Legal guide

Late Payment Fees: Can You Charge Them? How Much?

Many freelancers don't realise they have a legal entitlement to charge interest and compensation on late invoices — even without it being in their contract. In the UK and EU, the law grants this automatically. Here's what you're entitled to, how to calculate it, and how to add it to your invoices.

🇬🇧 UK: Late Payment of Commercial Debts Act

Your automatic legal entitlements (UK)

Statutory interest rate8% per annum + Bank of England base rate (currently ~5.25%, so ~13.25% total)

Fixed debt recovery compensation£40 for debts under £1,000 / £70 for £1,000–£9,999 / £100 for £10,000+

Reasonable debt recovery costsAdditional legal/collection costs above fixed compensation

When it appliesAutomatically on any B2B invoice with no agreed payment terms after 30 days, or immediately after agreed terms breach

UK example: Invoice for £2,500, 45 days overdue

Original invoice£2,500.00

Interest (13.25% × 45/365 × £2,500)£40.95

Fixed compensation (£1,000–£9,999)£70.00

Total you can claim£2,610.95

🇪🇺 EU: Late Payment Directive (2011/7/EU)

Interest rate:ECB reference rate + 8 percentage points (e.g. ECB at 4.25% = 12.25% total)

Minimum compensation:€40 fixed per late invoice (or equivalent in local currency)

When it applies:Automatically after 30 days (public sector) or 60 days (commercial) — though you can agree shorter terms

Member state variations:Some countries (Germany, France, Netherlands) have additional protections. Check local implementation.

🇺🇸 US: State-by-state, contract-dependent

The US has no federal automatic late payment entitlement. Your rights depend on your contract and state law.

If in your contract:You can charge whatever you agreed — typically 1.5–2% per month (18–24% per annum)

If NOT in your contract:You can usually only claim the legal rate for your state (typically 6–10% per annum)

Best practice:Always include late payment terms in your contract: "Invoices unpaid after 30 days incur a late fee of 1.5% per month"

🇦🇺 Australia

No automatic late payment law equivalent to the UK. Your rights come from your contract.

Include a late payment clause: "Interest will accrue on overdue amounts at [X]% per month." The Penalty Interest Rates Act (VIC) and similar state laws cap punitive fees, so keep it reasonable (1–2% per month is typical and enforceable).

How to add late fees to an overdue invoice

Calculate the amount: Use our free Late Payment Interest Calculator to work out the exact interest + compensation.

Send an updated invoice: Create a new invoice (or updated version) showing: original amount, interest charges, fixed compensation, and new total.

Reference the legal basis: In the UK, cite the Late Payment of Commercial Debts (Interest) Act 1998. In EU, cite the Late Payment Directive.

Give them a deadline: State a clear new due date (e.g. '7 days from today') and consequences for continued non-payment.

Should you always charge late fees?

Having the legal right and choosing to exercise it are different things. Consider:

Charge late fees when:

✓ Client is a repeat late payer
✓ Invoice is 30+ days overdue
✓ Client hasn't responded to reminders
✓ You don't plan to work with them again
✓ The amount is significant

Consider waiving when:

→ Good client, first time late
→ They've communicated proactively
→ You want to maintain the relationship
→ The amount is small

Get paid before late fees become necessary

Chaser's automated follow-up resolves most late invoices before 30 days — so you never have to calculate interest charges or threaten legal action.

Try Chaser free →Calculate late fees →