When a business customer fails to pay an invoice on time, most people focus on recovering the original amount owed. What many do not realise is that they are also entitled to claim statutory interest and fixed compensation on top — automatically, without a court order, and without a solicitor.
These rights exist under the Late Payment of Commercial Debts (Interest) Act 1998 and apply to most business-to-business transactions in the UK. They are designed to compensate creditors for the cost and disruption of late payment, and to discourage debtors from using delayed payment as a cash flow strategy at their supplier's expense.
🧮 Free calculator: Use our late payment calculator to calculate exactly what you can claim — the live Bank of England base rate is fetched automatically.
Statutory interest is interest that accrues automatically on overdue commercial invoices. The rate is 8% per year above the Bank of England base rate.
So if the base rate is 4.75%, the statutory interest rate on your overdue invoice is 12.75% per year. That interest starts running from the date the payment became late — which is either the date specified in your contract, or 30 days after the invoice was issued or the goods and services were delivered, whichever is later.
You do not need a court order to claim it. You do not need a solicitor to calculate it. You add it to the amount owed and include it in your letter before action or any subsequent recovery process.
On top of statutory interest, you are entitled to claim a fixed sum as compensation for the cost of recovering the debt. The amounts are set by the Late Payment Act and depend on the size of the debt:
| Debt size | Fixed compensation |
|---|---|
| Under £1,000 | £40 |
| £1,000 to £9,999 | £70 |
| £10,000 or more | £100 |
These sums are payable per invoice, not per debtor. If a customer has failed to pay three separate invoices, you can claim the fixed compensation amount on each one. No court order is needed — the entitlement arises automatically when a commercial payment becomes late.
Yes, in some cases. If your actual costs of recovering the debt exceed the fixed compensation sum, you may be able to claim the difference as reasonable recovery costs under the Act.
This might include the cost of using a debt recovery service, instructing a professional to pursue the matter, or other reasonable expenses directly attributable to the recovery process. The costs must be reasonable and proportionate — but for larger debts where the fixed £100 sum falls well short of your actual recovery costs, this additional entitlement is worth knowing about.
There are two main situations where statutory interest under the Late Payment Act does not apply.
The first is where your contract already specifies an interest rate for late payment. If your terms of business include a contractual late payment clause, that rate applies instead of the statutory rate — though if the contractual rate is lower, you may be able to argue it is not a substantial remedy and fall back on the statutory rate instead.
The second is 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, or whether a contract existed at all. In those situations, the right route is to resolve the dispute first. If your debtor is actively disputing the invoice, a neutral decision process is a more appropriate starting point than a statutory interest claim.
The practical steps are straightforward.
If the debtor is not simply ignoring your invoice but is actively contesting it — disputing the work, the contract, or the amount — statutory interest and fixed compensation are not the priority. Resolving the dispute is.
A private neutral decision service like Dispute Neutral is designed for exactly this situation. An independent neutral reviews the contract, the documents, and the written submissions from both sides and issues a binding decision — without a hearing, without solicitors, and within 10 business days of the matter being ready.
For commercial debts under £150,000 in England, Wales, and Northern Ireland, it is a faster, cheaper, and more proportionate route than court.
Use our standalone late payment calculator for the most accurate and up-to-date figures — it fetches the current Bank of England base rate automatically.
Open the late payment calculator →The calculator shows the live base rate, calculates interest day by day, applies the correct fixed compensation band, and handles multiple invoices.
It applies to most business-to-business transactions for the supply of goods or services under a commercial contract. It does not apply to consumer transactions, to debts that are genuinely disputed, or where a contract expressly provides a different remedy that constitutes a substantial remedy for late payment.
The rate is 8% above the Bank of England base rate. Check the current base rate on the Bank of England website, add 8%, and apply that annual rate to the invoice amount. To get the daily rate, divide the annual interest by 365 and multiply by the number of days overdue. The Small Business Commissioner provides a free online calculator that does this automatically.
Yes. The entitlement to statutory interest arises from the date the payment became late — not from the date you first chased it. Interest will have been accruing since the invoice became overdue, regardless of when you sent your final demand or letter before action. Include the full calculated amount in any further correspondence or recovery process.
If the debtor raises a genuine dispute about the underlying invoice — the work done, the amount, or the contract — the statutory interest claim becomes secondary. A disputed invoice needs a process that can resolve the disagreement. A private neutral decision process resolves the underlying dispute and produces a binding decision on what is actually owed, at which point any interest entitlement can be addressed alongside the principal amount.
If your invoice is overdue and you want a clear, binding route to recovery — including your entitlement to statutory interest and compensation — 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