Late Payment Interest Calculator
Contractor Calculator's Late Payment Interest Calculator helps UK contractors and freelancers calculate the statutory interest and compensation they can claim on unpaid invoices under the Late Payment of Commercial Debts (Interest) Act 1998. Enter your invoice details to calculate the total amount claimable.
How is this calculated?
Interest rate: The statutory rate is the Bank of England base rate (currently 4.5%) plus 8%, giving 12.5% per annum.
Daily calculation: Interest = Invoice amount × (12.5% ÷ 365) × number of days overdue.
Compensation: A fixed amount per invoice: £40 for debts under £1,000, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more.
These rights come from the Late Payment of Commercial Debts (Interest) Act 1998 and apply to business-to-business transactions in England, Wales, Scotland, and Northern Ireland.
How have these tax rates changed?
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Frequently Asked Questions
How do I calculate late payment interest on an unpaid invoice in the UK?
Under the Late Payment of Commercial Debts (Interest) Act 1998, you can charge interest at 8% above the Bank of England base rate. The current statutory rate is 12.5% (4.5% base rate + 8%). Interest is calculated daily: (invoice amount × rate) ÷ 365 × days overdue.
What compensation can I claim for a late payment in the UK?
You can claim fixed compensation on top of interest: £40 for debts up to £999.99, £70 for debts from £1,000 to £9,999.99, and £100 for debts of £10,000 or more. This compensation is per invoice, not per payment.
What is the current Bank of England base rate for late payment interest?
The Bank of England base rate used for statutory late payment interest calculations is 4.5% (as of early 2025). This is added to the statutory 8% to give a total interest rate of 12.5%. Check the Bank of England website for the most current rate.
Can I charge late payment interest to any business?
The Late Payment of Commercial Debts Act applies to business-to-business (B2B) transactions in the UK. Both the supplier and the customer must be acting in the course of business. It does not apply to consumer debts or transactions with individuals acting privately.
Do I need to include late payment terms in my contract?
You have the statutory right to charge interest on late commercial payments even if your contract does not mention it. However, it is good practice to include payment terms and reference to the Late Payment Act in your invoices and contracts.
These calculations are estimates based on current published tax rates. They do not constitute financial, tax, or legal advice. Always consult a qualified accountant for your specific situation.
Tax rates sourced from HMRC published rates for the 2025/26 tax year. Last verified: March 2026.