Late payment interest and compensation calculator

What the number means

The total is what the customer owes you today, and every part of it is yours as of right: the invoice itself, the statutory interest accrued since the day after payment fell due, and a fixed sum towards the cost of chasing it. You do not need a clause in your contract and the customer does not have to agree — the Late Payment of Commercial Debts (Interest) Act 1998 implies the entitlement into every business-to-business supply of goods or services.

The daily figure is the one that changes conversations. An unpaid invoice is not a static number sitting in a ledger; it is growing at a stated rate, and putting that rate in writing turns “when we get a chance” into something that costs the customer more every week they leave it.

What to do with it

The figure on its own does not collect the money. What collects the money is a short, unemotional letter setting out the invoice number and amount, the date payment fell due, the interest accrued to today, the daily rate it continues to accrue at, the fixed sum under s.5A, and a date by which you expect payment — with the sections of the Act named. Naming the statute changes the tone of the reply, because it signals that the entitlement is automatic rather than a negotiating position.

1. Send figures, not a complaint. One page, no adjectives, a total and a deadline.
2. Put the fixed sum on its own line. Folded into a total it disappears; on its own line it reads as the statutory entitlement it is, rather than a fee you invented.
3. Do it per invoice. Twelve unpaid invoices are twelve separate entitlements to the fixed sum, not one.
4. Decide in advance whether you will waive it. You can claim the interest in the letter and drop it on payment as a goodwill gesture. Many suppliers do exactly that, and it is a perfectly respectable way to use the right.
5. If it stays unpaid, escalate properly. The next step is a letter before action that complies with the Practice Direction on pre-action conduct, not a fifth reminder.

You do not have to claim interest to preserve it, and it survives payment of the principal. But the further you get from the event the harder it is to collect without souring the relationship, so the useful moment is the first letter rather than the fourth.

How this calculator works

Every business supplying another business in the UK has a statutory right to interest and compensation on a late payment. It comes from the Late Payment of Commercial Debts (Interest) Act 1998, and it applies whether or not your contract mentions it. Most suppliers never claim it, which is exactly why late payment persists.

The rate is 8% above the Bank of England base rate. The base rate today is 3.75%, in force since 18 December 2025, so statutory interest is currently 11.75% a year. That is the figure this calculator uses unless you change it.

Why the base rate box changes when you change the due date

This is the part almost every online calculator gets wrong. The Act does not use today's base rate. Article 4 of the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002 fixes the rate by reference to the base rate in force on the 30 June or 31 December immediately before interest starts running — 30 June for interest starting between 1 July and 31 December, and 31 December for interest starting between 1 January and 30 June. Once fixed, that rate applies for as long as the debt stays outstanding; it does not move when the Bank of England moves.

So an invoice that fell due in March 2025 carries a different rate from one that fell due last week. The calculator holds the Bank of England's published rate-change history and picks the correct reference rate for you, then tells you which date it used. You can type over it if you need to.

The arithmetic, step by step

1. Interest starts running the day after the payment was due (s.4(2) of the 1998 Act). Pay on the due date and nothing is owed.
2. Annual interest = the outstanding amount × (base rate + 8%).
3. Daily interest = annual interest ÷ 365. This is the method GOV.UK sets out in its own worked example.
4. Interest accrued = daily interest × the number of days since the due date.
5. Add the fixed sum for debt recovery costs — £40 if the debt is under £1,000, £70 from £1,000 to £9,999.99, and £100 at £10,000 or more (s.5A of the 1998 Act).
6. The total owed is the invoice plus the interest plus the fixed sum.

Statutory interest is simple interest. It does not compound, and this calculator does not compound it.

When is a payment actually late?

If you agreed a payment date, that is the date. If you did not agree one, the law makes the payment late 30 days after the later of two things: the day you performed, and the day the customer had notice of the amount — in practice, the day they received the invoice.

There are two outer limits. A payment date agreed with a public authority cannot exceed 30 days. A payment date agreed with another business cannot exceed 60 days unless the longer period is not grossly unfair to the supplier. Both come from s.4 of the Act. If a customer has imposed 90-day terms on you, that is not automatically binding.

The compensation nobody claims

The fixed sum under s.5A is per unpaid debt, not per relationship, and it is claimable once for each invoice. Twelve unpaid invoices of £2,000 each is twelve separate entitlements of £70, not one. And if your reasonable costs of recovering the debt exceed the fixed sum, s.5A(2A) entitles you to the difference on top.

When to hand it over, and what that costs

Most late invoices are collected by the supplier, not by anybody legal. The point to bring someone in is when the customer has gone silent on a sum large enough to matter, when they have raised a dispute you cannot answer out of your own paperwork, or when you are close to issuing a claim and want the pre-action stage done properly rather than done again.

Buzz Legal handles that stage before proceedings: working out what you can actually prove, assembling the chronology and the evidence, and preparing the letter before action. That work is scoped and the price agreed in writing before anything starts, because a two-invoice chase and a disputed account running to six figures are not the same job. Anything that becomes contentious litigation is reserved work and goes to RHF Solicitors, authorised and regulated by the SRA (no. 324115), at rates confirmed before it begins. Buzz Legal Ltd is not a firm of solicitors and is not regulated by the SRA.

The cheaper fix is usually upstream. If this invoice went late because your payment terms never said what payment depended on, or because a token contractual interest rate quietly wrote you down from the 11.75% statutory entitlement, a contract review is a fixed £249 +VAT and a full business terms and conditions package is £695 +VAT — both set out on the fixed-fee work page. If chasing is a monthly event rather than an annual one, the subscription starts at £49 +VAT a month.