The Late Payment of Commercial Debts (Interest) Act 1998 gives UK businesses a right to add interest and a fixed sum to a late invoice. Here is what it means in plain English.
The Act lets a business charge statutory interest at the Bank of England reference rate plus 8% (11.75% with the reference rate at 3.75%, as of 30 June 2026) on a late commercial debt, plus a fixed compensation sum of £40, £70 or £100 by debt size. Both are recoverable from the debtor.
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The Act has two separate entitlements — statutory interest and the fixed compensation — and you can claim both on the same overdue invoice.
Statutory interest accrues at 8 percentage points above the reference rate, as simple (non-compounding) interest on the unpaid amount, from the day payment became late until it is paid. The reference rate is the Bank of England Bank Rate in force on 31 December (for interest that starts to run from 1 January to 30 June) or on 30 June (for interest that starts to run from 1 July to 31 December), and it stays fixed for the life of the debt.
Fixed compensation under s.5A is a single sum per invoice — £40 below £1,000, £70 from £1,000, and £100 from £10,000 — recognising the cost of having to chase. It is in addition to the interest.
You do not need to go to court to ask for either: you can set them out in a reminder or a Letter Before Action, and many debtors pay once they see the figure. If a claim does reach the County Court, whether interest and costs are awarded is at the court's discretion.
Work out the interest and compensation on your invoice with the free calculator.
It is the UK law that gives a business a statutory right to claim interest and a fixed compensation sum when another business pays a commercial debt late. It applies to B2B transactions in England & Wales.
Statutory interest is the Bank of England reference rate plus 8 percentage points. With the reference rate at 3.75% that is 11.75% a year, charged as simple interest on the unpaid amount from the day it became late.
Under s.5A you can claim a fixed sum per unpaid invoice: £40 for debts under £1,000, £70 for debts from £1,000 up to £10,000, and £100 for debts of £10,000 or more — on top of the interest.
No. The interest and compensation belong to you. RobinReturn charges only its per-action fees and takes no percentage of what you recover.
RobinReturn is not a law firm and does not give legal advice. Start with a reminder that states the debt, interest and compensation.
For undisputed invoices up to £10,000 owed by another business in England or Wales.
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