Debt Recovery

Claim Statutory Interest on Unpaid Invoices

Your client owes you money for work delivered and hasn't paid. Under the Late Payment of Commercial Debts Act 1998, you can claim statutory interest and debt recovery costs on top of the invoice amount. Learn how to calculate, notify the debtor, and claim in small claims court.

Quick Answer

For unpaid invoices over 30 days late, you can claim statutory interest at 8% plus Bank of England base rate (currently around 8.75%, as of April 2026). You can also claim fixed debt recovery costs: £40-£100 depending on debt size. Send a formal demand letter citing the Act. If unpaid after 30 days notice, claim in small claims court. The interest compounds, so the longer the debt is unpaid, the more you can claim.

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Late Payment of Commercial Debts Act 1998

This Act gives business creditors (self-employed, contractors, small businesses) the automatic right to claim statutory interest on invoices unpaid after their due date. There is no need to contract in to this right - it applies automatically unless you waived it in writing in advance. The interest rate is the Bank of England base rate plus 8 percentage points, currently around 8.75%.

Interest Calculation Formula

Interest = (Debt Amount × (Base Rate + 8%) × Days Late) / 365. For a £1,000 invoice 60 days late at 8.75%, interest is approximately £14.38. The interest accrues daily and continues until paid.

Fixed Debt Recovery Costs

Under the Act, you can also claim fixed costs for debt recovery: £40 for debts under £100; £70 for £100-£999; £100 for £1,000 or more. These are separate from interest and cover administrative costs of chasing the debt.

When the Act Applies

The Act applies to invoices from businesses, government bodies, and public authorities. It does not apply to consumer debts (money owed by individuals for personal use). Your customer must be a business or organisation. If they are a consumer, the Act doesn't apply, but you can still sue for the debt in small claims.

How to Claim Interest Step-by-Step

  1. Check the invoice due date. If no date specified, it is 30 days from invoice date (implied term).
  2. Once 30 days late, send a formal demand letter stating: invoice number, date, amount owed, due date, interest rate, costs, and final deadline for payment (14 days recommended).
  3. Calculate interest and costs at the date of the letter. Example: £1,000 invoice, 60 days late = £1,014.38 plus £100 costs = £1,114.38 total due.
  4. If unpaid after 14 days notice, claim in small claims court (under £5,000) or county court (£5,000+). Include invoice, demand letter, proof of service, and interest calculation.
  5. Tribunal or court will award the debt plus interest accrued to the judgment date.

Statutory Rates (April 2026)

Bank of England base rate currently 5.25% (check current rate as it changes). Statutory interest rate is base rate plus 8%, approximately 8.75% per annum. This rate applies to most commercial debts under the Act.

Legal Framework

Late Payment of Commercial Debts (Interest) Act 1998 s.4 sets out the statutory rate. The rate automatically adjusts on 1 January and 1 July each year as the base rate changes. You do not need to contract in - the right applies automatically unless waived in writing before supply.

Do You Need Help?

WageReclaim can help calculate interest, draft a demand letter, and file a small claims court claim if the debtor doesn't pay.

What the Law Says

Legislation
Late Payment of Commercial Debts Act 1998
Gives automatic right to statutory interest and recovery costs on unpaid business invoices. Right applies unless waived in writing before supply.
Interest Rate
Base Rate + 8%
Currently around 8.75%. Rate adjusts 1 January and 1 July with base rate changes. Accrues daily until debt paid.
Costs
Fixed Recovery Costs
£40 under £100; £70 for £100-£999; £100 for £1,000+. Payable separately from interest.
Time Limit
6 Years
Can claim interest and debt for up to 6 years from the original due date.

Frequently Asked Questions

Can I claim interest on invoices from individuals? +
No. The Late Payment Act only applies to business-to-business debts. If your customer is a consumer (individual), the Act doesn't apply. You can still sue for the debt in small claims, but not statutory interest.
What if the invoice has no payment terms? +
If no due date is specified, it defaults to 30 days from the invoice date under the Act. After day 30, you can claim interest and costs.
Can the customer refuse to pay interest? +
No. The right to interest applies automatically unless they obtained your written agreement to waive it BEFORE you supplied the goods/services. Attempts to exclude interest after the fact do not work.
How long does interest accrue? +
Interest accrues daily from the due date until the debt is paid. Even if you sue and get a judgment, interest continues to accrue on the unpaid judgment debt at 8% per year.
Can I claim interest on government or council debts? +
Yes. Central and local government bodies are covered by the Act. Many government bodies are notoriously slow payers. The Act applies fully to them.
What if the debt is partially paid?
Interest accrues on the unpaid portion. If £1,000 is due and they pay £500, interest continues on the remaining £500 until paid.

Claim Your Statutory Interest

Use WageReclaim to calculate interest, draft a demand letter, and file a small claims court claim.

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