How does the UK Late Payment of Commercial Debts Act work?

For business-to-business debts you can charge statutory interest of 8% per year above the Bank of England base rate, calculated as simple interest from the day after payment was due. You can also add a fixed compensation sum (£40, £70, or £100) depending on the size of the debt.

Is the interest simple or compound?

UK statutory interest under the Late Payment Act is simple interest — it does not compound. This tool defaults to simple but offers a daily-compounding option for contracts that specify it. Always check the contract or applicable statute.

How is the daily interest figure derived?

Daily interest is the principal multiplied by the annual rate, divided by 365. Multiplying that by the number of overdue days gives the simple interest. For example, £10,000 at 10% is about £2.74 per day.

What is the fixed compensation amount?

Under UK law you may claim £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99, and £100 for debts of £10,000 or more. This is added once per invoice, on top of the interest.

Does this replace legal advice?

No. The figures are an estimate to support a demand or letter before action. Rates, base-rate changes over the period, and jurisdiction-specific rules can change the result. Confirm with a solicitor or your terms before relying on it in court.

Late Payment Interest Calculator

When a commercial invoice goes unpaid, you are usually entitled to interest on the outstanding amount. This calculator works out how much has accrued, using the UK Late Payment of Commercial Debts (Interest) Act rate of 8% over the Bank of England base rate, a flat judgment-style rate, or any custom contractual rate.

How it works

Interest accrues from the day after the debt became due. The core formula for simple interest is:

daily interest = principal × (annual rate / 100) / 365
total interest = daily interest × overdue days

For the UK statutory basis the annual rate is 8 + base rate. If your contract specifies daily compounding instead, the tool applies:

total = principal × (1 + (rate/100)/365) ^ days − principal

UK statutory claims may also include a one-off fixed compensation sum — £40, £70 or £100 — scaled to the debt size. That is added once to the grand total.

Example and tips

A £12,000 invoice that is 90 days overdue, with a base rate of 5%, attracts a statutory rate of 13%. Daily interest is about £4.27, so 90 days adds roughly £384 in interest, plus the £100 fixed compensation — a grand total near £12,484. Always state the rate, the period, and the daily figure on your demand letter so the debtor can verify the arithmetic; courts expect a clear, day-counted breakdown.