Late payment interest calculator
When a business pays your invoice late, you can add statutory interest at Bank Rate plus 8% and fixed compensation of £40 to £100. Enter the amount and dates to get the figure and a sentence to paste into your reminder.
Checked 7 November 2026.
| Period | Days | Rate | Interest |
|---|---|---|---|
| 2 August to 1 November 2026 Bank Rate of 3.75% on 30 June 2026 plus 8% | 92 | 11.75% | £148.08 |
| Fixed compensation, once per invoice | £70.00 | ||
| Total to add | £218.08 | ||
| Invoice plus interest and compensation | £5,218.08 | ||
| Each further day adds | £1.61 | ||
For your chaser email: Under the Late Payment of Commercial Debts (Interest) Act 1998, statutory interest of £148.08 (92 days at 11.75% a year on £5,000.00, due 1 August 2026) and fixed compensation of £70.00 are added, so £5,218.08 is now due, with interest continuing at £1.61 a day until paid.
A worked example
A client owes you £5,000.00 including VAT, due on 1 August 2026, and pays on 1 November 2026. Interest starts to run on 2 August, which falls between 1 July and 31 December, so the rate is set by the Bank Rate on 30 June 2026. That was 3.75%, so the statutory rate is 11.75%.
The debt is 92 days late. Interest is £5,000.00 × 11.75% × 92 ÷ 365 = £148.08. The invoice is between £1,000 and £9,999.99, so the fixed compensation is £70.00. You can add £218.08, making £5,218.08 in total. Set the date paid to 1 November 2026 in the calculator to see the same figures.
Why the result moves
Interest grows by the same amount each day the invoice stays unpaid, so the total goes up until the date paid. The rate depends on when the debt fell overdue. A debt that falls overdue in the first half of 2027 will use the Bank Rate on 31 December 2026, which is 4.00% unless the Bank of England changes it before then, giving 12.00%. Compensation steps up from £40 to £70 at £1,000 and to £100 at £10,000.
When this calculator is wrong for you
- Your client is a consumer. The Act only covers business to business debts, and you can only charge interest to a consumer if your contract says so.
- The invoice is disputed. Interest under the Act runs on a debt that is owed, so settle the dispute first or expect the claim to be argued.
- Your contract has its own interest clause. A contract rate that is a substantial remedy replaces statutory interest. Use the contractual option under More options.
- The client paid part of the invoice. Interest then runs on the balance from the part-payment date, which needs a separate calculation for each part.
Questions people ask
Can I charge interest on a late invoice?
Yes, if both you and your client are businesses. The Late Payment of Commercial Debts (Interest) Act 1998 gives you the right to statutory interest and fixed compensation once a payment is late. It does not apply to invoices sent to consumers.
Does it need to be in my contract or on my invoice?
No. The right comes from the Act, so you can claim it even if your terms say nothing about late payment. Stating it on your invoices makes the claim less of a surprise. If your contract sets its own interest rate, that rate applies instead.
Which Bank Rate do I use?
The Bank Rate in force on 31 December for interest that starts to run between 1 January and 30 June, or on 30 June for interest that starts between 1 July and 31 December. The rate is set by the day the debt fell overdue and does not change while it stays unpaid.
Is the compensation per invoice or per client?
Per invoice. You can claim £40, £70 or £100 for each late invoice, depending on its size, even if one client owes you several. You can also claim reasonable recovery costs above that amount if you actually incurred them.
Do I charge VAT on the interest or compensation?
No. Late payment interest and the fixed compensation are not payment for a supply, so they are outside the scope of VAT. Add them to your chaser or a new invoice without VAT.
Will charging interest damage the client relationship?
It can. Many freelancers mention the right in a first reminder and only add the figure if payment still does not arrive. You can waive it at any point, so working it out first costs nothing.
How much interest does HMRC charge on late tax?
Bank Rate plus 4%, as simple interest from the day after the due date until you pay. HMRC changes its rate a short time after each Bank of England decision. It pays repayment interest on overpaid tax at Bank Rate minus 1%, with a floor of 0.5%.
How this is worked out
Statutory interest is simple interest at 8% a year over the Bank of England Bank Rate in force on 30 June (for interest that starts to run between 1 July and 31 December) or 31 December (for interest that starts between 1 January and 30 June) immediately before interest starts, under article 4 of the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, SI 2002/1675. That rate stays fixed until the debt is paid. Days are counted from the day after the due date to the date paid, so the due date itself is excluded and the payment date is included. Interest is the amount × the rate × the days ÷ 365, rounded to the penny. Fixed compensation is £40 below £1,000, £70 from £1,000 to £9,999.99 and £100 from £10,000, once per invoice. HMRC late payment interest uses Bank Rate plus 4% and repayment interest Bank Rate minus 1% (at least 0.5%), with each Bank Rate change taking effect 13 days after the Bank of England decision and the period split where the rate changes.
Full formulas, rounding rules and test cases are on the methodology page. Every rate update is listed in the changelog.