Late invoices cost you twice
An overdue invoice costs you the money you are owed and the time you spend chasing it. In the UK, the law recognises both: the Late Payment of Commercial Debts (Interest) Act 1998 lets businesses charge statutory interest at 8% over the Bank of England base rate, plus fixed compensation of £40, £70 or £100 depending on the debt size — and you can charge it even if your contract never mentioned late payment.
This calculator works out the statutory interest on an overdue commercial invoice and the fixed compensation you are entitled to. It also covers the EU Late Payment Directive rules and notes on US practice, since late payment is a universal freelancer problem.
UK statutory figures reviewed: October 2026. The Bank of England base rate changes over time — the calculator uses the rate you enter, so use the current one.
Estimate only, not legal advice. Statutory interest rules differ by country and contract terms.
How to use it
- Enter the overdue amount (the invoice total including any VAT, as the statute covers the full amount due).
- Enter the date the invoice became overdue (the day after the payment deadline).
- Enter the date of calculation (today, or the date payment finally arrived).
- Enter the Bank of England base rate (for UK statutory interest) or your contractual rate if your contract specifies one.
- Read the interest due, the fixed compensation tier, and the total claimable amount — formatted as a statement you can attach to a chasing email.
What it calculates and how the formula works
| Component | Formula / rule |
|---|---|
| UK statutory interest rate | Bank of England base rate + 8% per annum |
| Daily interest | Overdue amount × annual rate ÷ 365 |
| Total interest | Daily interest × days overdue |
| Fixed compensation (UK) | £40 (debts up to £999.99), £70 (£1,000–£9,999.99), £100 (£10,000+) |
| EU statutory interest | ECB reference rate + at least 8 percentage points, plus minimum €40 compensation |
Assumptions:
- Interest is simple, not compound — it accrues daily on the principal only. That matches the UK statute.
- The payment deadline is your contractual term (or 30 days implied for business-to-business in the UK if no term was agreed). Interest runs from the day after the deadline.
- The calculator assumes a commercial (business-to-business) debt. Consumer debts follow different rules.
Worked example: the £4,800 invoice paid 47 days late
A consultant in Birmingham invoices a client £4,800 on 1 September with 30-day terms. The deadline is 1 October. Payment arrives 17 November — 47 days late. The Bank of England base rate at the time of review (October 2026) is 3.75%:
- Statutory rate: 3.75% + 8% = 11.75% per annum
- Daily interest: £4,800 × 11.75% ÷ 365 = £1.55/day
- Interest for 47 days: £1.55 × 47 = £72.62
- Fixed compensation (debt between £1,000 and £9,999.99): £70.00
- Total claimable on top of the invoice: £142.62
The calculator formats this as a short statement — invoice number, dates, rate, interest, compensation — ready to paste into a firm but professional chasing email.
Important considerations and limitations
- You do not need a late-payment clause. Under the UK Act, statutory interest applies to qualifying business debts even if the contract says nothing about it. (If your contract specifies a different rate, that rate generally applies instead — as long as it is not grossly unfair.)
- Claiming it is a business decision. The law gives you the right; relationships may counsel restraint. Many freelancers mention the right in their terms and only enforce it on repeat offenders — the mention alone improves payment behaviour.
- EU rules are similar but national. The EU Late Payment Directive sets ECB rate + 8% and €40 minimum compensation, but each member state implements it in national law — Germany, for example, uses its own published base rate with a higher margin. Check the national implementation.
- US practice varies by state. There is no federal late-payment statute for private commercial debts; interest depends on your contract terms and state law (state prejudgment-interest rates differ). Put a rate in your contract.
- Interest on the VAT portion: the “amount due” includes VAT charged on the invoice, so interest accrues on the VAT-inclusive total.
- This is not legal advice. For large debts or disputed invoices, speak to a solicitor before taking action.
- Browser-local: your invoice details never leave your browser.
Frequently asked questions
Can I charge interest on an overdue invoice if my contract doesn’t mention it?
In the UK, yes — the Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right to interest at 8% over the Bank of England base rate plus fixed compensation, for qualifying business-to-business debts, even with no contractual clause.
How is UK statutory late payment interest calculated?
Annual rate = Bank of England base rate + 8%. Daily interest = invoice total × annual rate ÷ 365. Multiply by days overdue. It is simple interest on the VAT-inclusive invoice total.
What is the £40/£70/£100 compensation?
Fixed sums the Act entitles you to per overdue invoice, on top of interest: £40 for debts up to £999.99, £70 for £1,000–£9,999.99, £100 for £10,000 and above. No reminder or notice is required to claim it.
When does an invoice become “late”?
The day after the agreed payment deadline. If no term was agreed, UK law implies 30 days for business-to-business transactions. Interest runs from the day after the deadline until payment.
Can I charge late fees on invoices that were eventually paid late?
Yes. The right to interest and compensation arose during the overdue period. Many businesses add it to the next invoice or send a separate interest invoice.
Is late payment interest subject to VAT?
This is a genuinely tricky area — HMRC’s position has changed over time, and recent guidance treats certain late-payment charges differently from the underlying supply. Check current HMRC guidance or ask your accountant before adding VAT to an interest charge.
What about late payment in the EU?
The EU Late Payment Directive (2011/7/EU) gives creditors statutory interest at the ECB reference rate plus at least 8 percentage points, plus minimum €40 compensation, implemented through each member state’s national law.
Should I actually charge it, or will I lose the client?
That is a judgement call. In practice, stating the right in your payment terms and mentioning it in a second or third reminder resolves most late payments without ever formally charging it. The calculator exists so the number is ready when you need it.
Related tools
External references
- GOV.UK — Late commercial payments: charging interest and debt recovery
- Bank of England — The interest rate (Bank Rate)
- EU law — Directive 2011/7/EU on combating late payment in commercial transactions
This tool provides estimates for guidance only and is not professional financial, tax, or legal advice.