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Understand your legal rights when clients pay late. Learn how to claim statutory interest and fixed compensation under UK law.
The Late Payment of Commercial Debts (Interest) Act 1998 gives UK businesses and freelancers the right to charge interest and claim compensation when commercial invoices are paid late.
If a business client pays you late, you are legally entitled to charge 8% interest (plus the Bank of England base rate) AND claim a fixed compensation fee.
The statutory interest rate is 8% plus the Bank of England base rate. As of December 2024, with a base rate of 4.75%, this means you can charge 12.75% annual interest.
Invoice amount: £5,000
Days overdue: 60 days
Interest rate: 12.75% per year
Daily rate: 12.75% ÷ 365 = 0.035% per day
Interest owed: £5,000 × 0.00035 × 60 = £105.00
In addition to interest, you can claim a fixed compensation fee based on the invoice value:
Business-to-business transactions only — Not for consumer sales
After the payment due date — Default is 30 days from invoice or delivery
Can be added automatically — No need for prior agreement
While you have the legal right to claim interest, consider your business relationship. A polite reminder often works better than immediately claiming interest. RecoupIQ can help you escalate gradually and professionally.
Here's a recommended escalation process that balances firmness with professionalism: