How late payment interest is calculated
The statutory rate is 8% per annum above the Bank of England base rate. Interest accrues from the day after the due date until the date payment is received. It is calculated on a daily basis using a 365-day year.
The formula
Daily interest = (invoice amount × (base rate + 8%)) ÷ 365. Total interest = daily interest × number of days overdue. The current Bank of England base rate is applied.
Who can claim late payment interest
Businesses delivering goods or services to other businesses under a contract can claim statutory interest if payment is late. Sole traders and partnerships are included. Consumers are not covered by this legislation.
Important: This is a planning aid only. Late payment interest entitlement depends on the contract terms, the nature of the debt, and whether the debt is genuinely overdue. Seek professional advice before making a formal claim.
FAQs
What rate of interest applies to late commercial payments?
The statutory interest rate for late commercial payments in the UK is 8% per annum above the Bank of England base rate. This applies to B2B transactions where the debt is unpaid after the agreed payment date.
When does late payment interest start?
Interest starts the day after the payment was due, if the payment has not been made by then. It runs until the date the payment is received.
Can I claim the late payment interest?
Under the Late Payment of Commercial Debts (Interest) Act 1992, a creditor is entitled to claim statutory interest if the debt is unpaid after the agreed payment period. A reasonable administration charge may also be claimed.
Does this apply to consumer transactions?
No. The Late Payment legislation applies to commercial B2B debts. Consumer transactions are covered by different rules under the Consumer Rights Act 2015.