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Interest on Late Payments

Readers might be interested to know that you have certain rights to charge interest if your customers are late in paying your bills. This may not be prudent in certain circumstances, primarily if you want to continue selling to them, but if your relationship has broken down you can charge interest and recover other costs. Here’s what the website says about this issue:

When a payment becomes late

You can claim interest and debt recovery costs if another business is late paying for goods or a service. If you agree a payment date, it must usually be within 30 days for public authorities or 60 days for business transactions. You can agree a longer period than 60 days for business transactions – but it must be fair to both businesses. If you do not agree a payment date, the law says the payment is late 30 days after either:

  • the customer gets the invoice
  • you deliver the goods or provide the service (if this is later)

The instructions also set a statutory rate of interest that you can charge:

The interest you can charge if another business is late paying for goods or a service is ‘statutory interest’ – this is 8% plus the Bank of England base rate for business to business transactions. You cannot claim statutory interest if there’s a different rate of interest in a contract.

You cannot use a lower interest rate if you have a contract with public authorities.

And finally, you can recover debt recovery costs:

You can also charge a business a fixed sum for the cost of recovering a late commercial payment on top of claiming interest from it. The amount you’re allowed to charge depends on the amount of debt. You can only charge the business once for each payment.

Amount of debt

What you can charge

Up to £999.99


£1,000 to £9,999.99


£10,000 or more


These amounts are set by late payment legislation. If you’re a supplier, you can also claim for reasonable costs each time you try to recover the debt.

It has also been reported that Philip Hammond is keen to pep-up this process for small businesses, including a requirement for listed companies to report on their performance in annual reports and accounts.

Commercially, this availability to charge interest would rarely be pursued if a continuing relationship with a customer was desired, but if all else has failed, look to your terms and conditions of sale, and if these exclude provisions to charge interest, then perhaps the above statutory rights will help you to get your invoice paid.

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