What is the UK late payment interest rate in 2026?
11.75% APR. Bank of England base rate (3.75% since December 2025) plus 8 percentage points, set by the Late Payment of Commercial Debts (Interest) Act 1998. Plus a fixed compensation charge of £40 (under £1k), £70 (£1k-£10k) or £100 (over £10k) per overdue invoice. Use the calculator at /unpaid-invoices/late-payment-interest-calculator/ for instant results.
What this means for your business
If a customer pays an invoice late without an agreed alternative in the contract, UK law gives a business the right to charge statutory interest of 11.75% APR (8 percentage points plus the Bank of England base rate, currently 3.75%). This applies automatically to business-to-business transactions under the Late Payment of Commercial Debts (Interest) Act 1998, even if it is not mentioned in the original terms.
On top of the interest, a fixed compensation charge can also be added per invoice, scaled to the debt size. In practice, most SMEs do not enforce this routinely, since it can strain a customer relationship, but it becomes a useful lever when chasing persistent late payers or calculating what is genuinely owed.
The rate moves with the base rate, so it should be rechecked whenever the Bank of England changes it.
Key points
- The statutory late payment rate is 11.75% APR, made up of the 3.75% Bank of England base rate plus 8 percentage points.
- The right to charge this interest applies automatically to UK business-to-business invoices under the Late Payment of Commercial Debts (Interest) Act 1998.
- A fixed compensation charge also applies per overdue invoice: £40 for debts under £1,000, £70 for £1,000 to £10,000, and £100 for debts over £10,000.
- The rate changes whenever the Bank of England moves its base rate, so businesses should recheck the figure rather than assume it is fixed.
- An instant calculation is available at /unpaid-invoices/late-payment-interest-calculator/.
Common pitfalls
A common mistake is assuming the statutory rate only applies if it was written into the original contract, when in fact it applies by default to business-to-business debts unless the parties agreed a different remedy. Businesses also often forget the fixed compensation charge, which is payable in addition to interest, not instead of it.
Another pitfall is using an outdated base rate figure after a Bank of England change, which understates or overstates what is owed. Finally, some businesses hesitate to invoke these rights at all, worried about damaging a customer relationship, even when the debt is significantly overdue.
Related questions
Can I charge statutory interest even if my invoice terms do not mention it?
Yes. The Late Payment of Commercial Debts (Interest) Act 1998 gives UK businesses this right automatically on business-to-business debts, regardless of whether it is stated on the invoice. It only does not apply if the contract already sets out a different, substantial remedy for late payment.
Is the compensation charge instead of interest or as well as?
The fixed compensation charge is payable in addition to statutory interest, not as an alternative to it. It is intended to cover the reasonable costs of chasing the debt, while the interest compensates for the delay itself.
Does the late payment interest rate change automatically when the Bank of England changes the base rate?
Yes, the statutory rate is always 8 percentage points above whatever the Bank of England base rate is at the time payment becomes overdue. When the base rate moves, the applicable interest rate for any newly overdue invoices moves with it.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind Market Invoice. He spent over three years as managing director of Penny, a UK invoice finance business, and his career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library.
Last reviewed: 24 July 2026