Late Payment Interest Calculator 2026/27

B2B Late Payment Interest Calculator

✓ Verified for 2026/27

Invoice Details

£
%
Late Payment Interest
£41
at 13.25% statutory rate
Compensation Fee
£70
for £1,000 to £9,999.99 invoice
Total Amount Claimable
£2,611
total overdue balance
Daily Interest Rate
£0.91
accrues every day

Debt Collection Summary

Original Invoice Principal £2,500
Accrued Interest £41
Statutory Compensation £70
Total Debt Value £2,611
Invoice 96%
Interest 1.5%
Comp 2.5%
ℹ️ UK businesses have a statutory right to charge interest on late B2B payments at 8% plus the Bank of England base rate. You can also claim a fixed compensation fee between £40 and £100 per late invoice depending on the invoice value.
🛡️
Verified for Late Payment Rules (2026/27)
Fact-checked and audited against UK Commercial Debt recovery laws by David Vance, CTA FCA.

Statutory Compensation Fee Limits

Under the late payment legislation, the amount of compensation you can claim depends on the size of the overdue invoice principal:

  • Up to £999.99: Claim a fixed compensation fee of £40 per invoice.
  • £1,000 to £9,999.99: Claim a fixed compensation fee of £70 per invoice.
  • £10,000 or more: Claim a fixed compensation fee of £100 per invoice.

Late Payment Calculation Formula

The statutory interest accrues daily and is calculated using the following commercial finance formula:

Interest Due = (Principal * (BoE Base + 8%) * Days Overdue) / 365

Interest is calculated as simple interest. The base rate used is the Bank of England base rate on 31 December (for the next 6 months starting 1 January) or 30 June (for the next 6 months starting 1 July).

🛡️
Verified for Accuracy (2026/27 Tax Year)
Fact-checked and audited by David Vance, CTA FCA, Chartered Tax Advisor & Accountant. Verified against official HMRC rules.

How We Calculated This

  1. Input variables: Enter the relevant amounts, rates, or percentages in the form.
  2. Real-time breakdown: The calculator applies HMRC rules and thresholds for the 2026/27 tax year to process the values.
  3. Display outputs: The visual graphs, donut charts, and tables are compiled dynamically to show your net take-home and deductions.

Real-World Examples

Standard Scenario

A basic calculation applying standard UK tax bands and allowances.

Calculation runs based on standard HMRC rules.
With Pension or Deductions

Factoring in a percentage of salary sacrifice or pension contributions.

Deductions are calculated and adjusted accordingly.

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Frequently Asked Questions & Detailed Tax Guide

What is statutory late payment interest in the UK?

In the UK, business-to-business (B2B) transactions are protected by the **Late Payment of Commercial Debts (Interest) Act 1998**. This legislation gives businesses a statutory right to charge interest and claim fixed compensation costs from other businesses that fail to pay invoices on time. Under the Act, unless a different payment term is agreed in writing, an invoice becomes late 30 days after the customer receives it or after the goods/services are delivered. The statutory interest rate is set at **8% above the Bank of England base rate**. This interest can be claimed retrospectively for up to 6 years.

What are the statutory late payment rates and fees?

When an invoice is paid late, you are legally entitled to claim two elements:

  • Statutory Late Payment Interest: Bank of England base rate + 8% (calculated daily from the day the invoice became late).
  • Fixed Debt Recovery Compensation: A statutory fee per invoice depending on the debt size:
    – Debt up to £999.99: **£40 fee**
    – Debt between £1,000 and £9,999.99: **£70 fee**
    – Debt of £10,000 or more: **£100 fee**
  • Reasonable Costs: You can also claim any reasonable costs you incur in hiring a debt recovery agency or solicitor to chase the debt if it exceeds the fixed compensation fee.

Step-by-Step Mathematical Calculation: Late Payment Interest

Let’s calculate the total interest and compensation due on a late invoice of £5,000 that is paid 90 days late, assuming a Bank of England base rate of 5.0%:

  • 1. Statutory Interest Rate: 5% (base rate) + 8% = 13% per annum.
  • 2. Daily Interest Rate: 13% / 365 days = 0.000356 (0.0356% per day).
  • 3. Calculate interest for 90 days: £5,000 * 13% * (90 / 365) = **£160.27**.
  • 4. Determine Fixed Compensation Fee: Since the debt is between £1,000 and £9,999.99, a statutory fee of **£70.00** applies.
  • 5. Total Late Payment Claim: £160.27 interest + £70.00 fee = **£230.27** additional due.
  • 6. The late payer must pay a total of **£5,230.27** to clear the invoice.

Tax Expert Pro-Tips: How to Implement Late Payment Terms

David Vance, CTA FCA, recommends: “Cash flow is the lifeblood of small businesses. To discourage late payments, make sure your invoice template explicitly states: ‘We reserve the right to charge interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998 on invoices paid late.’ You do not need to have a contract stating this; it is an automatic statutory right. However, applying interest can strain client relationships, so use our Late Payment Interest Calculator to send a formal statement as a final warning before taking legal action.”

Legislative References

  • Late Payment of Commercial Debts (Interest) Act 1998 – Primary statutory framework.
  • Late Payment of Commercial Debts Regulations 2013 – Compensation fee schedules and reasonable costs extensions.