How much can I charge for a late payment fee UK?

Under the Act, you can charge statutory interest (currently 11.75% a year) plus fixed compensation of £40 to £100 depending on the size of the debt, automatically, on any qualifying B2B invoice. On top of that, you can only charge a fee you set yourself in your contract if your client agreed to that term in advance and it isn't an unenforceable penalty.

Is a late payment fee the same as interest?

No. Interest is a specific entitlement calculated as a percentage of the debt over time. A "late payment fee" is a looser phrase people use for interest, for the separate fixed compensation sum, or for a flat charge a business sets in its own terms. They can overlap on the same invoice, but they are not the same thing.

Can I charge a late payment fee without a contract?

Yes, if you mean statutory interest and fixed compensation: both apply automatically to a qualifying business-to-business debt with no contract needed, written or otherwise. A custom late fee you've invented yourself is different. Without your client having agreed to it, you generally cannot enforce that specific figure.

What's the difference between a late payment fee and a late payment charge?

In practice, none. Both phrases are used loosely by different people to mean the same cluster of things: statutory interest, fixed compensation, or a self-set contractual fee. Neither term has a fixed legal meaning of its own, which is exactly why it is worth checking which one actually applies before you quote a figure to a client.

How do I calculate a late payment fee on an overdue invoice?

Work out statutory interest first: invoice amount × 11.75% ÷ 365 × days overdue. Add fixed compensation of £40, £70, or £100 depending on the debt size. If your contract also has your own late fee clause, add that too, provided your client agreed to it. See the worked example above for how these three add up on a real invoice.

Money & Your Rights

Late Payment Fees, Interest, and Compensation: What's the Difference, and What Can You Actually Charge?

9 min read·Published 30 July 2026

Not legal advice

NudgeBadger provides tools, templates, and general guidance only. We are not solicitors, and nothing on this page is legal advice. It's written to help you understand the process, not to tell you what to do in your specific situation. If your case is complex, high-value, or already disputed, speak to a qualified solicitor before relying on anything here.

In this guide

1. The three things people call a 'late payment fee'
2. Statutory interest
3. Fixed compensation
4. Can you set your own late fee in your contract?
5. So what can you actually charge? A worked example
6. Common myths about late payment fees
7. FAQ

"Late payment fee", "late payment charge", "interest", and "compensation" get used as if they're all the same thing. They aren't, and the difference matters, because only some of them are yours to charge automatically under UK law.

This guide untangles the terminology first, then sets out exactly what you can charge, under which name, and how those figures stack up on a real invoice.

£5,230

the average amount a self-employed worker is owed in late payments at any one time

IPSE, Late Payment Within the Self-Employed Sector

54%

of self-employed workers have experienced a late payment in the past year

IPSE, Pay Up: How to End Late Payment

11.75%

the current statutory interest rate a year, one of the entitlements this confusion usually hides

Bank of England, Bank Rate

1. The three things people call a "late payment fee"

Search for "late payment fee UK" and you'll find the phrase attached to at least three different things. Only one of them requires you to have agreed anything in advance.

Late payment fee vs late payment charge: what people actually mean
What people call it	What it actually is	Automatic under UK law?	How it's calculated
Statutory interest	Interest charged under the Late Payment of Commercial Debts (Interest) Act 1998	Yes	Bank of England base rate + 8%, simple interest, calculated daily
Fixed compensation	A one-off flat sum toward the cost of recovering the debt, set by the same Act	Yes	£40, £70, or £100 depending on the size of the debt
A contractual late fee	A fee you write into your own terms and conditions	No, only if your client agreed to it	Whatever you specify, within the limits of contract law

The first two are statutory rights. They exist because Parliament put them into law, and they apply to a qualifying invoice whether or not you ever mentioned them. The third is something you'd have to build into your own terms, and it comes with real limits on what you can enforce.

Tip

This table is the short version. The next two sections link out to our full guides on statutory interest and compensation rather than repeating them here, so you can go straight to the detail you actually need.

2. Statutory interest

Statutory interest is what most people mean when they eventually work out what they're actually entitled to. It's calculated at the Bank of England base rate plus a fixed 8% set by the Act, currently a combined 11.75% a year, checked 5 July 2026.

It applies automatically to a qualifying business-to-business invoice once it's overdue, with no contract clause needed. For the full legal basis, the current rate, and how it interacts with your own contract terms, see our guide to late payment interest and compensation in the UK. For the step-by-step of actually working out the figure and telling your client, see how to charge interest on overdue invoices.

3. Fixed compensation

Fixed compensation is the second statutory entitlement, and the one most often left out of the "late payment fee" conversation entirely. It's a flat sum you can add on top of interest, set by the size of the debt, not by what you actually spent chasing it.

Fixed compensation bands under the Late Payment of Commercial Debts (Interest) Act 1998
Debt value	Fixed compensation
Less than £1,000	£40
£1,000 to £9,999.99	£70
£10,000 or more	£100

Source: GOV.UK, claim debt recovery costs on late payments

You don't need a receipt or a timesheet to justify it. Our late payment interest and compensation guide covers this in full, including what happens when your actual recovery costs run higher than the fixed band.

4. Can you set your own late fee in your contract?

This is the part neither of our other guides covers, and it's usually where the real confusion starts. Yes, you can write a late fee clause into your own terms and conditions, on top of the statutory rights above. But it only bites if your client agreed to it before the work started, and it has real limits.

A contractual late fee sits alongside statutory interest, not instead of it. Your client can't use a self-set fee to argue their way out of the statutory rate, and you can't assume a clause buried in terms they never actually saw will hold up either.

The penalty clause limit

Under English contract law, a fee that's disproportionate to your genuine likely loss, or clearly designed to punish late payment rather than compensate for it, risks being struck out as an unenforceable penalty clause. A late fee that's a modest, reasonable reflection of your actual admin cost is far more defensible than a large flat charge picked to intimidate. If in doubt, keep it modest and be able to justify the figure.

This is exactly the kind of term that's easy to set once and then forget to apply consistently. Invoicing software like Sage^(affiliate) can store a custom late fee clause against your terms and apply it automatically once an invoice goes overdue, rather than relying on you to remember it invoice by invoice.

5. So what can you actually charge? A worked example

Take a £4,500 invoice that's 35 days overdue, with a standard set of terms and no separate late fee clause agreed in advance. Here's what the statutory rights alone are worth at the current rate.

Worked example: £4,500 invoice, 35 days overdue
Item	Amount
Original invoice	£4,500.00
Days overdue	35 days
Statutory interest (£4,500 × 11.75% ÷ 365 × 35)	£50.70
Fixed compensation	£70.00
Total now due	£4,620.70

£120.70 on top of the original amount, and every penny of it automatic. If this client's terms also included a genuine, pre-agreed late fee clause, that would be added on top again, provided it's reasonable enough to survive a challenge.

Work out your own figure

Our free late payment interest calculator works out the statutory interest and compensation for the invoice you're chasing right now, correct rate, correct days, no spreadsheet.

6. Common myths about late payment fees

"The fee is optional, so it doesn't matter what I call it": statutory interest and compensation apply automatically regardless of whether you used the word "fee", "charge", or nothing at all on your invoice.
"I can charge whatever late fee I like": a fee set purely to punish late payment, rather than reflect a genuine cost, risks being unenforceable as a penalty clause.
"Fees only apply if there's a signed contract": statutory interest and compensation apply with no contract at all, written or otherwise. Only a custom fee needs prior agreement.
"A late payment fee and a late payment charge are legally different things": they aren't. Both are informal labels for the same cluster of statutory and contractual entitlements.
"Compensation is just another word for interest": they're two separate entitlements under the same Act, and you can claim both together on the same invoice.

7. FAQ

"Late payment fee" isn't a single legal term. People use it to mean statutory interest, fixed compensation, or a custom late fee written into someone's own contract, and only some of those apply automatically under UK law. Statutory interest and fixed compensation come from the Late Payment of Commercial Debts (Interest) Act 1998. A custom late fee is something you'd have to agree with your client in advance, in your terms.

Statutory interest and fixed compensation are enforceable automatically, because Parliament put them into the Act. A custom late fee you've written into your own terms is enforceable only if your client agreed to it, and only if it's a genuine attempt to cover your likely loss rather than a punishment. A fee set purely to scare a client into paying on time risks being struck out as an unenforceable penalty clause.

The NudgeBadger Team

Credit control & invoicing

We write and maintain NudgeBadger’s letter templates and escalation guidance for UK freelancers and small businesses.

Last reviewed: 30 July 2026

Know what you're owed, stop guessing at the terminology

NudgeBadger works out the statutory interest and compensation you're entitled to and builds it straight into a properly worded letter, free to try.