How to calculate late payment interest UK (2026): Bank Rate + 8% and compensation
Late payment interest UK, short answer: for qualifying B2B supplies, UK statute lets you claim simple interest at Bank of England base rate + 8% plus a fixed compensation of £40 / £70 / £100 per overdue invoice (depending on the debt size). Soften with GOV.UK late commercial payments and the Bank of England Bank Rate page — rates move. This is not automatic software magic: InvoiceAdept does not file claims, court papers, CIS300, VAT returns, MTD or Self Assessment. Domestic / consumer work is usually outside the statutory Act. If you are VAT-registered (threshold £90,000), keep VAT lines correct on the original invoice; interest treatment is a separate softener with your accountant.
This page is the how-to calculate shape for trades and freelancers chasing overdue B2B invoices. Build clear originals first with the free invoice generator (Free: 5 invoices; Pro £7.99 / Pro+ £12.99). Figures below are illustrative — always re-check the live Bank Rate before you quote a %.
Who this applies to (and who it does not)
Situation | Statutory interest / compensation? | Practical note |
|---|---|---|
B2B supply of goods or services | Often yes when payment is late under the Act | Soften with GOV.UK / your contract / solicitor |
Private householder / consumer | Usually no under the statutory commercial Act | Use contract terms and consumer rules carefully |
Public authority contracts | Often covered with their own late-payment rules | Check the contract and guidance — do not invent |
You already agreed a different interest rate in writing | Contractual rate may apply instead | Statutory fallback when the contract is silent or unfair |
Do not invent CIS on a householder invoice while chasing interest. CIS and late-payment interest are separate topics.
The formula: Bank Rate + 8%
Statutory interest is simple interest (not compound) at Bank Rate + 8 percentage points. GOV.UK sets the reference Bank Rate for each six-month period (roughly 1 Jan–30 Jun and 1 Jul–31 Dec). Always confirm the rate that applied when the debt became overdue.
Piece | What to use |
|---|---|
Principal | The overdue invoice amount (net of any agreed credit notes) |
Rate | Bank Rate for the relevant reference period + 8% |
Days late | From the day after the due date to the day paid (inclusive rules — soften) |
Interest | Principal × (rate/100) × (days late / 365) |
Compensation | Fixed £40 / £70 / £100 per invoice (see table below) |
Fixed compensation: £40 / £70 / £100
Debt size (that invoice) | Fixed compensation |
|---|---|
Up to £999.99 | £40 |
£1,000 to £9,999.99 | £70 |
£10,000 or more | £100 |
Compensation is per overdue invoice, not per day. Soften recovery of reasonable additional costs with GOV.UK and advice — InvoiceAdept does not decide what a court will award.
Worked example (illustrative only)
Scenario: you issued a B2B invoice for £2,400 net, due 14 days after issue. The customer pays 40 days late. Assume (illustrative) the applicable statutory rate is 11.75% because Bank Rate for that reference period was 3.75% + 8%. Re-check live Bank Rate before you use this number on a real claim.
Line | Figure |
|---|---|
Principal | £2,400.00 |
Days late | 40 |
Interest | £2,400 × 0.1175 × (40/365) ≈ £30.90 |
Compensation (debt £1k–£9,999.99) | £70.00 |
Interest + compensation (illustrative) | ≈ £100.90 |
Narrate clearly on any interest note: period overdue, rate used, Bank Rate source date, and that this is a B2B statutory claim — not a consumer charge.
Contractual interest vs statutory interest
Approach | When it fits |
|---|---|
Contractual interest in your T&Cs | You already agreed a rate / remedy in writing |
Statutory Act fallback | Contract silent, or terms do not provide a substantial remedy |
Neither on consumers | Do not bolt statutory commercial interest onto a householder job |
Put payment due dates on every PDF. Vague “payment as agreed” makes late-payment maths harder.
CIS, VAT and the original invoice
Topic | Practical rule |
|---|---|
VAT threshold | £90,000 — use only the current threshold |
VAT on the original supply | Show VAT only if registered; interest tax treatment — ask your accountant |
CIS on construction ops | Separate from interest; soften with HMRC when a CIS contractor pays you |
Householder own-home | Usually no CIS; statutory commercial interest usually does not apply |
InvoiceAdept | Does not file CIS300, VAT, MTD, Self Assessment or court claims |
How to claim without over-promising
1) Confirm the supply is B2B and payment is overdue. 2) Calculate interest + compensation with the correct Bank Rate period. 3) Send a clear written claim referencing the invoice number, due date, days late, rate and compensation. 4) Keep chasing proportionate — escalate with advice if needed. Soften court / debt recovery with a solicitor; software does not “file” the claim for you.
Preventing late payment (better than claiming interest)
Most trades recover more cash by tightening the original invoice than by chasing interest months later. Put a clear due date, bank details, and a short description that AP can match to a PO or site address.
Clear due dates, bank details on the PDF, stage / deposit billing where the contract allows, and prompt reminders beat interest maths. For schedule-driven work see our stage payment template and deposit template. Build tidy originals in the free invoice generator.
Frequently asked questions
What rate do I use for UK late payment interest?
Statutory commercial interest is Bank of England base rate + 8% (simple). Confirm the Bank Rate that applied for the overdue period on the Bank of England / GOV.UK guidance.
Is compensation £40, £70 or £100?
Per overdue invoice: up to £999.99 = £40; £1,000–£9,999.99 = £70; £10,000+ = £100.
Does this apply to householders?
Usually no under the statutory commercial debts Act. Soften consumer / contract rights separately — do not invent statutory B2B interest on a domestic own-home job.
Does CIS change the interest calculation?
CIS is a separate withholding topic when a CIS contractor pays construction ops. Interest maths still starts from the overdue principal; ask your accountant if CIS deductions affect what was “due”.
What VAT threshold should I use in 2026?
£90,000. Soften registration with your accountant.
Can InvoiceAdept file the claim for me?
No. InvoiceAdept helps you raise clear invoices; it does not file late-payment claims, CIS300, VAT returns, MTD or Self Assessment.
Should I compound the interest monthly?
Statutory interest under the Act is framed as simple interest. Do not invent compound methods unless your contract and advice say otherwise.
Where can I build a clearer original invoice?
Use the InvoiceAdept free invoice generator — Free covers 5 invoices; Pro £7.99 / Pro+ £12.99.
Next step: clear invoices, then calculated claims
Confirm B2B scope, use Bank Rate + 8% with the right reference period, add the fixed compensation band, and keep householder jobs out of the statutory commercial claim. Open the free invoice generator so the next original PDF has a clear due date and bank details. InvoiceAdept does not file CIS300, VAT returns, MTD, Self Assessment or court claims for you.
Last reviewed: 17 September 2026.
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