How to Charge Interest on Overdue Invoices: A UK Step-by-Step Guide

Yes, you can charge interest on an overdue invoice in the UK, and here's exactly how to do it.

This guide skips the legal background and goes straight to the practical part: working out the figure you're owed, deciding when to apply it, and the actual wording to use when you tell a client without derailing the relationship. If an invoice on your desk is overdue right now, this is the guide for turning that into a number and a message.

1. Can you charge interest on an overdue invoice?

Yes, provided the debt qualifies. You need a business-to-business invoice (not a consumer buying for personal use), a debt that's genuinely overdue, and nothing else. You don't need a signed contract, a mention of interest on your original invoice, or your client's agreement. The right exists in law and applies the moment payment becomes late.

2. Work out what you’re owed

The calculation itself is simple interest, worked out daily on the original invoice amount, not compounded on anything already accrued.

Take a £2,400 invoice that's 30 days overdue. Here's what that actually adds up to at the current rate:

Doing that sum by hand for every overdue invoice gets old fast, especially once the base rate has changed since you last checked it. It's exactly the kind of repetitive calculation that accounting software like Sage^(affiliate) is designed to handle automatically, rather than a spreadsheet you have to remember to update.

If you're chasing more than one overdue invoice at a time, work out the figure separately for each one rather than combining them: they'll almost always have different due dates, different amounts, and so different numbers of days overdue, and lumping them together tends to produce a total nobody can actually check.

Keep a note of the exact due date and the day you're calculating from for each invoice. It sounds like overkill for one late payment, but the moment you're chasing three or four at once, or a single invoice drags on for months, that record is what stops the figure drifting out of date between one chase and the next.

3. When to start charging it

Interest starts accruing the day after the invoice's due date, whether or not you do anything about it. That's the legal answer. The practical answer is a bit more of a judgement call.

For most overdue invoices, it's worth applying interest retrospectively from the actual due date rather than only from today. The figure is small on a single invoice that's a few days late, so there's little downside to including it from day one.

Where it becomes a genuine decision is with a client you deal with repeatedly: adding three weeks of backdated interest to a first late payment from an otherwise reliable client can land as heavier-handed than the situation calls for, whereas a client who's chronically late, or one you're chasing for the first and possibly last time, is exactly where the full retrospective figure earns its keep.

One practical wrinkle worth knowing: the Bank of England base rate can move partway through the period an invoice has been overdue, which changes the combined statutory rate from that date onward.

If an invoice has been outstanding across an MPC decision, the technically correct approach is to apply each rate for the days it was actually in force, rather than using today's rate for the whole period. In practice, for most freelance-sized invoices chased within a few weeks of the due date, this makes only a marginal difference, but it's worth checking if a debt has dragged on for several months.

4. How to tell your client

This is the part most guides skip. Knowing the figure is only half the job: it has to land the right way, or it reads as either an empty threat or an overreaction. The wording that works states the legal basis, the rate, and the exact total, without apologising for it and without sounding aggressive.

Notice the last line: stating the interest plainly doesn't mean closing the door on a normal conversation. Tone matters as much as the figure itself, particularly with a client you want to keep. For the full playbook on getting that balance right across an entire chase, not just the interest line, see our guide on chasing invoices without damaging the client relationship.

5. Do you have to charge it?

No, and that's worth knowing before you send anything. The interest is a right, not an obligation, so you can choose not to claim it, claim it in full, or use it strategically.

• Waiving it as a goodwill gesture: with a client you value and who's paid late for the first time, saying you're not applying interest "on this occasion" can do more for the relationship than the money is worth.
• Holding it in reserve as leverage: mentioning that interest applies, without necessarily charging every penny of it yet, can be enough to get a slow payer moving, without escalating further than the situation needs.
• Enforcing it in full: with a persistent late payer, a client you no longer expect repeat work from, or a debt that's dragged on for months, there's little reason to leave it on the table.

The right call depends on the client and the amount, not a fixed rule. What matters is that it's your decision to make, rather than something forced on you by the invoice itself.

6. If they refuse to pay the interest

If a client disputes the invoice itself, deal with that first: interest only applies to a genuinely owed debt. But if they simply refuse to pay the interest while accepting the underlying invoice is due, restate the figure once, clearly, and then treat it as part of the same debt going forward rather than a separate argument.

From there, it follows the same escalation path as the rest of an unpaid invoice: a firmer written chase, then a formal letter before action if that's ignored, with the interest and compensation recalculated to the day and carried into the letter rather than dropped.

If that's ignored too, the same figures carry straight into a Money Claim Online claim. See our small claims court guide for exactly how that process works, from filing to judgment.

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