Late payment compensation: £40, £70 and £100 explained

Last updated: 25 July 2026 · General information for UK businesses

In some UK commercial late payment situations, a business may be able to claim a fixed amount of compensation for debt recovery costs. The commonly referenced bands are £40, £70 and £100, depending on the size of the overdue debt.

What is late payment compensation?

Late payment compensation is a fixed amount that may be added to an overdue commercial debt to help cover the cost of recovering the payment. It is separate from late payment interest.

For example, if a business invoice is overdue, the supplier may be able to calculate statutory interest and may also be able to add a fixed compensation amount, depending on the circumstances.

The three fixed compensation bands

The commonly referenced UK fixed compensation bands are:

These bands are based on the amount of the debt. This is why the fixed compensation shown by a calculator may change when the invoice amount changes.

You can check official UK guidance here: GOV.UK: Claim debt recovery costs on late payments .

Is compensation the same as interest?

No. Late payment interest and fixed compensation are different.

• Interest is calculated based on the invoice amount, annual interest rate and number of days overdue.
• Fixed compensation is a set amount based on the size of the overdue debt.

This means an overdue invoice may have:

• The original unpaid invoice amount
• Interest accrued over the overdue period
• A fixed compensation amount

Example 1: A £750 overdue invoice

If an overdue commercial invoice is for £750, it falls into the first compensation band.

Interest may also be calculated separately if the debt qualifies and the payment is overdue.

Example 2: A £1,000 overdue invoice

If an overdue invoice is exactly £1,000, it falls into the second compensation band.

For example, if the invoice is 45 days overdue and the interest is £14.49, the estimated total may be:

Example 3: A £10,000 overdue invoice

If an overdue invoice is £10,000 or more, it falls into the third compensation band.

The exact interest amount would depend on the annual interest rate and how many days the invoice is overdue.

When might fixed compensation apply?

Fixed compensation is generally relevant to late commercial payments. This may include business-to-business situations such as:

• A freelancer invoicing a business client
• A supplier selling goods to another company
• A consultant providing services to a business
• An agency waiting for payment from a commercial customer

It may not be suitable for every unpaid amount. Consumer debts, employment payments, rent, tax, personal debts and non-UK debts may follow different rules.

Can compensation be claimed if the invoice is not overdue?

In general, fixed compensation is connected to late payment. If the invoice is not actually overdue, adding fixed compensation would usually be inappropriate.

Before adding compensation, check:

• The correct due date
• Whether the payment is actually late
• Whether the debt is commercial
• Whether your contract changes the position
• Whether the amount has already been paid in part or in full

What if there are multiple invoices?

If several invoices are overdue, the calculation may depend on whether each invoice is treated as a separate debt. In many practical situations, businesses calculate interest and compensation separately for each overdue invoice.

However, the correct approach may depend on the contract, payment terms and facts of the transaction. If the amounts are significant, it is sensible to take advice before making a formal claim.

Can you claim more than the fixed amount?

The fixed compensation bands are designed to provide a set amount for recovery costs. In some circumstances, additional reasonable recovery costs may be relevant, but this can be more complex and should be checked carefully.

If you are considering claiming additional recovery costs, you should check official guidance and consider professional advice.

How our calculator handles compensation

Our calculator estimates the fixed compensation band based on the invoice amount entered:

• Less than £1,000: £40
• £1,000 to £9,999.99: £70
• £10,000 or more: £100

The calculator also lets you turn fixed compensation on or off, because not every situation will qualify.

You can try it here: UK late payment interest calculator.

Common mistakes to avoid

When dealing with late payment compensation, avoid these common mistakes:

• Adding compensation when the invoice is not overdue
• Using the wrong debt amount band
• Applying business late payment rules to a consumer debt
• Ignoring contract terms that may affect late payment rights
• Forgetting that interest and compensation are separate
• Using compensation as a penalty rather than a recovery-cost estimate

Quick summary

UK late payment compensation is a fixed amount that may be added to some overdue commercial debts. The commonly referenced amounts are £40, £70 and £100, depending on the size of the debt.

It is separate from interest, and you should always check whether the invoice is actually overdue and whether the debt qualifies before relying on the calculation.