# Late-Paying Clients: The Interest You Are Entitled To Charge

Canonical: https://taxmo.co.uk/blog/charging-interest-on-late-payment
Published: 2026-08-06
Tags: Invoicing, Cash flow

Most freelancers know late payment is a problem and do not know they have a statutory right to charge for it. You do, and you do not need it written into the contract.

## The right exists by default

Under the Late Payment of Commercial Debts (Interest) Act 1998, a business supplying another business can charge statutory interest on a late payment. It applies automatically. It does not need to be in your terms, and the other side cannot simply refuse it.

Interest runs from the day after payment was due. If no payment terms were agreed, a default period applies.

## Interest plus a fixed sum

Two things are chargeable. Statutory interest, calculated at a set percentage above the Bank of England base rate, and a separate fixed sum for the cost of recovering the debt, which increases in bands with the size of the debt.

The fixed sum is the part people forget, and on a small invoice it can be worth more than the interest itself.

> Both the interest margin over base rate and the fixed recovery sums are set in legislation and have been amended before. Check the current figures before you invoice for them.

## Whether to actually charge it

This is a commercial decision more than a legal one. For a client you value and who is usually prompt, mentioning the entitlement is often enough. For a client who is persistently late, charging it is both fair and a useful signal.

Being able to produce the exact figure, calculated from the due date, changes the conversation. It moves from a complaint about being paid late to an invoice line with a statutory basis.

## Prevention beats collection

Clear payment terms on the invoice, a due date rather than just terms, and a reminder that goes out the day after the due date will collect more than any interest claim.

Set invoices to chase themselves. The reason late invoices go uncollected is almost never that the right is unavailable; it is that nobody had time to chase them.

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Thresholds, rates and allowances are indexed or set at fiscal events and are deliberately not quoted here. Check the current figure on GOV.UK.