Late payers owe you 11.75 per cent: how to charge it

A business that pays your invoice late owes you interest at 11.75 per cent a year, and a fixed sum on top, whether or not your terms mention it. The right has existed since 1998. It is one of the most useful lines a small supplier can put on an invoice.

Where 11.75 per cent comes from

The gov.uk guide to late commercial payments puts statutory interest at 8 per cent plus the Bank of England base rate, for business to business sales. The base rate that counts is fixed twice a year. For interest that starts to run between 1 July and 31 December, the law uses the rate in force on 30 June. The Bank held its rate at 3.75 per cent on 18 June, so for any invoice falling overdue in the second half of 2026 the figure is 11.75 per cent, whatever the Bank does with its rate before the year is out. The rate was also 3.75 per cent on 31 December 2025, so the first half of the year was the same.

On top of the interest you can charge a fixed sum towards the cost of chasing, once for each payment:

• £40 on a debt up to £999.99;

• £70 on a debt of £1,000 to £9,999.99;

• £100 on a debt of £10,000 or more.

If your reasonable costs of chasing come to more than the fixed sum, the law lets you claim the difference. Interest is simple, not compound: work out the year's figure, divide by 365 and multiply by the days late. When you decide to charge, gov.uk's advice is to send a new invoice for it.

Two conditions matter. If your contract sets its own interest rate, that rate applies instead of the statutory one. And a payment is only late once the agreed date has passed. If you never agreed one, the law treats payment as late 30 days after the customer receives your invoice, or after you deliver, whichever is later.

What it adds up to on one invoice

Illustration, not a real client. A print studio in Deptford invoices a retail client £6,000 on 30-day terms, due on 31 August 2026. The money arrives 45 days late.

• Interest at 11.75 per cent on £6,000 is £705 a year, which is £86.92 for 45 days.

• The fixed sum for a debt of that size is £70.

• Together that is £156.92, claimed on a new invoice.

£156.92 will not change the studio's year. The point is the next invoice: a customer who knows you will charge has a reason to pay you first.

Why it is worth having even if you never charge it

The usual reason to leave the right alone is the relationship. That is a fair worry with a client you hope to keep for years, and I would not send an interest invoice to one who is late once and apologetic. But the right does its best work before anything is late. A line on your invoice and in your terms, saying that late payments carry statutory interest and compensation, costs nothing and changes where you sit in a customer's queue.

Three things make it work in practice:

1. Agree a date in writing. Without one you are relying on the 30-day default. Our guide to what an invoice needs to show covers the details that stop a payment being held up on a technicality.

2. Chase on the day it falls due, not a fortnight later. Interest runs from the day after.

3. Know which invoices you can afford to wait for. A week-by-week cash forecast tells you which late payer is an irritation and which one is a problem.

What Parliament is changing

The government's Commercial Payments Bill, introduced in May, would cap payment terms at 60 days when large firms buy from smaller suppliers, make interest on late payment mandatory at 8 per cent above base rate, and give the Small Business Commissioner powers to investigate and fine persistent late payers. It is still going through Parliament and has no start date, so none of it applies yet.

The 1998 rules apply today, and 11.75 per cent applies to any invoice that falls overdue in 2026, for as long as it stays unpaid. Put the line on your next invoice.

About the author

Harvey Dhillon is the founder and CEO of Zmartly, a UK accountancy firm for small businesses. He grew up in West London and began his career in investment banking finance at Barclays, before going full-time on Zmartly in 2020. He is a Chartered Management Accountant (ACMA, CGMA).

Featured photo by Camilo Rueda Lopez on Unsplash.