, UK rules may allow interest to start after a certain period, depending on the type of transaction and the contract terms.

You should keep clear records of:

The invoice date

The invoice due date

The unpaid invoice amount

The payment date or expected payment date

The Bank of England base rate used

Any written payment terms agreed with the customer

Having accurate records makes it easier to explain your calculation and support your claim.

Debt recovery costs

In some UK business debt situations, fixed debt recovery costs may also be claimable in addition to statutory interest. These fixed amounts are often based on the value of the overdue debt.

However, whether you can claim interest or recovery costs depends on your situation, the contract, and the applicable rules. If the amount is significant or disputed, consider getting professional advice.

Use our UK late payment interest calculator

You can use our free calculator to estimate statutory interest on overdue UK invoices:

To use the calculator, enter:

The invoice amount

The Bank of England base rate

The invoice due date

The payment date

The calculator will estimate:

Days overdue

Statutory annual interest rate

Estimated interest

Total amount including interest

Important disclaimer

This article and calculator are for general information only. They do not constitute legal, financial, accounting, tax, or professional advice. Always check the latest Bank of England base rate, your contract terms, and the relevant UK rules before relying on any calculation or making a claim.