What is statutory interest on late commercial payments in the UK?
Statutory interest on late commercial payments is interest that a UK business may be able to claim when another business pays an invoice late. It is commonly used for overdue business-to-business invoices where payment has not been made by the agreed due date.
This guide provides general information only. It is not legal, financial or debt recovery advice. Always check your contract terms and seek professional advice if you are unsure.
What does statutory interest mean?
In simple terms, statutory interest is interest that may be added to an overdue commercial debt under UK late payment rules. It exists to help compensate suppliers, freelancers and businesses when a customer does not pay on time.
The word “statutory” means it comes from legislation rather than simply from a private agreement between the parties. However, whether it can be claimed in a specific case depends on the circumstances, the type of debt, the contract terms and whether the payment is a commercial payment.
Who is it generally relevant to?
Statutory late payment interest is generally relevant to commercial transactions. This usually means situations such as:
- A freelancer invoicing a business client
- A supplier selling goods to another business
- A consultant providing services to a company
- An agency waiting for payment from a business customer
- A small business chasing an overdue invoice from another business
It is not designed for every type of debt. For example, consumer debts, personal loans, tax debts, rent arrears, employment payments and non-UK debts may follow different rules.
When does a payment become late?
A payment may become late when it has not been paid by the agreed payment date. If the invoice or contract states a clear due date, that date is usually the starting point for checking whether the payment is overdue.
Where no payment date has been agreed, UK guidance generally refers to a payment becoming late after a set period, often linked to when the customer receives the invoice or when the goods or services are delivered. The exact position can depend on the facts of the transaction.
For official guidance, see: GOV.UK: Late commercial payments, interest and debt recovery .
How is statutory interest calculated?
UK statutory interest for late commercial payments is commonly described as:
Bank of England base rate + 8%
The Bank of England base rate can change over time, so it is important to check the current rate before relying on a calculation. You can check the official Bank Rate here: Bank of England: Bank Rate .
The basic calculation is:
Invoice amount × annual interest rate ÷ 365 × days overdue
This gives an estimate of the interest accrued over the number of days the invoice remains overdue.
Example calculation
Suppose a business invoice is for £1,000 and it is 45 days overdue. If the annual interest rate is 11.75%, the estimated interest would be:
£1,000 × 11.75% ÷ 365 × 45 = approximately £14.49
This is only the interest element. Depending on the circumstances, fixed compensation for recovery costs may also be relevant.
What about fixed compensation?
In addition to interest, UK late commercial payment rules may allow a business to claim a fixed sum for debt recovery costs. The commonly referenced bands are:
- £40 for debts up to £999.99
- £70 for debts from £1,000 to £9,999.99
- £100 for debts of £10,000 or more
This is why many late payment calculators show both interest and fixed compensation separately. They are related but not the same thing.
You can estimate both using our UK late payment interest calculator.
Can a contract use a different interest rate?
Some contracts include their own late payment interest clause. If a contract states a different rate or sets out a specific process for late payment, you should read those terms carefully.
In some cases, the contractual rate may apply instead of the statutory rate. In other cases, the wording of the contract may be unclear or may need professional interpretation.
If the amount is significant or the contract wording is unclear, it is sensible to get professional advice before adding interest or compensation to a demand for payment.
Should you mention statutory interest in a reminder email?
Many businesses start with a polite payment reminder before escalating. A reminder email can mention that the invoice is overdue and that statutory interest and fixed compensation may be added if payment is not made.
A good reminder email should usually be:
- Polite and professional
- Clear about the invoice amount
- Clear about how many days late the payment is
- Specific about the amount now requested
- Reasonable about the deadline for payment
Our calculator can generate a simple chase email based on the invoice amount, due date and interest rate you enter.
Common mistakes to avoid
Before claiming late payment interest, avoid these common mistakes:
- Using the wrong payment due date
- Applying UK commercial payment rules to a non-commercial debt
- Forgetting to check whether the contract has its own late payment clause
- Using an outdated Bank of England base rate
- Adding compensation when the invoice is not actually overdue
- Assuming every type of unpaid debt qualifies
Quick summary
Statutory interest on late commercial payments is a way for UK businesses to estimate interest on overdue business invoices. It is commonly calculated using the Bank of England base rate plus 8%, multiplied by the invoice amount and the number of days overdue.
However, it is important to check the type of debt, the payment terms, the contract wording and the current official rate before relying on any calculation.
Need an estimate? Use the free UK Late Payment Interest Calculator to calculate interest, fixed compensation and an estimated total amount owed.