UK: the statutory right
The Late Payment of Commercial Debts (Interest) Act 1998 applies to business-to-business transactions. It does not apply to consumers.
Interest runs at 8% above the Bank of England base rate, calculated daily from the day after payment was due. If no payment terms were agreed, the default is 30 days from delivery of the goods or services, or from receipt of the invoice, whichever is later.
You can also claim a fixed sum for recovery costs, on top of the interest, per invoice:
| Debt | Fixed charge |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
If your reasonable costs of recovering the debt exceeded the fixed sum — a debt collection agency, for instance — you can claim the difference as well.
The important part: this right exists whether or not your invoice mentions it. Stating it is useful because it makes the consequence visible in advance, but staying silent does not waive it.
US: agree it in advance
There is no federal statutory interest right for commercial invoices. A late fee is enforceable only if it was agreed before the debt arose — which in practice means stating it in your contract, your terms of business, or on the invoice itself before the work.
Rates are capped by state usury laws and the caps vary widely, so a flat “1.5% per month” (18% a year) that is unremarkable in one state may be unenforceable in another. Check your state’s limit once and set your standard rate below it.
A fee that looks punitive rather than compensatory is more likely to be struck out, so keep it proportionate to the actual cost of being kept out of your money.
How to state it
Put it in the terms field, in one plain sentence, before it is ever needed:
Payment is due within 30 days. Overdue amounts carry interest at 8% above the Bank of England base rate under the Late Payment of Commercial Debts (Interest) Act 1998, plus statutory recovery costs.
Or, in the US:
Payment is due within 30 days. A late fee of 1.5% per month applies to overdue balances.
Whether to actually charge it
Most small businesses state the right and rarely invoke it, which is a reasonable strategy — the clause does its work as a deterrent and as leverage in a conversation, without you having to damage a client relationship over a fortnight’s delay.
Where it genuinely matters is with clients who are habitually late, and in formal recovery. If a debt reaches a letter before action or a small claims filing, interest and fixed costs are added to the sum claimed, and a term that was already on the invoice makes that straightforward.
Invoicing promptly and stating a concrete due date prevents far more late payment than any interest clause does. See payment terms.
Last reviewed August 2026.