Statutory interest
Normally 8 percentage points above the applicable Bank of England reference rate, calculated daily on the qualifying debt.
Commercial debt · United Kingdom
Late Payment of Commercial Debts
A practical guide to statutory interest, fixed compensation and reasonable recovery costs—plus a verified calculator for qualifying overdue business debts.
Current law distinguished from proposed reform
Calculator checked against statutory rules
Updated 30 August 2026
Current 2026 calculator rate: both 2026 statutory reference periods use a 3.75% Bank Rate reference, producing statutory interest of 11.75% per year. A historical debt may use a different fixed reference rate.
2026 statutory rate
11.75% p.a.
The essentials
Late-payment protection for commercial suppliers
The Late Payment of Commercial Debts (Interest) Act 1998 implies a right to interest into many contracts for the supply of goods or services where both parties are acting in the course of business.
Fixed compensation
£40, £70 or £100 for each qualifying late debt, according to the amount of that debt.
Recovery costs
Reasonable recovery costs exceeding the fixed sum may also be claimed where the statutory conditions are satisfied.
2026 reform status:
the Commercial Payments Bill proposes significant changes, including tighter payment-term limits and mandatory interest in more cases. At the date of this review it is still a Bill at House of Lords report stage, not an Act. This page and calculator therefore apply the law currently in force.
Verified calculation tool
Statutory interest and compensation calculator
For one qualifying debt with no changes to the principal during the interest period. Read the eligibility and limitation notes before relying on the result.
Enter the invoice details
Enter the amount of the qualifying debt, including VAT where it forms part of the contractual debt.
Claim breakdown
Partial payments:
do not enter only today’s balance for the whole overdue period. Split the calculation into separate periods using the principal outstanding during each period, then add the results. The fixed compensation band is based on the qualifying debt—not a later reduced balance.
How the calculator works
Statutory interest is normally 8% above the Bank of England reference rate. The reference rate is not necessarily today’s Bank Rate:
- For a debt becoming overdue between 1 January and 30 June, the reference rate is the Bank Rate applying on the preceding 31 December.
- For a debt becoming overdue between 1 July and 31 December, the reference rate is the Bank Rate applying on the preceding 30 June.
- That statutory rate is fixed by the relevant six-month reference period; later Bank Rate changes do not alter this invoice’s rate.
Fixed compensation per overdue invoice
- Debt below £1,000: £40
- Debt from £1,000 to £9,999.99: £70
- Debt of £10,000 or more: £100
Reasonable recovery costs exceeding the fixed compensation may also be recoverable, but they are not included automatically because they depend on the actual costs incurred.
Check the contract first.
Statutory interest may be unavailable where the contract already provides a substantial late-payment remedy. The Act generally concerns commercial contracts for supplying goods or services and does not apply to ordinary consumer debts.
When the Act applies
The statutory scheme generally applies to a contract for the supply of goods or services where supplier and purchaser are each acting in the course of a business. It can cover companies, partnerships, sole traders, public authorities and other organisations, depending on the transaction.
It does not apply merely because money is owed. Ordinary consumer debts, damages, loans and transactions that are not contracts for goods or services require separate analysis. Insolvency proceedings and contracts governed by another legal system may also affect the available remedy.
Check the contract
Parties may agree their own late-payment remedy. In a business-to-business contract, a contractual remedy can displace statutory interest only if it is a substantial remedy for late payment; an attempt to exclude statutory interest without a substantial alternative may be ineffective. Public-authority contracts are subject to stricter statutory controls.
When payment becomes late
If the contract fixes a valid payment date, payment is normally late after that date. Statutory interest begins on the next day.
If no payment date is agreed, the statutory period is generally 30 days from the latest relevant trigger: performance of the supplier’s obligation, the purchaser receiving notice of the amount due, or completion of an agreed acceptance or verification procedure.
| Transaction | Current general position |
|---|---|
| Public authority purchasing goods or services | Payment terms are generally limited to 30 days. In England, Wales and Northern Ireland, the Procurement Act 2023 also implies 30-day payment terms into many public contracts and qualifying subcontracts; Scotland has a separate procurement regime. |
| Business-to-business transaction | A period up to 60 days may generally be agreed. A longer period may be enforceable only if it is expressly agreed and is not grossly unfair to the supplier. |
| No agreed payment date | The statutory 30-day default described above usually applies. |
Determining the correct trigger can be fact-sensitive, particularly where delivery, acceptance, disputed performance, staged payments or public procurement rules are involved.
What may be claimed
1. Interest
The usual statutory rate is the applicable Bank of England reference rate plus 8 percentage points. It accrues daily on the qualifying debt. For debts becoming overdue from January to June, the reference rate is the Bank Rate at the preceding 31 December; for July to December, it is the rate at the preceding 30 June. That reference rate remains fixed for the relevant debt even if Bank Rate later changes.
2. Fixed compensation
| Qualifying debt | Fixed sum |
|---|---|
| Less than £1,000 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
The fixed sum is attached to each qualifying debt, not automatically to every reminder or document issued.
3. Reasonable recovery costs
If reasonable recovery costs exceed the fixed sum, the supplier may be entitled to the difference. This depends on costs actually and reasonably incurred, so the calculator does not add an assumed amount.
Making a late-payment claim
- Confirm that the transaction and debt fall within the statutory scheme.
- Check the contract for the due date and any substantial contractual late-payment remedy.
- Identify the correct statutory reference period and calculate interest from the day after payment became due.
- State the principal, interest rate, daily rate, interest period, fixed compensation and total clearly in writing.
- Keep the contract, order, invoice, proof of performance or delivery, payment history and recovery-cost evidence.
The Act creates financial remedies; it does not itself operate as a complete dispute-resolution procedure. A disputed debt may require negotiation, mediation, the Small Business Commissioner where eligible, or court proceedings.
Reliability, limitations and sources
The calculator uses the statutory daily formula debt × annual rate ÷ 365 × days overdue, the correct compensation thresholds and verified six-month Bank Rate reference values through 31 December 2026. It deliberately refuses to guess a rate outside its embedded table.
It is an estimate, not a determination that a debt is due or that the Act applies. It does not handle partial payments automatically, compound interest, contractual interest, currency conversion, limitation, insolvency, litigation costs or disputed principal.
Primary and official sources: Late Payment of Commercial Debts (Interest) Act 1998; Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002; Late Payment of Commercial Debts Regulations 2002; GOV.UK late-commercial-payment guidance; Small Business Commissioner calculator guidance; Bank of England official rate history; and Commercial Payments Bill progress.
General information only.
Obtain legal advice where eligibility, the due date, a contractual remedy, disputed performance, partial payment, insolvency or court action is in issue.
Need help with a commercial debt?
Provide the contract, invoice and payment history so the available recovery route can be considered.
