Late payment is one of the most common cash flow problems for any business. UK law gives you clear rights when another business pays you late. This guide walks through them in order, using GOV.UK guidance. It covers invoices to other businesses and public authorities, not to consumers.
1. Check the invoice is actually late
If you agreed a payment date, the invoice is late the day after it. If you did not agree one, GOV.UK says payment is late 30 days after the customer receives the invoice or after you deliver the goods or service, whichever is later. GOV.UK says an agreed payment date must usually be within 60 days for business transactions and 30 days for public authorities.
Our invoice due date calculator works out the date for you.
2. Make sure your invoice is complete
A customer can delay paying an invoice that is missing details. GOV.UK says an invoice must include:
- a unique identification number
- your business name, address and contact details
- the customer's name and address
- a clear description of what you are charging for
- the date the goods or service were provided, and the date of the invoice
- the amount being charged, VAT if it applies, and the total amount owed
Sole traders and limited companies must also show some extra details, which GOV.UK lists.
3. Send a polite reminder, then a firm one
Start with a short, friendly reminder that quotes the invoice number, amount and due date, and says how to pay. If that does not work, send a firmer note that says you are entitled to statutory interest and recovery costs on late commercial payments. An AI assistant such as ChatGPT can draft the wording from your notes. Check every figure and date yourself before you send it.
4. Add statutory interest
Unless your contract sets a different rate, you can claim statutory interest of 8% plus the Bank of England base rate on late business payments. You cannot claim statutory interest if your contract already sets out a different interest rate. GOV.UK gives a worked example, on a £1,000 debt with a base rate of 0.5%, yearly interest is £85, which is about 23p a day, so 50 days late adds £11.50.
When you add interest, GOV.UK says to send a new invoice. Our late payment interest calculator works out the amount using the GOV.UK method.
5. Add fixed recovery costs
You can also claim a fixed sum for the cost of recovering the debt, once per late payment:
- £40 for a debt up to £999.99
- £70 for a debt of £1,000 to £9,999.99
- £100 for a debt of £10,000 or more
GOV.UK says suppliers can also claim reasonable costs beyond these fixed amounts.
6. Make the next invoice easier to collect
Put your payment terms on every quote and invoice, and send invoices as soon as the work is done. Accounting apps such as FreeAgent and Xero handle invoicing and bookkeeping in one place, so you can see who owes you money.
Questions
When is an invoice legally late in the UK?
If no payment date was agreed, GOV.UK says payment is late 30 days after the customer receives the invoice or after the goods or service are delivered, whichever is later. If a date was agreed, it is late after that date.
How much interest can I charge on a late invoice?
For business customers you can claim statutory interest of 8% plus the Bank of England base rate, unless your contract sets a different rate.
Can I charge a fee for chasing a late payment?
Yes. You can claim fixed recovery costs of £40, £70 or £100 depending on the size of the debt, once per late payment, and GOV.UK says suppliers can also claim reasonable extra costs.
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Sources
- GOV.UK, late commercial payments
- GOV.UK, charging interest on commercial debt
- GOV.UK, claiming debt recovery costs
- GOV.UK, what an invoice must include
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