How Statutory Late Payment Interest Works in the UK

The Late Payment Act applies when both sides are businesses (including sole traders) and your contract doesn't set its own interest rate. Interest starts the day after the payment was due — the agreed date, or 30 days after the invoice or delivery if none was agreed — and runs until it's paid.

Which rate

The rate is 8% plus the reference rate: the Bank Rate on 31 December for interest starting 1 January–30 June, and on 30 June for 1 July–31 December (gov.uk; Bank of England). It stays the same for that debt even if Bank Rate changes later. With Bank Rate at 3.75% since 18 December 2025, invoices whose interest started in 2026 use 11.75%.

The arithmetic

Daily interest = amount × rate ÷ 365. A £12,500 invoice 96 days late at 11.75% is £12,500 × 11.75% × 96 ÷ 365 = £386.30.

When it doesn't apply

Consumers, contracts with their own late-payment terms, and old debts (generally six years under the Limitation Act). Talking to the customer first is usually cheaper than a claim.

Last reviewed 2026-11-04. General information, not legal advice.