📖 Longer guide — approx. 10 min read
Most businesses chasing an overdue invoice focus on recovering the original amount. What many do not realise is that UK law entitles them to significantly more than that — and they can claim it automatically, without a court order, and without a solicitor.
Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can add statutory interest and fixed compensation to overdue commercial invoices as a matter of right. These amounts accrue from the date the invoice became late, not from the date you first chased it.
Current statutory interest rate: 11.75% per year — based on the Bank of England base rate of 3.75% (confirmed at the March 2026 MPC meeting) plus 8%. The next MPC decision is 30 April 2026.
The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses an automatic statutory right to claim interest, fixed compensation, and reasonable recovery costs on overdue commercial invoices. It applies to contracts for the supply of goods or services between businesses — business-to-business transactions — where the buyer has failed to pay on the agreed date.
It does not apply to consumer transactions or to invoices that are genuinely disputed. The Act was designed to address a systemic problem: large businesses using extended payment terms and delayed payment as a form of free credit at their suppliers' expense.
Statutory interest on overdue commercial invoices is charged at 8% per year above the Bank of England base rate.
The Bank of England base rate is currently 3.75%, confirmed at the March 2026 MPC meeting. That means the current statutory interest rate on overdue commercial invoices is 11.75% per year.
Interest accrues from the date the payment became late. Under the Late Payment Act, a payment becomes late either on the date specified in the contract, or — if no date is specified — 30 days after whichever is the later of the date the invoice was delivered or the date the goods or services were delivered.
Daily interest formula:
Daily rate = Invoice amount × 11.75% ÷ 365
Example — £25,000 invoice at current rate:
Example — £50,000 invoice overdue for 90 days:
These amounts are claimable on top of the original invoice. They do not require a court order. They accrue automatically from the date the payment became late.
The statutory interest rate changes when the Bank of England base rate changes. The next MPC decision is scheduled for 30 April 2026. Always use the rate applicable at the date the debt became late, and update it if proceedings extend beyond a rate change.
In addition to statutory interest, you are entitled to claim a fixed compensation sum for the cost of recovering the debt:
| Invoice amount | Fixed compensation |
|---|---|
| Under £1,000 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
These amounts are payable per invoice — not per debtor. If a customer has failed to pay three separate invoices, you can claim fixed compensation on each one independently. Three invoices of £15,000 each entitle you to £300 in fixed compensation alone — before statutory interest is calculated.
Fixed compensation accrues automatically from the date the payment became late. It does not require a court order.
If your actual costs of recovering the debt exceed the fixed compensation sum, the Late Payment Act allows you to claim the difference as reasonable recovery costs. This might include the cost of using a professional debt recovery service or other costs directly attributable to recovery. The costs must be reasonable and proportionate, but for larger invoices where the £100 fixed sum falls significantly short of actual recovery costs, this additional entitlement is worth pursuing.
Where your contract specifies a different rate. If your terms of business include a contractual late payment interest clause, that rate applies instead of the statutory rate — unless it is so low as not to constitute a substantial remedy, in which case you may be able to fall back on the statutory rate.
Where the invoice is genuinely disputed. Statutory interest and fixed compensation are not generally claimable on invoices that are legitimately contested — where the debtor disputes the work done, the amount charged, the quality, or whether the payment obligation has been triggered at all.
If your debtor is not simply refusing to pay but is actively contesting the invoice, the right next step is to resolve the underlying dispute — not to add interest to a contested figure. A private neutral decision process resolves the disagreement directly and produces a binding determination on what is actually owed. See our unpaid invoice recovery guide for the full picture.
In practice, debtors sometimes raise a dispute only after a letter before action or formal demand — as a tactic to delay or complicate recovery. A late-raised dispute does not automatically make the invoice non-recoverable, but it does mean you need a process that can assess the underlying disagreement fairly.
For commercial debts under £150,000 in England, Wales, and Northern Ireland, a private neutral decision process at Dispute Neutral is designed for exactly this situation. Both parties submit their documents and written case. An independent neutral reviews everything and issues a binding decision within 10 business days of the matter being ready — without a hearing, without solicitors on either side.
For the full picture on your recovery options, see our guides on recovering unpaid invoices without court or solicitors and debt recovery without solicitors.
Invoice: £17,500 for professional services
Payment due date: 1 January 2026
Date of letter before action: 8 April 2026 (97 days overdue)
Statutory interest rate: 11.75% (base rate 3.75% + 8%)
| Item | Calculation | Amount |
|---|---|---|
| Original invoice | — | £17,500.00 |
| Annual interest | £17,500 × 11.75% | £2,056.25 |
| Daily rate | £2,056.25 ÷ 365 | £5.63/day |
| Interest for 97 days | £5.63 × 97 | £546.11 |
| Fixed compensation | Invoice > £10,000 | £100.00 |
| Total claimable | £18,146.11 |
That is £646.11 above the original invoice amount — claimable automatically, without a court order, from a debtor who has simply not paid.
Yes. The statutory interest rate is always 8% above the current Bank of England base rate. The base rate is currently 3.75% (March 2026 MPC meeting), giving a current statutory rate of 11.75%. The next MPC decision is on 30 April 2026. If the base rate changes, recalculate accordingly. Always use the rate applicable at the date the debt became late.
Yes. The interest accrues from the date the payment became late — not from the date you first claimed it or became aware of your entitlement. If an invoice became overdue six months ago, you are entitled to six months of accrued interest at the applicable rate, plus the fixed compensation sum.
No. These amounts are a statutory entitlement — they arise automatically by operation of law when a commercial payment becomes late. You assert the entitlement in your letter before action and include it in any subsequent recovery process. A court or neutral would apply the same entitlement in any formal determination.
If your contract specifies a late payment interest rate, that rate applies instead of the statutory rate. However, if the contractual rate is significantly lower than the statutory rate, you may be able to argue it does not constitute a substantial remedy — in which case the statutory rate can apply instead. Draft clauses for future contracts are available in the Include us section of the site.
Not generally. Statutory interest and fixed compensation are not claimable on invoices that are genuinely disputed. In those situations, the right approach is to resolve the underlying dispute through a process designed for that purpose. Once the dispute is resolved and the amount owed is determined, interest entitlement can flow from that point. See our unpaid invoice recovery guide for the full picture.
If your invoice is overdue and you want a clear, binding route to recovery — including your full statutory interest and compensation entitlement — Dispute Neutral is designed for commercial debts under £150,000 in England, Wales, and Northern Ireland.
Start a matter →Private • Fixed-fee • Binding decision in 10 business days