Late Payment of Commercial Debts Act 1998 — what every UK contractor needs to know

The Late Payment of Commercial Debts (Interest) Act 1998 gives you the legal right to charge statutory interest on overdue invoices. It applies to almost every B2B transaction in the UK. Most contractors don't use it. Most clients are counting on that.

What does the Late Payment Act entitle you to?

Three things:

1. Statutory interest at 8% over base rate

Bank of England base rate plus 8%. As of 2026 thaaround 13% per year. You can charge this from the day after the invoice was due. You don't need to include it in your original invoice — you can add it later.

2. Fixed debt recovery costs

| Invoice amount | Fixed fee you can claim | |---|---| | Under £1,000 | £40 | | £1,000 to £9,999.99 | £70 | | £10,000 or more | £100 |

These are automatic. No court order needed. They're yours the moment the invoice goes overdue.

3. Reasonable legal costs

If the fixed fee doesn't cover your actual recovery costs, you can claim the difference — solicitor fees, court costs, the lot.

When does the Act apply?

• Both parties are businesses (not consumer contracts)
• There's no agreed payment term, OR the agreed term is under 60 days
• The invoice has been delivered correctly

If you agreed 30-day payment terms, interest starts from day 31. If no terms were agreed, the default is 30 days from invoice date.

Construction-specific rules

The Housing Grants, Construction and Regeneration Act 1996 addtection for construction work:

• Payment notices: The client must issue a payment notice showing what they're paying and when
• Pay-less notices: If they want to pay less than your invoice, they must say so at least 5 days before the payment date
• Adjudication: You can take construction disputes to fast-track adjudication at any time — no need to wait for court
• No pay-when-paid: Clauses saying subcontractors only get paid when the main contractor gets paid are void

How to calculate statutory interest

Interest = (Invoice amount × statutory interest rate × days overdue) ÷ 365

Example: £5,000 invoice, 13% rate, 60 days overdue

(5,000 × 0.13 × 60) ÷ 365 = £107.12 interest

Plus £70 fixed recovery fee = £177.12 you can legitimately add to the invoice.

Use Certi's free Late Payment Calculator to calculate this automatically.

How to use the Act in practice

Step 1: Make sure your invoices state paymenrly. "Payment due 30 days from invoice date" is clean and enforceable.

Step 2: When an invoice goes overdue, send a letter or email that references the Late Payment of Commercial Debts Act 1998, states the original invoice amount and due date, calculates the daily interest rate, states the fixed recovery fee, and sets a 7-day deadline. Most clients pay when they see the Act referenced.

Step 3: If they still don't pay — escalate. Adjudication for construction contracts. Small claims court for amounts up to £10,000. The interest keeps accumulating every day they don't pay. That's your leverage.

How Certi automates this

Manually tracking overdue invoices, calculating statutory interest, writing legal demand letters — it's time you don't have.

Certi's 7-stage automated payment escalation does all of it the moment an invoice goes overdue:

1. Friendly payment reminder
2. Second reminder with invoice copy
3. Statutory interest notice (Late Payment Act)
4. Formal overdue notice
5. Final warnin-day ultimatum
6. Legal demand letter
7. Debt recovery referral

Every stage logged, timestamped, and stored as evidence. Every invoice earning statutory interest automatically from day one of being overdue.

Start your free 10-day trial — no card required

Frequently asked questions

Can I charge statutory interest if I didn't mention it in my contract? Yes. The Act applies by default to all B2B transactions. You don't need to include it in your contract.

Does it apply to sole traders? Yes. Sole traders are businesses for this purpose.

Can I claim on invoices that are already overdue? Yes, as long as they haven't been settled or written off.

What if my client is a homeowner, not a business? The Act applies to B2B only. Different consumer protection rules apply for domestic customers.

Can a client refuse to pay the statutory interest? They can try. But it's legally owed. If it goes to court, you'll recover it — plus likely your legal costs.

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This guis for general information. For specific legal advice, speak to a solicitor or Citizens Advice.