Late Payment Interest Calculator for Commercial Debts

Updated: November 2026 | Calculations based on standard UK/EU statutory commercial debt frameworks.

If a client pays you 45 days late, you've lent them money for free. In the UK and across the EU, the law says you don't have to. Late payment of commercial debts interest builds up automatically on overdue business invoices, at a rate set by statute rather than by whatever your contract forgot to mention. Put your invoice into the calculator below to see what you're owed, then read on for how the rates work, which dates matter, and how to ask for the money without wrecking the relationship.

How to Calculate Late Payment Interest

Daily interest is the invoice amount multiplied by the annual rate, divided by 365. Multiply that by the number of days overdue and you have the interest owed. The calculator above uses simple interest, so nothing compounds.

In symbols: Interest = (Principal × Rate ÷ 100 ÷ 365) × Days Overdue. Both the UK Act and the EU directive describe interest as running day by day, which is why a 365-day divisor is standard.

Take a $5,000 invoice that is 45 days overdue at 8%. A year of interest would be $400. Divide by 365 and you get $1.0959 a day. Multiply by 45 and the answer is $49.32. The currency makes no difference to the arithmetic, so it works the same in pounds or euros.

Now the catch. That 8% is only the margin. The statutory rate is a reference rate plus 8 points, and in 2026 the UK reference rate is 3.75%. The real UK rate is therefore 11.75%, and the same invoice earns $72.43 over the same 45 days, nearly 50% more than the 8% figure suggests. If you've been quoting 8% in your reminders, you've been undercharging.

Counting days trips people up. Interest starts the day after the due date and stops on the day payment arrives. An invoice due on 1 October and paid on 15 November is 45 days late. Weekends and bank holidays count, because the clock doesn't stop for them.

A larger UK example shows how the fixed sum behaves. A £10,000 invoice paid 60 days late at 11.75% earns £193.15 in interest, about £3.22 a day. The fixed compensation is £100 because the debt reaches £10,000, so the total due is £10,293.15. Now try a £900 invoice and the same 60 days. Interest comes to just £17.38, but the £40 fixed sum still applies, more than double the interest itself. Small invoices are worth claiming too.

Late Payment of Commercial Debts (Interest) Act 1998 (UK)

The Late Payment of Commercial Debts (Interest) Act 1998 gives UK businesses a statutory right to interest at 8% above the Bank of England base rate on overdue B2B invoices. On top of that comes a fixed compensation sum of £40, £70 or £100 depending on the size of the debt.

This is the "late payment of commercial debts act" most people mean when they search for the UK rules, and it applies when both the supplier and the customer are acting in the course of business. Consumers are outside it. So are most invoices where the contract already contains a "substantial remedy" for lateness, which is the main loophole large buyers exploit.

The rate is not the live base rate. It's the Bank Rate on a fixed date: 30 June for debts that fell due in the second half of the year, and 31 December for debts due in the first half. For any debt due between July and December 2026, the Bank Rate in force on 30 June 2026 was 3.75%, which makes the statutory rate 11.75%. The Bank of England held at 3.75% again in September, so the figure is stable for now, but check the rate in force for your due date instead of assuming.

Sole traders and limited companies both qualify as suppliers, and the customer can be a company, a partnership or a public body. The Act covers contracts for goods or services, so a loan agreement is a different matter. Part payments change the sum: if a customer pays half, interest continues on the unpaid balance only, so recalculate with the new principal from the day the part payment lands.

The fixed sums are per invoice, not per day:

• £40 for a debt under £1,000
• £70 for a debt from £1,000 to £9,999.99
• £100 for a debt of £10,000 or more

If your real recovery costs exceed the fixed sum, you can claim the reasonable extra. Keep receipts. The official guidance sits on GOV.UK's late commercial payments page.

The default payment term matters too. When a contract says nothing, the Act treats the invoice as due 30 days after delivery or after the invoice arrives, whichever is later. A customer who says "we pay at 90 days" is only bound by that if it was agreed, and agreed terms can be challenged if they are grossly unfair.

That last point is about to change. The Commercial Payments Bill, introduced to Parliament in May 2026, would cap most payment terms at 60 days and make statutory interest mandatory, so a contract could no longer swap it for a weaker remedy. A legal summary on Mondaq notes the Bill would also rename the 1998 Act. It hasn't passed yet and commentators expect it in early 2027, so today's rules still apply. For how this interacts with ordinary invoice clauses, see our guide to charging late fees legally.

EU Late Payment Directive 2011/7/EU

The EU's Late Payment Directive 2011/7/EU entitles businesses to interest at the European Central Bank's main refinancing rate plus at least 8 percentage points, along with a minimum €40 compensation per late invoice. It covers payments between businesses, and between businesses and public authorities, across the EU.

The directive is a floor, not a single national law. Each member state wrote its own version, so exact dates and rates differ. The common design is a reference rate fixed for a six-month period. Ireland, for instance, uses the ECB rate in force on 1 January or 1 July, and from 1 July 2026 its late payment rate is 10.40%, being the ECB's 2.40% plus 8 points. The Irish enterprise department publishes each period's rate, and the calculator's EU preset uses that figure.

Payment deadlines follow a pattern. If the contract sets none, the default is 30 days. Parties between businesses may agree up to 60 days, and longer only if it's expressly agreed and not grossly unfair to the supplier. Public authorities are held to tighter limits. The full text is on EUR-Lex.

Compensation is where the EU and UK differ most. The directive sets €40 as the minimum, regardless of invoice size, and lets you claim reasonable additional recovery costs. The UK's sliding scale pays more on big invoices. If you invoice across borders, the law governing the contract usually decides which regime applies, which is worth a quick read of your terms and our explainer on the EU late payment directive.

One thing the directive doesn't do: make interest automatic in practice. In most countries you still have to claim it. Many suppliers never do, partly because they don't know the rate and partly because they don't want an awkward conversation with a customer they need next quarter.

How to Enforce a Late Payment Fee

Check what your contract says about late payment, send a revised invoice showing the interest and fixed fee, then follow up with a formal demand letter if the money doesn't arrive. Keep every step in writing.

Start with the contract and your invoice terms. Look for any clause on payment periods, interest or late fees. A clause that sets a lower rate may replace the statutory one, as long as it counts as a substantial remedy. A clause that sets no remedy leaves the statutory right in place. If you haven't written terms at all, the default rules above apply, and it's worth adding a line to future invoices saying you'll claim statutory interest. Our invoice generator at GetInvoicePDF.com lets you add that note in a few seconds.

Next, issue a revised invoice or a separate statement. Show the original amount, the due date, the days overdue, the rate used and the interest figure, plus the fixed compensation. Use the calculator's output and keep the working visible, because customers who see a clear formula argue less. Give a new, reasonable deadline, usually seven or fourteen days.

If that deadline passes, send a formal letter. It should name the invoice, state the legal basis, give the total now owed and set a final date before you take further action, such as a county court claim in England and Wales or a referral to a debt recovery service. The structure of a good one is covered in our guide to drafting a late payment demand letter.

A few practical points. Interest keeps running until payment lands, so recalculate if the customer pays after your letter. Don't mix a disputed invoice with an undisputed one, because a genuine dispute over quality can weaken your claim on that portion. And think about the relationship. For a client you want to keep, a polite note that the statutory interest is "available" often gets the invoice paid without you ever collecting it. This guide is general information and not legal advice, so speak to a solicitor before issuing court proceedings.

Some businesses print a flat late fee on every invoice, such as 5% of the amount. That's a different tool from statutory interest. A contractual fee needs to reflect a genuine interest in getting paid on time, and a large flat charge can be challenged as a penalty, whereas the statutory rate has Parliament behind it. If you want a clause in your terms, make it mirror the statutory rate and say so plainly. Customers rarely argue with a number they can look up.

Keep your evidence tidy as well. Save the signed quote or purchase order, proof of delivery or completion, the invoice with its date, and every reminder you've sent. If the claim ever reaches a court or a mediator, the dates on those documents decide how many days of interest you can prove, and a clean paper trail turns a long dispute into a short one.

Frequently Asked Questions (FAQ)

Can I charge interest if it wasn't in my original contract?

Usually yes. The UK Act applies automatically to qualifying B2B debts unless the contract provides a substantial alternative remedy, and the EU directive works similarly through national law. Check for any payment clause first, because that's where the exceptions hide.

What is the standard statutory interest rate?

In the UK, the Bank of England base rate plus 8 points. For debts due in the second half of 2026 that is 11.75%. In the EU, the ECB main refinancing rate plus at least 8 points. Ireland's rate from July 2026 is 10.40%, and other member states set their own.

Is my financial data saved on your servers?

Nothing is stored. The calculator is 100% client-side, so the numbers you type are processed by JavaScript in your own browser, and nothing is uploaded, stored or logged. Close the tab and it's gone.

Is the fixed recovery fee added on top of interest?

It's a separate, one-off charge per late invoice, added to the interest. In the UK it's £40, £70 or £100 by debt size and in the EU at least €40. The calculator's toggle lets you include or leave it out.

Before you send anything, check the Bank Rate and your invoice's due date against the half-year rule. Getting the reference rate right is worth more than any amount of chasing.

Sources: GOV.UK late commercial payments guidance; Directive 2011/7/EU on EUR-Lex; Irish Department of Enterprise late payment rates; Mondaq on the Commercial Payments Bill. Bank Rate of 3.75% and ECB rate of 2.40% as reported in September to July 2026.