What is the UK statutory interest rate for late commercial payments?
Statutory interest is 8 percentage points above the Bank of England base rate on 30 June (for interest that starts to run from 1 July to 31 December) or 31 December (for interest that starts to run from 1 January to 30 June). For interest starting from 1 July to 31 December 2026 the rate is 11.75% per year, set by the 3.75% base rate on 30 June 2026. It stays at that rate for the debt, not recalculated as base rate moves. It runs daily from the day after the payment due date until the debt is paid.
What this means for your business
In practice, this means an SME supplying goods or services on commercial credit terms has a statutory right to charge interest once a customer pays late, without needing that right written into the contract. For a debt where interest starts to run before 1 January 2027, interest accrues at 11.75% a year from the day after the agreed payment date.
This matters most for businesses using invoice finance, because unpaid or slow-paying customers directly affect available funding lines and cash flow. The rate that applies is locked in at the point the debt fell due, so a business does not need to keep recalculating if the base rate changes afterwards.
Knowing this figure helps when chasing overdue invoices or deciding whether to formally claim interest as part of debt recovery.
Key points
- Statutory interest is set at 8 percentage points above the Bank of England base rate on 30 June or 31 December, whichever came last before interest starts to run.
- For interest starting from 1 July to 31 December 2026 the rate is 11.75% per year, from the 3.75% base rate on 30 June 2026.
- The rate is fixed when interest starts to run and does not change if the Bank of England base rate moves later.
- Interest accrues daily starting the day after the agreed payment date and continues until the debt is settled.
- The right applies automatically under the Late Payment of Commercial Debts (Interest) Act 1998, without needing a specific clause in the contract.
Common pitfalls
A common mistake is assuming the statutory rate updates automatically if the Bank of England changes base rate after the invoice fell due, when in fact it is fixed at the original breach date. Businesses also often forget that daily interest calculations require the exact due date, so poor record keeping on invoice terms and payment dates can lead to disputed or miscalculated claims. Some SMEs simply do not claim statutory interest at all, either through unfamiliarity with the right or reluctance to strain a customer relationship, which quietly erodes cash flow that invoice finance facilities are meant to protect.
Related questions
Can I claim statutory interest even if my invoice doesn't mention it?
Yes. The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses this right automatically on qualifying commercial debts, regardless of whether the invoice or contract mentions it. It cannot generally be excluded by a contract term that provides no substantial remedy.
Does statutory interest apply to invoices funded through an invoice finance facility?
Yes, the underlying debt still qualifies for statutory interest even if it has been assigned to an invoice finance provider. Whether the funder or the business ultimately benefits from any recovered interest usually depends on the terms of the finance agreement.
Can I also claim a fixed compensation sum on top of the interest?
Yes, the same Act allows a fixed compensation charge per late invoice, in addition to statutory interest, to cover reasonable debt recovery costs. The amount depends on the size of the debt.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam was managing director of Penny, a UK invoice finance business, from July 2020 to November 2023. His career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library. Career record.
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