Late Payment of Commercial Debts Act: Your Rights Explained
UK freelancers have strong legal protections when clients don't pay on time. Most never use them. Here's what the Late Payment of Commercial Debts Act gives you — and how to use it.
Note: This article covers UK law under the Late Payment of Commercial Debts (Interest) Act 1998. For EU equivalents (including the Netherlands), see the section on the EU Late Payment Directive below. This is general information, not legal advice.
What is the Late Payment of Commercial Debts Act 1998?
The Late Payment of Commercial Debts (Interest) Act 1998 is a UK law that gives businesses the automatic right to charge interest and claim debt recovery costs when clients pay invoices late. It was extended in 2002 to cover all B2B transactions.
Statutory interest rate
The statutory interest rate is the Bank of England Base Rate + 8% per annum, applied from the due date to the date of payment.
Example calculation (2026):
This rate is intentionally higher than commercial lending rates — it's designed as a deterrent, not a cost of borrowing.
Fixed debt recovery costs
In addition to interest, you can claim a fixed compensation amount per overdue invoice:
| Invoice value | Fixed compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 – £9,999.99 | £70 |
| £10,000 or more | £100 |
These amounts are in addition to the statutory interest — not instead of it. If your reasonable debt recovery costs (e.g. solicitor's fees) exceed these fixed amounts, you can claim the higher actual costs.
How to claim late payment interest
You don't need a solicitor for most claims. The most effective approach is to include a formal claim in your payment demand letter:
// Template language for formal demand letter
Invoice [NUMBER] for £[AMOUNT] was due on [DATE].
I hereby claim statutory interest under the Late Payment of Commercial Debts
(Interest) Act 1998 at 8% above the Bank of England base rate, calculated
from the due date to the date of payment.
I also claim the fixed debt recovery cost of £[40/70/100] per the Act.
Total now owed: £[ORIGINAL + INTEREST + FIXED COST].
Please make payment within 7 days to avoid further action.
You don't need to go to court for most amounts — the formal demand letter is often enough. Clients who see that you know your rights typically pay promptly.
EU Late Payment Directive
EU member states have similar protections under Directive 2011/7/EU on combating late payment in commercial transactions:
When to use this vs when to just get paid
Claiming interest isn't about the money — it's about signal. It tells the client you know your rights, you track late payments, and you won't be a pushover.
Chaser's stage 4 email references your legal rights
Chaser's final notice email (day 30) automatically references your statutory rights under the Late Payment Act (for UK clients) or the applicable EU directive. This signal — that you know your rights — motivates payment before collection proceedings begin.
Try Chaser free →Frequently asked questions
Who does the Late Payment of Commercial Debts Act apply to?
The Act applies to B2B (business-to-business) transactions only — it does not cover consumer invoices. Both parties must be businesses. Sole traders and limited companies are covered. If you invoice a private individual, this Act does not apply.
What is the current statutory interest rate for late payment?
The statutory interest rate is the Bank of England base rate + 8% per annum, calculated from the due date. As of 2026, with the Bank Rate at approximately 4.5%, the statutory rate is around 12.5% per annum. This rate is typically higher than most commercial bank rates, making it a meaningful deterrent.
Do I need a contract to claim late payment interest?
No. The Late Payment of Commercial Debts Act 1998 provides a statutory right to claim interest even without a contract, as long as it is a B2B transaction and the payment is overdue. Having a contract that specifies payment terms strengthens your position, but it is not required to claim statutory interest.
Do I have to go to court to claim late payment interest?
Not for small amounts. For invoices under £10,000, you can use the UK Small Claims Court (now called the County Court Money Claims Centre) online. For amounts you simply want to add to a demand letter, you can state the interest owed without going to court — many clients pay as soon as they realise you know your rights.
Can I claim late payment interest on international invoices?
The UK Late Payment Act applies to contracts governed by English law. For international clients, the applicable law depends on your contract. EU clients may be subject to the EU Late Payment Directive (2011/7/EU), which provides similar protections. For US clients, you would need to rely on your contract terms.