Getting paid on time: your right to charge interest on late invoices
Business customers who pay late can be charged statutory interest of 8% above base rate, plus fixed compensation. Few small firms use the right, but knowing it changes the conversation.
Late payment is one of the main reasons good small businesses run short of cash. Research for the government and industry puts the cost to the UK economy in billions every year. In construction, retentions held back on contracts add to the strain.
Your rights
If another business pays you late, you can charge statutory interest at 8% above the Bank of England base rate, unless your contract sets a different rate. You can also claim fixed compensation for the cost of recovering the debt: £40 for debts under £1,000, £70 for debts up to £9,999.99, and £100 above that.
Show the data
| Up to £999.99 | £40 |
|---|---|
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
Using it well
- Put your payment terms and late payment rights on every invoice.
- Mention interest early in a friendly reminder; it often prompts payment.
- Keep a record of every chase, in case the debt goes further.
- For construction contracts, agree when retentions will be released and diarise the dates.
Most customers pay once they know you will follow up. The point is not to charge interest; it is to stop being the supplier who can be paid last.
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This insight is general information, not advice for your circumstances. Talk to us before acting on it.