How to calculate statutory interest on a late invoice in the UK (2026)
For business-to-business invoices, statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 is 8% a year over the Bank of England base rate in force on 31 December (if the invoice became late between January and June) or on 30 June (if it became late between July and December). Bank Rate was 3.75% on both 31 December 2025 and 30 June 2026, so the rate is 11.75% for any invoice that became overdue in 2026. Interest is simple: amount owed × 11.75% ÷ 365 × days late, counted from the day after the due date, and the rate stays the same until the debt is paid.
The rules, from the legislation
- Who it applies to: contracts for goods or services where both the buyer and the supplier act in the course of a business (section 2). A sole trader customer counts as a business; a consumer does not.
- The rate: 8% over the official dealing rate (Bank Rate) in force on 30 June or 31 December immediately before the day interest starts to run (SI 2002/1675, article 4).
- When it starts: the day after the agreed payment date. With no agreed date, 30 days after the later of delivery and the customer receiving notice of the amount (section 4).
- Fixed for the life of the debt: section 4 applies the rate in force at the end of the due date, so a later change in Bank Rate does not change the interest on a debt that is already late.
- Contract terms: if your contract sets its own late payment interest, that rate applies instead, provided it is a substantial remedy (GOV.UK guidance).
Statutory interest rates since 2023
| Debt became late between | Bank Rate on reference date | Statutory interest rate |
|---|---|---|
| 1 Jan – 30 Jun 2023 | 3.50% (31 Dec 2022) | 11.50% |
| 1 Jul – 31 Dec 2023 | 5.00% (30 Jun 2023) | 13.00% |
| 1 Jan – 30 Jun 2024 | 5.25% (31 Dec 2023) | 13.25% |
| 1 Jul – 31 Dec 2024 | 5.25% (30 Jun 2024) | 13.25% |
| 1 Jan – 30 Jun 2025 | 4.75% (31 Dec 2024) | 12.75% |
| 1 Jul – 31 Dec 2025 | 4.25% (30 Jun 2025) | 12.25% |
| 1 Jan – 30 Jun 2026 | 3.75% (31 Dec 2025) | 11.75% |
| 1 Jul – 31 Dec 2026 | 3.75% (30 Jun 2026) | 11.75% |
Bank Rate history: Bank of England. The rate for invoices that become late from 1 January 2027 will depend on Bank Rate on 31 December 2026.
Worked example
An invoice for £750 (including VAT) was due on 15 February 2026 and is still unpaid on 16 May 2026.
| Step | Calculation | Result |
|---|---|---|
| Rate | 8% + 3.75% (Bank Rate on 31 Dec 2025) | 11.75% |
| Annual interest | £750 × 11.75% | £88.13 |
| Daily interest | £88.125 ÷ 365 | £0.24 |
| Days late | 16 Feb to 16 May 2026 | 90 days |
| Interest | £750 × 11.75% × 90 ÷ 365 | £21.73 |
| Fixed compensation | debt under £1,000 | £40.00 |
| Total claimable | £811.73 |
If the customer pays part of the invoice late, interest runs on the full amount up to the payment date and on the balance after it. The late payment interest calculator does this for several invoices at once and shows each line of the calculation.
Common mistakes
- Using today's Bank Rate: the rate is fixed by the reference date before the debt became late, not by the rate on the day you calculate.
- Splitting the calculation on 1 July: unlike France, the UK rate does not change while the debt is outstanding.
- Charging it to a consumer: the Act only covers business-to-business contracts.
- Compounding: statutory interest is simple interest.
- Forgetting the fixed sum: £40, £70 or £100 per invoice can be claimed on top of interest.
FAQ
Do I need to have mentioned statutory interest on my invoice? No. The right comes from the Act. It is still worth stating it in your terms and on reminders.
Is interest calculated on the amount including VAT? Interest runs on the debt, which is the amount the customer owes under the invoice, VAT included.
Should I send a new invoice for the interest? GOV.UK suggests sending a new invoice if you decide to add interest to the amount owed. You can also state it in a letter before action with the calculation attached.
Can I claim statutory interest from a public body? Yes, the Act covers public authorities as purchasers, and a contract with a public authority cannot set a lower rate.
Does it apply in Scotland and Northern Ireland? The Act applies across the UK. Court procedures for recovering the debt differ in Scotland and Northern Ireland.