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.

How the UK Late Payment Act works in practice

The Late Payment of Commercial Debts (Interest) Act 1998 applies automatically to most business-to-business contracts. You do not need a clause in your contract — the right to charge interest arises by statute. Key practical points:

When does the debt become due? If your invoice specifies payment terms (for example “net 30”), the debt falls due on day 31. If no terms are stated, the Act implies a 30-day default period for business transactions. The interest clock starts the day after the due date.

What rate applies? The statutory rate is 8% above the Bank of England base rate. The base rate applies at the start of each six-month reference period (January and July each year), not day-by-day. If the base rate changes during the overdue period, the tool uses a single rate — use the rate in effect when the debt first became overdue for the strictest statutory reading, or use a period-average for a more pragmatic approach.

Fixed compensation sums — these are added once per invoice regardless of how long it remains unpaid:

Can the debtor waive these rights? For most B2B contracts, statutory interest cannot be entirely excluded by contract unless the substitute remedy is “substantial.” Zero-interest clauses are generally unenforceable under the Act.

Using the figures in a demand letter: state the principal, the statutory rate and its components (8% + base rate = total %), the period in days, the daily interest figure, total accrued interest, and the fixed compensation. Present the calculation clearly so the debtor can verify it independently; this both demonstrates you are serious and makes the claim easier to pursue if needed.

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.

Note that this calculator estimates the interest charge — it does not constitute legal advice. For disputed debts or amounts you intend to pursue through a court or debt collection agency, confirm the figures with a solicitor or adviser familiar with the Act.