What Is Statutory Interest on Late Payments in the UK?

Statutory interest on late payments is interest that may be charged when a business customer pays an invoice late. In the UK, statutory late payment interest is commonly used for business-to-business debts where payment has not been made by the agreed due date.

For many businesses, freelancers, contractors, and service providers, statutory interest can help estimate how much extra may be owed when an invoice becomes overdue.

What does statutory interest mean?

Statutory interest means interest that is set by law rather than agreed only by contract. In the context of UK late commercial payments, it usually refers to interest that may be charged on overdue business debts under late payment rules.

This type of interest is designed to encourage prompt payment and compensate businesses for payment delays.

How is statutory late payment interest calculated?

For many UK business-to-business invoices, statutory late payment interest is commonly calculated using:

Bank of England base rate plus 8%

This means the annual interest rate is made up of the current Bank of England base rate plus an additional 8 percentage points.

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

5.25% + 8% = 13.25%

The basic formula is:

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

Example calculation

Suppose an invoice is for £1,000 and it is 30 days overdue.

If the Bank of England base rate is 5.25%, the annual statutory interest rate would be 13.25%.

The estimated interest would be:

£1,000 × 13.25% × 30 ÷ 365 = £10.89

So the estimated total including interest would be:

£1,010.89

You can also use our UK Late Payment Interest Calculator to estimate this more quickly:

When can statutory interest apply?

Statutory late payment interest may apply where a business invoice has not been paid on time and the payment relates to a commercial debt.

It is most commonly relevant for:

Businesses
Freelancers
Contractors
Consultants
Service providers
Suppliers
Small businesses dealing with other businesses

However, whether statutory interest applies can depend on the type of customer, the contract terms, the invoice terms, and the circumstances of the debt.

What if the contract has its own interest terms?

Some contracts include their own late payment interest clause. If a contract already sets out how late payment interest should be charged, that wording may be important.

Before charging statutory interest, businesses should check:

The written contract
The invoice payment terms
Any agreed credit period
Whether the customer is a business or consumer
Whether another interest clause applies

Statutory interest and compensation

In some UK business late payment situations, a business may also be able to claim fixed compensation for debt recovery costs. The amount may depend on the size of the unpaid debt.

However, this website focuses mainly on helping users estimate interest. Businesses should check official guidance or seek professional advice before making a claim.

Why statutory interest matters

Late payments can create cash flow problems for businesses. Even a small delay can affect operating costs, supplier payments, payroll, tax planning, and general financial stability.

Charging or calculating statutory interest can help businesses understand the possible cost of late payment and decide how to handle overdue invoices.

Important points to remember

Statutory interest is usually calculated using the Bank of England base rate plus 8%.
The number of days overdue affects the total interest.
The invoice amount affects the total interest.
Contract terms may change what interest can be charged.
The Bank of England base rate can change over time.
Businesses should check the latest official guidance before relying on any calculation.

Use a calculator

If you want a quick estimate, you can use our UK Late Payment Interest Calculator:

Enter the invoice amount, Bank of England base rate, invoice due date, and payment date. The calculator will estimate the number of overdue days, annual interest rate, estimated interest, and total amount including interest.

General information only

The information on this page is provided for general information only. It does not constitute legal, financial, accounting, tax, debt collection, or professional advice.

Overdue Interest Tools is not a law firm, accounting firm, financial adviser, tax adviser, or debt collection agency.

You should always check the latest applicable rules, review your contract terms, and consider seeking professional advice before charging interest, making a claim, or relying on any calculation.