Late payment interest,
and the fixed sum on top.
This late payment interest calculator applies the Late Payment of Commercial Debts (Interest) Act 1998. It picks the Bank Rate that fixes your invoice’s rate, then adds the fixed sum the Act allows per invoice. Nothing is sent anywhere.
Know which invoices
are late, and by how long.
Interest is only claimed on the invoices somebody knows are late. Held against the job with its final date for payment, every application shows its days overdue without anybody counting.
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How late payment interest
is calculated.
The Act gives three things on a late commercial invoice: interest, a fixed sum, and recovery costs above that sum. Each is worked out on its own rule.
A worked example
A subcontractor invoices £12,000. The final date for payment is 31 July 2026, and the money arrives on 19 September 2026, 50 days late.
Interest starts on 1 August 2026, so the reference date is 30 June 2026, when Bank Rate was 3.75%. The rate is 11.75% a year. That is £1,410 a year, or £3.86 a day, and £193.15 over 50 days.
The debt is £10,000 or more, so the fixed sum is £100. The claim is £293.15 on top of the £12,000, before any recovery costs.
The statutory interest rate
Statutory interest is 8% a year over the Bank of England’s Bank Rate. The Bank Rate used is not today’s. It is the rate in force on one of two reference dates, set by the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002:
- Interest starting 1 January to 30 June: Bank Rate on the previous 31 December.
- Interest starting 1 July to 31 December: Bank Rate on 30 June of that year.
Once fixed, the rate stays the same for that debt until it is paid, whatever Bank Rate does next. Scotland has its own order, which sets the same rate. An invoice going late between 1 July and 31 December 2026 takes Bank Rate on 30 June 2026, which was 3.75%, so it carries 11.75%. The calculator reads the Bank of England’s published rates each night.
When interest starts to run
Interest runs from the day after the payment was due. Where the contract fixes a date for payment, that date governs. Where it fixes none, payment is due on the last day of a 30-day period. That period starts with the later of the work being done and the buyer having notice of the amount, usually by the invoice.
Between businesses, an agreed date more than 60 days after the work and the invoice counts only if it is not grossly unfair to the supplier. Otherwise interest runs from day 61. Where the buyer is a public authority, the limit is 30 days.
It is simple interest. The daily figure is the debt times the rate, divided by 365.
The fixed sum per invoice
Once statutory interest is running, section 5A of the Act adds a fixed sum for each debt:
- £40 where the debt is under £1,000.
- £70 where it is £1,000 or more but under £10,000.
- £100 where it is £10,000 or more.
It is due once per invoice, so ten late invoices carry ten fixed sums. Where the reasonable cost of recovering the debt is higher, the difference can be claimed as well.
When a contract sets its own rate
A contract can replace statutory interest with its own rate, but only if that rate is a substantial remedy for late payment. A clause that gives a token rate, or none at all, is void to that extent, and statutory interest applies instead.
Where a contract rate does apply, the fixed sum under section 5A does not, because it attaches only to statutory interest. Choose “My contract’s rate” above to work out interest at the clause’s margin over Bank Rate.
On a construction contract
The Housing Grants, Construction and Regeneration Act 1996 sets the due date, the payment notice and the final date for payment. The final date for payment is the date to use here. The payment timetable calculator works it out from your valuation date.
A sum withheld by a valid pay less notice is not late. A sum withheld without one is late from the final date for payment, and the notified sum carries interest from the next day.
The Commercial Payments Bill
The Commercial Payments Bill, before Parliament since May 2026, proposes changes to late payment interest. Until it receives Royal Assent and comes into force, the 1998 Act applies as set out here. What the Bill would change for contractors.
Late payment interest,
in plain terms.
How to raise the claim, and the letter that goes with it, is in interest on a late payment.