Can I charge interest on late payments to domestic customers?

The Late Payment of Commercial Debts Act only applies to business-to-business transactions. For domestic (consumer) customers, you can only charge interest if it was agreed in your contract or terms of service.

What is the current Bank of England base rate?

The base rate changes periodically. Check the Bank of England website for the current rate. Your statutory interest rate is this base rate plus 8%.

Should I actually charge late payment interest?

It depends on your relationship with the customer. For one-off lateness from a good customer, a reminder is usually enough. For repeat offenders or very late payments, applying statutory interest is your legal right and sends a clear message.

late paymentsgetting paidcash flowpayment termslegal rights

Your Rights When Customers Pay Late: A Guide for UK Tradespeople

26 February 20262 min read

Late payments are costing UK tradespeople billions

According to the Federation of Small Businesses, late payments cost UK small businesses £22 billion a year. For tradespeople working job to job, a single late payment can cause serious cash flow problems.

The good news is that UK law gives you clear rights when commercial customers pay late. This guide explains what you can do.

The Late Payment of Commercial Debts Act 1998

This Act gives you two key rights when a commercial customer (another business, not a domestic consumer) pays an invoice late:

Statutory interest — you can charge interest at 8% above the Bank of England base rate, calculated from the day after the due date
Fixed compensation — £40 for debts up to £999.99, £70 for debts up to £9,999.99, £100 for debts of £10,000 or more

Use our late payment calculator to work out exactly what a customer owes you in interest and compensation.

When does the clock start ticking?

Interest starts accruing the day after your payment terms expire. If your invoice says "net 30" and is dated 1 March, payment is due by 31 March. Interest starts from 1 April.

This is why clear payment terms on every invoice are essential — they establish the due date that triggers your right to charge interest.

Practical steps to recover late payments

1. Send reminders promptly

Most late payments are the result of forgetfulness, not malice. A polite reminder the day after the due date resolves most cases. InvoiceAdept's automatic payment reminders handle this for you.

2. Follow up by phone

If email reminders do not work, call the customer directly. Be firm but professional. Confirm the amount, the due date, and ask when you can expect payment.

3. Send a formal late payment notice

If the invoice is more than 14 days overdue, send a formal notice stating the amount owed, the interest accrued (use our calculator), and the compensation you are claiming. Give a final deadline of 7 days.

4. Consider mediation or the Small Claims Court

For debts under £10,000, the Small Claims Court is a straightforward process. You can file a claim online through Money Claims Online (MCOL). Court fees start from £35.

Prevention is better than cure

The best way to handle late payments is to prevent them:

Always use written payment terms — generate yours with our payment terms generator
Send invoices promptly — ideally on the day you complete the work
Offer card payments so customers can pay immediately — see our Stripe payments feature
Set up automatic reminders via InvoiceAdept
For new customers or large jobs, request a deposit upfront

Start protecting your cash flow

Try InvoiceAdept free — automatic reminders, card payments, and professional invoices that make it easy for customers to pay on time.