Late payment FAQ (Frequently Asked Questions)


1. A customer hasn't paid me and it's now overdue. Can I charge interest?

Yes. As long as it's a commercial debt.


2. I am late in paying a supplier and they've now sent me notice of late payment interest. Can they do this?

Yes. This legislation has existed for a number of years (since 1998) you aren't really surprised are you?

The only situations in which it would not apply, is if it wasn't a commercial debt or if there is some other agreement in place to cover late payment.


3. Do I have to notify customers before-hand, to be allowed to charge interest.

Probably not. The legislation gives you the right to the interest. However, the official guidance from the government does suggest that you should put something on all your paperwork to indicate you may use the legislation. They even provide some suggested wording:

We understand and will exercise our statutory right to claim interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to agreed credit terms.

4. How do I know how much interest to charge?

The calculation requires you to know the date on which the money was due. The number of days since then. The amount of the debt and the interest rate to be charged. The easy option is to use our interest calculator.

The interest rate that applies is 8% over the Bank of England base rate that was in force at the start of each 6 month period. The periods run from the 1st of January to the 30th of June and from the 1st of July to the 31st of December.

So for debts due between 1st January and the 30th June in a given year, the rate charged is 8% over the base rate as it was on the 1st January.


5. A customer owes money on several invoices issued on different dates. How do I work out the interest?

This gets a bit tricky and unfortunately - the calculator on this site doesn't handle multiple invoices. Here is a rough work-around.

There are two parts to working out interest. The total amount of interest - up to a certain date. Secondly, the total daily amount still outstanding.

To calculate the first value, work out the interest on each invoice (using the calculator) and then add the amounts (to date) together. Ignore the daily amount.

For the second number, add up the total amount still outstanding and put this into the calculator. The amount-to-date will be wrong but the daily amount should be correct.


6. A customer owes money on several invoices issued on different dates. Can I claim the compensation charge on each invoice?

Don't know.

Interactive Legal Chatbot