Late payment interest and compensation: what you can claim on every overdue invoice
Every overdue business-to-business invoice in the UK carries interest and compensation by law. Almost no business claims them. Here is exactly what you are owed and how to work it out.
What the Act gives you
The Late Payment of Commercial Debts (Interest) Act 1998 applies to contracts for goods or services between businesses. Where an invoice is paid late, three things are owed automatically, without any clause in your terms:
- Statutory interest at 8 percentage points above the Bank of England base rate, on the gross sum including VAT, from the day after the invoice fell due until it is paid.
- Fixed compensation per invoice: £40 for a debt under £1,000, £70 from £1,000 to £9,999.99, £100 at £10,000 and above.
- Reasonable recovery costs above the fixed sum, where they exceed it.
Which rate applies
The rate is fixed by reference to the base rate in force at the start of the six-month period in which the debt became late: 31 December for debts falling due January to June, 30 June for July to December. With base rate at 3.75%, the statutory rate for 2026 is 11.75%. A debt that fell due in 2025 carries the rate from that period, which may differ.
A worked example
Compensation: £70 (the invoice is between £1,000 and £10,000)
Total recoverable: £8,530.82, increasing by £2.68 every day it stays unpaid
How long you have
Six years in England, Wales and Northern Ireland; five in Scotland. That includes invoices that were paid late and settled long ago: the interest and compensation on those remain claimable, and because the customer has already paid the principal, asking for them puts no relationship at risk.
What is changing
The Commercial Payments Bill, introduced in May 2026, would make the statutory rate mandatory and unwaivable, cap payment terms at 60 days, and require large businesses to report the statutory interest they owe and have paid. It is not law yet. Everything above is.