UK Statutory Interest Calculator: Calculate Late Payment Interest & Claim It

Chasing late invoices is frustrating at the best of times. It’s even worse when a customer drags things out for weeks (or months), and you’re the one carrying the cashflow hit.

The good news is that UK law can give your business a straightforward right to charge statutory interest on late commercial payments. With a simple statutory interest calculator approach, you can work out what you’re owed and add it to your debt recovery process more confidently.

Below, we’ll break down what statutory interest is, when it applies, how to calculate it step-by-step, and how to claim it in a way that actually helps you get paid (without creating avoidable legal risk).

What Is Statutory Interest On Late Payment (And Why Does It Matter)?

Statutory interest is a legal right that can apply when another business (or a public authority) pays your invoice late. In many cases, you can charge:

• Statutory interest on the overdue amount; and
• Fixed compensation per late invoice (and, in some cases, additional reasonable recovery costs).

In the UK, the key law is the Late Payment of Commercial Debts (Interest) Act 1998 (often referred to as “the Late Payment Act”). It’s designed to discourage late payment culture and give small businesses more leverage when invoices go overdue.

This is not the same as charging a customer a “penalty” interest rate. Statutory interest is a legally recognised remedy for late payment, as long as the rules apply to your situation.

Why it matters for small businesses: even a handful of overdue invoices can create a cashflow squeeze, limit your ability to pay suppliers, and slow down growth. Adding statutory interest won’t always make a slow payer move faster, but it can strengthen your position and reduce the incentive for them to keep you waiting.

When Can You Charge Statutory Interest (And When Can’t You)?

Before you use a statutory interest calculator, it’s important to check whether you’re actually entitled to claim statutory interest. The rules are fairly practical, but getting them wrong can backfire in negotiations or disputes.

Statutory Interest Usually Applies To B2B (And Public Authority) Debts

Statutory interest under the Late Payment Act generally applies where:

• the debt is for the supply of goods and/or services;
• the buyer and supplier are acting in the course of business; and
• payment is late under the payment terms (contractual or implied).

This is mainly a business-to-business remedy (and it can also apply where the customer is a public authority).

It Generally Does Not Apply To Consumer Debts

If you’re selling to individuals as consumers, statutory interest under the Late Payment Act typically won’t be the right framework. Consumer disputes often fall under different rules (including consumer contract and unfair terms considerations), so it’s worth getting tailored advice if you’re unsure.

What If Your Contract Already Has An Interest Clause?

Many well-drafted terms include a late payment interest clause (and sometimes an admin fee). If your contract already sets an interest rate and it’s a “substantial remedy”, statutory interest may not apply in the same way.

This is one reason it’s worth reviewing your terms and conditions before you start chasing debts-your contract terms may be stronger (or more specific) than the statutory default.

When Does Payment Become “Late”?

Payment becomes late when it passes the agreed due date.

If your contract doesn’t clearly set a due date, the Late Payment Act can imply one. In many B2B situations, interest can start running 30 days after the later of:

• the date the customer receives your invoice (or payment notice); and
• the date the customer receives the goods or services (or the date they’re accepted/verified, if an acceptance procedure applies).

For many public authorities, there are stricter rules and payment is often due within 30 days in most cases.

As a practical step, your invoices should clearly show:

• invoice date;
• payment due date (e.g. “14 days from invoice date” or a specific date);
• your bank/payment details; and
• what happens if payment is late (if you have terms covering interest and costs).

If you’re unsure whether your invoicing is compliant and clear enough, it can help to check the basics of invoice requirements so your position is easier to enforce.

Statutory Interest Calculator UK: How To Calculate It Step-By-Step

Let’s get into the calculation itself. A statutory interest calculator is essentially applying a formula consistently, based on the overdue amount, the applicable interest rate, and the number of days late.

Step 1: Confirm The Debt Amount

Start with the principal sum that’s overdue (the unpaid invoice balance).

Tip: if the customer has paid part of the invoice, calculate interest on the outstanding balance only, and consider calculating separately for different periods if payments were made at different times.

Step 2: Confirm The Statutory Interest Rate

Under the Late Payment Act, the statutory interest rate is typically:

8% + the Bank of England base rate

However, the base rate can change, and the Act uses a reference base rate that usually stays the same for a 6‑month period. In practice, you generally use the Bank of England base rate that applied on:

• 31 December (for debts where statutory interest starts between 1 January and 30 June); or
• 30 June (for debts where statutory interest starts between 1 July and 31 December).

So when you’re calculating, make sure you’re using the correct base-rate reference date for when statutory interest first started running on that invoice.

If you want the clean “calculator” version, treat it like:

• Annual statutory rate = 8% + the relevant base rate (expressed as a percentage)

Step 3: Count The Number Of Days Late

Work out the number of days from the day after the payment due date (or the implied statutory due date, if there isn’t one) up to:

• the date the invoice is paid (if it’s now settled); or
• today’s date (if it’s still outstanding and you’re calculating up to now).

Keep a record of how you counted the days. If you end up issuing a formal claim, you’ll want to show your working clearly.

Step 4: Apply The Daily Interest Formula

The simplest statutory interest calculator formula looks like this:

Interest = Debt Amount × Annual Statutory Rate × (Days Late ÷ 365)

Where “Annual Statutory Rate” is expressed as a decimal. For example, if the relevant base rate is 5.25%, the statutory rate would be 13.25%, which as a decimal is 0.1325.

Step 5: Add Fixed Compensation (If Applicable)

On top of interest, you can often claim a fixed sum per late invoice. Under the Late Payment Act, the standard fixed compensation amounts are:

• £40 for an invoice of up to £999.99;
• £70 for an invoice of £1,000 to £9,999.99; and
• £100 for an invoice of £10,000 or more.

If you’re also spending money chasing the debt (for example, instructing a debt recovery agency or solicitor), you may be able to claim reasonable recovery costs only to the extent they exceed the fixed compensation amount for that invoice.

If you’re thinking about adding fees or interest, it’s also worth understanding when you can charge interest on money owed more generally (for example, where statutory interest doesn’t apply but contractual interest might).

Worked Examples: Using A Statutory Interest Calculator In Real Life

Here are a couple of examples to show how the statutory interest calculator method works in practice. (We’ll keep the maths simple so you can apply it quickly.)

Example 1: £2,000 Invoice, 30 Days Late

• Debt amount: £2,000
• Days late: 30
• Assumed base rate: 5.25%
• Statutory rate: 8% + 5.25% = 13.25% (0.1325)

Interest = £2,000 × 0.1325 × (30 ÷ 365)

30 ÷ 365 = 0.08219 (approx.)

Interest = £2,000 × 0.1325 × 0.08219 ≈ £21.78

So you’d be looking at roughly £21.78 in statutory interest for a £2,000 invoice that’s 30 days late, plus the applicable fixed compensation amount for that invoice.

Example 2: £12,000 Invoice, 90 Days Late

• Debt amount: £12,000
• Days late: 90
• Assumed statutory rate: 13.25% (0.1325)

Interest = £12,000 × 0.1325 × (90 ÷ 365)

90 ÷ 365 = 0.24658 (approx.)

Interest = £12,000 × 0.1325 × 0.24658 ≈ £391.58

That’s roughly £391.58 in statutory interest, plus fixed compensation. For a larger invoice and longer delay, the numbers can add up quickly.

A Quick Note On “Precision”

In real disputes, you should calculate using the correct base rate reference date (which is often set by the Act’s 6‑monthly periods) and the correct day count. If the debtor pays in instalments, you may need to calculate interest in separate chunks. If the debt is seriously contested, it’s worth getting legal advice before you formalise your claim.

How Do You Claim Statutory Interest Without Making Things Messy?

Calculating interest is one thing. Collecting it is another.

As a small business, you want to protect your cashflow while also managing customer relationships and reputational risk. The key is to be clear, consistent, and professional from day one.

1) Check Your Contract And Paper Trail

Before you demand statutory interest, make sure you can clearly show:

• what was agreed (quote, purchase order, contract, scope);
• your payment terms (including due dates);
• that you delivered the goods/services; and
• the invoice date and outstanding amount.

If you’re dealing with delayed payment tactics (for example, “we never received the invoice”), strong invoicing and chasing processes matter. It can help to align your process with best practice for chasing overdue payments.

2) Start With A Clear Payment Reminder

In many cases, the fastest route to being paid is still a polite-but-firm reminder. You can include:

• the invoice number and amount;
• the original due date;
• a request for immediate payment; and
• a note that statutory interest and compensation may be added if payment remains outstanding.

If you want to keep your tone consistent and avoid saying the wrong thing, using a structured payment reminder letter approach can save you time and stress.

3) Send A Final Demand (With A Breakdown)

If reminders don’t work, your next step is usually a final demand. This is where your statutory interest calculator work becomes really useful.

Your final demand should clearly set out:

• principal debt amount;
• interest rate being applied (the statutory rate);
• the interest period (from/to dates);
• interest amount calculated to date;
• any fixed compensation being claimed; and
• the deadline to pay before escalation.

It’s common to put this into a short table for readability. If you need a formal escalation step, a final demand letter can also help you frame the issue properly.

4) Consider A Letter Before Action

If payment still isn’t made, you’ll usually want to send a letter before action. This signals that you’re prepared to start a court claim if they don’t pay within a final deadline.

This step is important because it shows you’ve acted reasonably and given the debtor a final chance to resolve the issue. It can also flush out whether they genuinely dispute the invoice or are just delaying.

For many small businesses, the most practical way to do this is to use a letter before action that clearly sets out the debt, the interest, and what will happen next.

5) If They Dispute The Invoice, Don’t Ignore It

Some customers respond to a demand by suddenly raising quality issues, scope arguments, or “we never agreed to that” objections. Sometimes it’s genuine. Sometimes it’s a delay tactic.

Either way, you should take it seriously and respond in writing, sticking to facts and documents. If you’re unsure how to handle it, it may help to follow a structured process for disputed invoices so you don’t accidentally weaken your position.

6) Escalate (Only When It Makes Commercial Sense)

If the debt is still unpaid, options can include:

• negotiating a payment plan (sometimes faster than court);
• instructing a debt recovery service or solicitor; or
• issuing a claim (often through the County Court / small claims track, depending on the amount).

Even when you’re legally entitled to statutory interest, you’ll want to weigh up:

• the size of the debt and interest;
• the likelihood of recovery (is the debtor solvent?);
• the value of the ongoing business relationship; and
• the time and cost of escalation.

Sometimes the best commercial outcome is to use statutory interest as leverage to get the principal paid quickly, rather than treating it as the main event.

Key Takeaways

• Statutory interest can give your business a legal right to charge late payment interest on overdue commercial debts under the Late Payment of Commercial Debts (Interest) Act 1998.
• A practical statutory interest calculator approach is: Interest = Debt Amount × Annual Statutory Rate × (Days Late ÷ 365), usually using a statutory rate of 8% + Bank of England base rate (using the correct reference base rate for the relevant 6‑monthly period).
• Statutory interest is typically relevant for B2B and public authority late payments, and won’t usually be the right framework for consumer debts.
• Before claiming statutory interest, check your contract terms-your terms and conditions might already set an interest rate or other late payment remedies.
• To claim interest effectively, follow a clear escalation path: payment reminder, final demand with calculations, letter before action, and only then consider formal recovery options.
• If the customer disputes the invoice, respond carefully and keep everything in writing-how you handle that dispute can affect whether you can recover the debt (and interest).

Important: This article is general information only and isn’t legal advice. If you’re unsure whether statutory interest applies to your invoice, or you’re dealing with a dispute, it’s worth getting advice on your specific circumstances.

If you’d like help tightening up your payment terms or recovering an overdue invoice (including claiming statutory interest correctly), you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.