This is general information about UK rules, checked on the date above. It is not legal advice, and rules change. For a decision that matters, check the sources below or ask a qualified adviser.
Many small business owners treat late payment as something to put up with, in case pushing back loses the customer. In fact the law gives you a right to interest and a fixed sum on top when another business pays late. You do not have to use it, but it helps to know it is there.
The short version
- If another business pays late, you can claim interest and debt recovery costs.1
- If no payment date was agreed, the payment is late 30 days after the customer gets the invoice, or you deliver, if later.1
- Statutory interest is 8% plus the Bank of England base rate.2
- You can add a fixed sum of £40, £70 or £100, depending on the size of the debt.3
These rights apply to business-to-business debts. Consumers are treated differently.
When a payment is late
If you agree a payment date, it must usually be within 30 days for public authorities, or 60 days for business transactions. You can agree a longer period than 60 days for business transactions, but it must be fair to both businesses.1
If you do not agree a date, the law says the payment is late 30 days after either the customer gets the invoice, or you deliver the goods or provide the service, if this is later.1
So putting clear payment terms on your quotes and invoices matters. It removes any doubt about when the clock started.
How much interest you can charge
Statutory interest is 8% plus the Bank of England base rate for business-to-business transactions. You cannot claim statutory interest if there is a different rate of interest in the contract.2
GOV.UK gives this example, using a base rate of 0.5%:2
| Step | Sum |
|---|---|
| Debt | £1,000 |
| Rate | 8.5% (8% plus 0.5%) |
| Annual interest | £85 |
| Daily interest | 23p (£85 ÷ 365) |
| After 50 days | £11.50 |
That base rate is only for illustration. Check the current Bank Rate when you do your own sum.4
The fixed recovery sum
On top of interest, you can charge a fixed sum for the cost of recovering a late payment. The amount depends on the size of the debt:3
| Size of debt | Fixed sum |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
On a small invoice, the fixed sum is usually worth more than the interest. On a £500 invoice, £40 can be a real incentive to pay on time.
Should you actually charge it?
That is a business judgement, and it is yours to make. A long-term customer who is a week late for the first time probably deserves a friendly reminder. A customer who pays 90 days late every time is a different matter, and this right gives you something concrete to point at.
Our suggested approach is to mention the right before you need it. A line on your invoice such as “We reserve the right to charge interest and recovery costs on late payments under the Late Payment of Commercial Debts (Interest) Act 1998” is firm without being hostile, and most good customers will never notice it.
A chasing routine that works
We suggest these steps, and most of them can be automated:
- Before it is due: send a short reminder a few days ahead for larger invoices.
- The day it is due: send a polite note with the invoice attached.
- 7 days late: send a personal message or make a call, and ask if there is a problem with the invoice.
- 30 days late: send a formal letter stating the amount, including interest and the fixed sum.
- After that: consider stopping further work, and get advice about the next step.
Keep a record of each contact. It helps your memory, and it will be important if the dispute goes further.
Prevent it in the first place
- Agree the terms before you start. Put them on the quote, as explained in quote or estimate, so that signing the quote means agreeing them.
- Invoice immediately. Every day you wait is a day later you get paid.
- Send invoices to the right person, and ask who handles payment.
- Take deposits or stage payments on larger jobs.
- Make paying easy, with a payment link and clear bank details.
Knowing what is owed
You cannot chase what you cannot see. Many small businesses only discover a problem when the bank balance looks low, and then have to dig through emails to find who still owes what.
Our admin dashboards can show overdue invoices alongside your sales, and let you send a reminder in one tap. If you want better habits around the paperwork as well, see how long to keep business records.
Sources
-
GOV.UK, Late commercial payments: when a payment becomes late, accessed 7 November 2026. ↩ ↩2 ↩3 ↩4
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GOV.UK, Late commercial payments: interest on late commercial payments, accessed 7 November 2026. ↩ ↩2 ↩3
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GOV.UK, Late commercial payments: claim debt recovery costs, accessed 7 November 2026. ↩ ↩2
-
Bank of England, Interest rates and Bank Rate, accessed 7 November 2026. ↩
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