Guide

Can you charge interest on a late invoice in the UK?

Updated 24 October 2026

Yes, sometimes. It depends entirely on who owes you. Plenty of templates online get this wrong, and threatening a homeowner with interest they do not owe weakens your position.

If a business owes you: yes

Under the Late Payment of Commercial Debts (Interest) Act 1998, when one business pays another late, the supplier can claim:

• Statutory interest at 8% above the Bank of England base rate, per year, from the day after the invoice was due.
• Fixed compensation of £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more.
• Reasonable recovery costs above the fixed sum, in some cases.

This includes sole traders and partnerships as well as limited companies. You do not need to have put it in your terms first. Use the free late payment interest calculator to work out the figures.

If a homeowner owes you: not under that Act

The Act covers business-to-business debts only. A homeowner can only be charged late payment interest if your terms included a fair interest clause they agreed to before the job. Put one in your quote terms for future work.

If you end up making a county court claim against a homeowner, you can ask the court to add interest to the claim, usually at 8% a year. That is separate from the Late Payment Act.

Sole traders are both

A sole trader is a business for the Late Payment Act, so statutory interest can apply. But they are also an individual, so before court you must follow the Pre-Action Protocol for Debt Claims with a 30-day letter of claim, not a 14-day company demand. Our Letter Before Action template handles this.

Should you actually charge it?

Mentioning the interest in a formal reminder often gets a business to pay without you ever having to claim it. Whether you then waive it is up to you. Many tradespeople use it as leverage rather than a profit line.