Waiting for a customer to pay is one of the most common pressures on a small business. The good news is that, for many business-to-business sales, the law gives you a right to claim interest on late payments. This step-by-step guide follows GOV.UK’s guidance on late commercial payments. It is general information, not legal advice.
Step 1: Work out when the payment became late
GOV.UK says a business can claim interest and debt recovery costs when another business is late paying for goods or a service. Start with the payment date you agreed. For business transactions, agreed payment dates usually must fall within 60 days (30 days for public authorities). A longer period can be agreed between businesses, but it must be fair to both sides.
If you never agreed a date, GOV.UK says the payment is late 30 days after the customer receives your invoice, or 30 days after you deliver the goods or provide the service, whichever is later. That makes clear invoicing records important: note the date each invoice was sent and the date the work was delivered.
Step 2: Read your contract
Statutory interest is a default. GOV.UK states that you cannot claim statutory interest if there is a different rate of interest in a contract. It also says you cannot use a lower interest rate if you have a contract with a public authority. If you have written terms, check them before you calculate anything.
Step 3: Calculate the interest
For business-to-business transactions, GOV.UK gives the statutory rate as 8% plus the Bank of England base rate. Its worked example assumes a £1,000 debt and a 0.5% base rate, which gives a total rate of 8.5%. That works out at £85 a year, about 23p a day, or roughly £11.50 after 50 days. The base rate in that example is only an illustration, so check the current Bank of England rate before you work out your own figure.
Step 4: Send a separate invoice for the interest
GOV.UK says that if you decide to add interest to the amount owed, you should send a new invoice for it. Keeping the interest on its own invoice makes it easier for the customer’s accounts team to process and for you to track.
Step 5: Keep a clear paper trail
This step is our practical suggestion rather than a GOV.UK requirement. Keep copies of the original invoice, the agreed terms, your reminders and the interest calculation together in one place. If the matter ever moves beyond a polite reminder, a tidy record saves time.
What to check before you act
GOV.UK has a separate page on claiming debt recovery costs on late payments, which is worth reading alongside the interest guidance. The government has also published material on proposed late-payment reforms, including a Commercial Payments Bill overview, so the rules could change. Always check the live GOV.UK pages, and speak to a qualified adviser before pursuing a large or disputed debt.
Charging interest is a right, but many owners prefer to start with a friendly reminder. Whichever route you choose, knowing when an invoice is officially late puts you in a stronger position.