How Much Interest Can You Charge on Overdue Invoices in the UK?

Overdue invoices can create cash flow problems for UK businesses. If a business invoice is paid late in the UK, you may be able to charge interest on the overdue amount. For many business-to-business invoices, statutory interest is commonly calculated using the Bank of England base rate plus 8%.

This means the total annual interest 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 annual interest rate would be:

Copy5.25% + 8% = 13.25%

This type of interest is generally used for late commercial payments, such as overdue invoices between businesses, freelancers, contractors, consultants, suppliers, and service providers.

What is statutory interest on overdue invoices?

Statutory interest is interest that may be charged under UK late payment rules when a commercial invoice is not paid on time. It is designed to help compensate businesses for late payment and encourage customers to pay invoices promptly.

The usual statutory interest rate for late commercial payments is:

CopyBank of England base rate + 8%

This is an annual interest rate. The actual interest amount depends on:

• The invoice amount
• The Bank of England base rate
• The number of days the invoice is overdue
• Whether the invoice is business-to-business
• Whether your contract already includes different payment terms

Example calculation

Suppose you issued an invoice for £1,000, and the customer paid 30 days late.

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

The formula is:

CopyInvoice amount × Annual interest rate × Days overdue ÷ 365

Using the example:

Copy£1,000 × 13.25% × 30 ÷ 365 = £10.89

So the estimated late payment interest would be:

Copy£10.89

The total amount including interest would be:

Copy£1,010.89

You can estimate this more easily using our UK Late Payment Interest Calculator:

Can you always charge interest on overdue invoices?

Not always. Before charging interest, you should check the specific circumstances.

Important things to review include:

• Whether the invoice is for a business customer
• Whether your contract contains payment terms
• Whether your contract already states a late payment interest rate
• Whether the payment due date is clear
• Whether the invoice was correctly issued
• Whether the customer disputes the invoice

Statutory interest is most commonly relevant to commercial debts. It may not apply in the same way to consumer debts or personal invoices.

If you are unsure whether interest can be charged, you should check official guidance or seek professional advice.

When does an invoice become overdue?

An invoice becomes overdue when it has not been paid by the agreed payment date.

If your contract states a payment period, such as 14 days, 30 days, or 60 days, the invoice is generally overdue after that period has passed.

If there is no agreed payment date, UK late payment rules may still provide guidance on when interest can start to apply. However, the exact position can depend on the facts and the contract terms.

Can you also claim fixed compensation?

In some late commercial payment cases, businesses may also be able to claim fixed compensation for debt recovery costs.

The fixed compensation amount can depend on the size of the debt. Common UK figures are:

• £40 for debts under £1,000
• £70 for debts from £1,000 to £9,999.99
• £100 for debts of £10,000 or more

This article focuses mainly on interest calculations, but fixed compensation may also be relevant in some cases.

Why the Bank of England base rate matters

The Bank of England base rate is important because statutory interest is calculated by adding 8% to the base rate.

If the base rate changes, the statutory interest rate may also change. This is why businesses should always check the latest base rate before relying on a calculation.

For example:

CopyBase rate 4.00% + 8% = 12.00%
Base rate 5.25% + 8% = 13.25%
Base rate 3.75% + 8% = 11.75%

Even a small change in the base rate can affect the final interest amount, especially for large invoices or long overdue periods.

Use an overdue invoice interest calculator

Calculating late payment interest manually can be time-consuming, especially when you need to work out the number of days overdue.

Our calculator can help estimate:

• Days overdue
• Annual statutory interest rate
• Estimated interest amount
• Total amount including interest

Use the UK Late Payment Interest Calculator here:

You should enter the invoice amount, Bank of England base rate, invoice due date, and payment date.

Key points to remember

• UK statutory late payment interest is commonly calculated as Bank of England base rate plus 8%
• The formula is based on invoice amount, annual rate, and days overdue
• Contract terms may affect whether interest can be charged
• The Bank of England base rate can change over time
• Some businesses may also claim fixed debt recovery compensation
• Always check current rules before relying on any calculation

General information only

This article is for general information only. It is not legal, financial, accounting, tax, or professional advice.

Overdue Interest Tools is not a law firm, accounting firm, financial adviser, or debt collection agency. You should check official guidance and consider seeking professional advice before charging interest, making a claim, or relying on any calculation.