Late Payment Interest Calculator
Work out interest and fees on an overdue invoice, by days late, with UK statutory interest, a flat monthly rate, or your own contract terms.
How to use this calculator
- 1Enter the invoice amount and the date payment was due — not the invoice date.
- 2Enter the date it was paid, or leave it as today to see what is currently owed.
- 3Pick the basis: UK statutory, an annual rate charged daily, or a monthly contract rate.
- 4Check the projection table to see what the debt becomes if it stays unpaid.
How the calculation works
daily: interest = amount × (annual rate ÷ 365) × days late monthly: interest = amount × monthly rate × months begun UK statutory rate = base rate + 8%- amount
- The unpaid invoice total
- days late
- Days from the due date to payment, counted from the day after payment fell due
- base rate + 8%
- The UK statutory rate for commercial debt under the 1998 Act
- fixed sum
- UK statutory compensation: £40 under £1,000, £70 to £10,000, £100 above
Interest is simple, not compound. Late-payment statutes specify simple interest, and compounding an overdue balance is unenforceable in several jurisdictions.
A daily basis charges only for days actually elapsed. A monthly basis charges for each month begun, so being one day late costs a whole month of interest — a meaningful difference on short delays.
The UK fixed sum is per invoice, not per debtor, and it stacks with interest rather than replacing it. Reasonable recovery costs above the fixed sum may also be claimed.
A monthly rate of 1.5% is 18% a year, not 1.5%. Contract terms are frequently quoted monthly because the number looks smaller.
Worked example
A £5,000 invoice 45 days late, UK statutory
- 1.Days late: 1 June to 16 July is 45 days.
- 2.Statutory rate: base rate 4% + 8% = 12% a year.
- 3.Daily rate: 12% ÷ 365 = 0.032877% a day.
- 4.Interest: £5,000 × 0.00032877 × 45 = £73.97.
- 5.Fixed sum for a debt between £1,000 and £10,000: £70.
- 6.Total owed: 5,000 + 73.97 + 70 = £5,143.97.
Result: £5,143.97 owed — £143.97 in charges
Why one day late costs a full month
- 1.The invoice is 1 day overdue.
- 2.On a monthly basis, any part of a month begun is charged in full.
- 3.1 day therefore counts as 1 month: $5,000 × 1.5% = $75.
- 4.On a daily basis at the same 18% annual rate, one day would cost only $2.47.
- 5.The monthly convention makes a one-day delay 30 times more expensive.
- 6.This is why the basis matters as much as the rate when agreeing terms.
Result: $75 for being one day late
Daily or monthly changes everything on short delays
Two sets of terms quoting the same annual rate can produce wildly different charges, because of how the period is counted. Interest charged daily accrues only for days actually elapsed. Interest charged monthly, on the standard "per month or part thereof" wording, charges a full month the moment the invoice becomes a day overdue.
On a $5,000 invoice at 18% a year, one day late costs $2.47 on a daily basis and $75 on a monthly one — thirty times more. Over a long delay the two converge, but most invoices are paid within weeks of falling due, which is exactly where the difference bites.
If you are setting terms, a daily basis is easier to defend as a genuine estimate of loss. If you are paying, a monthly basis makes it worth paying before the next month begins rather than a few days after.
The UK statutory right, which does not need to be in the contract
Businesses in the UK have a statutory right to claim interest on late commercial payments under the Late Payment of Commercial Debts (Interest) Act 1998. It applies automatically to business-to-business contracts and does not have to be written into the agreement. Many suppliers never invoke it simply because they do not know it exists.
The rate is 8 percentage points above the Bank of England base rate, calculated as simple interest from the day after payment was due. On top of that, a fixed sum is payable per invoice by size of debt: £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. Reasonable costs of recovering the debt above that fixed sum can also be claimed.
A contract can displace the statutory right, but only by providing a "substantial remedy" of its own. Terms that set a token rate specifically to avoid the Act are open to challenge, and a court can strike them out and apply the statutory rate instead.
Charging late fees, and the penalty problem
A late payment charge has to be a genuine pre-estimate of the loss caused by late payment, or compensation for it. A charge set high enough to punish rather than compensate risks being unenforceable as a penalty — a doctrine that exists in English law and in many other common law jurisdictions.
Interest at a commercially normal rate is rarely a problem. A flat fee that bears no relation to actual recovery costs, or a rate several times the cost of borrowing, is where the risk lies. The UK statutory scheme is useful partly because it is presumptively reasonable: nobody argues that the rate Parliament set is a penalty.
The other consideration is commercial rather than legal. Charging interest on an overdue invoice is a decision about the customer relationship as much as about the money, which is why many suppliers calculate it, state it on the reminder, and then waive it once payment arrives.
What this assumes, and where it stops
Assumptions
- Interest is simple, not compounded, as late-payment statutes specify.
- Days late are counted from the due date to the payment date inclusive of elapsed days.
- The UK statutory basis uses a 365-day year, as the Act does.
- The base rate entered is the one in force; statutory interest is fixed at the rate applying when the debt became late.
Limitations
- Not legal advice. Whether you may charge a particular rate depends on your contract, your jurisdiction and whether the charge is a genuine estimate of loss.
- The UK preset reflects the Late Payment of Commercial Debts (Interest) Act 1998 for business-to-business debts. Consumer debts, and debts in other jurisdictions, are governed differently.
- The base rate must be entered manually and is not fetched live. Using a stale rate produces a wrong figure.
- Does not handle partial payments, credit notes, disputed portions of an invoice, or VAT treatment of the charges.
- Statutory interest applies to the debt as it stood when it became late; this calculator does not re-rate the debt if the base rate changes mid-period.
Common questions
How much interest can I charge on a late invoice?
In the UK, businesses can claim statutory interest at 8 percentage points above the Bank of England base rate on overdue commercial debts, plus a fixed sum of £40 to £100 by debt size. Elsewhere it depends on your contract. Any rate you set must be a genuine estimate of loss rather than a penalty.
Is 1.5% per month a lot?
It is 18% a year, which is considerably more than most commercial borrowing costs. Monthly rates are commonly quoted because the number looks small. Check also whether the term charges per month begun — if so, being one day late costs a full month's interest.
When does late payment interest start?
The day after payment falls due, not the invoice date. If your terms are 30 days from invoice, interest begins on day 31. Where no payment period is agreed, UK law defaults to 30 days after the goods or service were supplied, or after the invoice was received, whichever is later.
Can I claim the cost of chasing an unpaid invoice?
In the UK, yes. Beyond the fixed sum of £40 to £100 you may claim reasonable additional costs of recovering the debt, such as a debt collection agency's fee. This is a separate entitlement from the interest and from the fixed sum, and it survives even where the debt is eventually paid.
Sources
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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