How to Calculate Late Payment Interest in the UK: Step-by-Step Guide

Introduction

Small UK businesses live and die by a handful of numbers: margin, break-even and cash flow. Staff also need to know their statutory rights on pay.

This guide explains how to calculate late Payment Interest in the UK, step by step. Calculate statutory interest and compensation on a late B2B invoice. You'll see the formula, a fully worked example and practical tips for UK readers.

What this calculation covers

Calculate statutory interest and compensation on a late B2B invoice.

Clear numbers help you price profitably, chase late invoices with confidence and understand statutory pay entitlements.

The method and formula

Under the Late Payment of Commercial Debts Act you can charge 8% plus the Bank of England base rate per year, plus fixed compensation of £40, £70 or £100 depending on the debt size.

Every figure on our late Payment Interest Calculator follows this method, so you can check the working yourself.

Worked example

Here's a typical example using these figures:

Running them through the method gives:

The headline figure is total you can claim: £119.32. Change any input and the result will move with it.

How to use the calculator

1. Enter or choose invoice amount (£).
2. Enter or choose bank of England base rate (%).
3. Enter or choose days overdue.
4. Read your results. The main figure is shown at the top, with a breakdown underneath.
5. Try different values to compare scenarios side by side.

Tips for UK readers

• Price from margin, not markup, if you want to hit a target profit percentage.
• Quote prices to businesses ex VAT and to consumers inc VAT.
• You can legally claim statutory interest on late B2B invoices.
• Statutory pay rates usually change every April – check GOV.UK.

Frequently asked questions

What's the quickest way to work out late Payment Interest?

Use our free late Payment Interest Calculator. It applies this method automatically: Under the Late Payment of Commercial Debts Act you can charge 8% plus the Bank of England base rate per year, plus fixed compensation of £40, £70 or £100 depending on the debt size.

Are statutory pay figures up to date?

Rates are editable on each calculator. Defaults reflect recent published rates; always confirm current figures on GOV.UK.

Do these work for sole traders?

Yes. Margin, markup and break-even apply to any business size.

Is this legal advice?

No. For disputes about pay, redundancy or debts, contact Acas, Citizens Advice or a solicitor.

Summary

To work out late Payment Interest, follow the method above: Under the Late Payment of Commercial Debts Act you can charge 8% plus the Bank of England base rate per year, plus fixed compensation of £40, £70 or £100 depending on the debt size. For a quick, accurate answer with your own figures, use the calculator.

Next, read Late Payment Interest: Common Mistakes, Tips and FAQs.