Late payment interest: what you can charge when a business pays late

In the EU and the UK, the law gives you a right to late payment interest and a fixed sum when another business pays your invoice late, even if your contract says nothing about it. In the US and Australia, you generally need to agree it in your terms first. This page explains the rules and links to the official sources. It is general information, not legal advice.

Last checked 28 October 2026.

The short version

  • European Union: statutory interest of at least the European Central Bank reference rate plus 8 percentage points, and at least €40 for each late payment, under the Late Payment Directive 2011/7/EU. Some countries give more.
  • United Kingdom: statutory interest of 8% a year above the Bank of England base rate, plus a fixed £40, £70 or £100 depending on the size of the debt, under the Late Payment of Commercial Debts (Interest) Act 1998.
  • United States and Australia: no general law gives you interest or a fee on a late business invoice. You can charge what your customer agreed to in your contract or terms, within local law.
  • These rules are about sales between businesses, and in the EU also to public authorities. They do not let you add interest to a consumer’s bill.

General information, not legal advice. Your contract and the law that applies to it decide what you can charge in your case. For large amounts or disputes, ask a lawyer or your local business support service.

European Union: the Late Payment Directive

Directive 2011/7/EU covers payments for goods and services between businesses, and between businesses and public authorities. EU countries had to put it into national law by 16 March 2013, and they may keep or adopt rules that are more favourable to the supplier. The exact rules therefore depend on the country whose law applies to your contract.

When an invoice is late

  • If your contract sets a payment date or period, interest runs from the day after it.
  • If no date was agreed, payment is due 30 calendar days after your customer receives the invoice. If that date is uncertain, or the invoice arrives before the goods or services, the 30 days run from when the goods or services were received.
  • Between businesses, agreed payment periods should not be longer than 60 calendar days, unless expressly agreed and not grossly unfair to the supplier.
  • Public authorities generally have 30 days to pay. Some, such as public healthcare providers, may be allowed up to 60.

Statutory interest

The minimum rate is the reference rate plus 8 percentage points, charged as simple interest. In the euro area, the reference rate is the European Central Bank’s main refinancing rate in force on 1 January for the first half of the year, and on 1 July for the second half. Countries outside the euro use their own central bank’s equivalent rate. You do not need to send a reminder first: interest is due from the day after the due date.

Example: the ECB rate in force on 1 July 2026 was 2.40%, so where the ECB rate applies, the minimum statutory rate for the second half of 2026 is 10.40% a year. On a €5,000 invoice paid 30 days late, that is about €42.74 (5,000 × 10.40% × 30 ÷ 365).

Countries can set a higher rate. In Germany, for example, the rate between businesses is 9 percentage points above the German base rate (Basiszinssatz), under § 288 of the German Civil Code. Check the rate published for the country whose law applies to your contract.

At least €40 for recovery costs

When interest becomes payable, you are also entitled to a fixed sum of at least €40 as compensation for your own recovery costs, again without a reminder. The EU Court of Justice has confirmed that this sum is due for each late payment, not once per contract. If your reasonable recovery costs are higher, for example a collection agency’s fee, you can claim reasonable compensation for the costs above €40.

Grossly unfair terms

A contract term or practice about the payment date or period, the interest rate or recovery costs that is grossly unfair to the supplier is either unenforceable or gives the supplier a claim for damages, depending on national law.

The proposed EU Late Payment Regulation

In September 2023, the European Commission proposed replacing the directive with a regulation that would apply directly in every EU country, with a strict 30-day maximum payment term and automatic payment of interest and compensation. The European Parliament adopted its position on 23 April 2024, which would allow terms of up to 60 days between businesses when expressly agreed.

The Council of the EU has not agreed to the proposal. As of September 2026, the European Parliament’s legislative tracker lists the file as blocked in the Council. Until a new law is adopted, the 2011 directive and the national laws based on it still apply.

United Kingdom: the Late Payment Act

The Late Payment of Commercial Debts (Interest) Act 1998 applies to contracts between businesses for goods or services. It writes a right to statutory interest and compensation into those contracts, so you have it even if your contract does not mention late payment.

When a payment is late

  • If you agreed a payment date, payment is late after that date. GOV.UK says agreed dates must usually be within 60 days for business transactions and 30 days for public authorities; longer periods between businesses are possible if they are fair to both.
  • If you did not agree a date, payment is late 30 days after your customer receives the invoice or you deliver the goods or service, whichever is later.

Statutory interest

The rate is 8% a year above the Bank of England base rate. For interest that starts to run between 1 July and 31 December, the base rate in force on 30 June applies; for interest that starts between 1 January and 30 June, the rate on 31 December. Bank Rate was 3.75% on 30 June 2026, so statutory interest on debts that became late in the second half of 2026 is 11.75% a year.

GOV.UK suggests working it out per day. On a £2,000 debt: £2,000 × 11.75% = £235 a year, divided by 365 is about 64p a day, so about £19 after 30 days.

Fixed sum for recovery costs

  • Debt under £1,000: £40
  • Debt of £1,000 to £9,999.99: £70
  • Debt of £10,000 or more: £100

You can claim the fixed sum on top of interest, once for each late payment. If your reasonable costs of recovering the debt are higher than the fixed sum, you can claim the difference as well.

If your contract sets its own rate

GOV.UK explains that you cannot claim statutory interest if your contract sets a different rate of interest for late payment. The Act only lets a contract replace statutory interest when the contract gives a “substantial remedy” for late payment. GOV.UK also advises sending a new invoice if you decide to add interest to what you are owed.

United States and Australia

United States

There is no general federal law that gives a business interest or a fixed fee when another business pays late. What you can charge comes from your contract or the payment terms your customer accepted, such as a monthly percentage on overdue balances, and it must stay within your state’s laws, which limit interest rates and set rules for unpaid debts.

The federal Prompt Payment Act works in the other direction: it requires federal agencies to pay their bills on time and to pay interest when they pay a supplier late.

Australia

Australia also has no general law that adds interest or a fee to a late business invoice. Payment terms form part of your contract, so set out any late payment interest or fee in your quotes, contracts and invoices before you start the work, and make sure your customer agrees to them.

Under the Payment Times Reporting Scheme, large businesses with annual revenue over A$100 million must report every six months how quickly they pay their small business suppliers. The scheme makes slow payers visible, but it does not set a maximum payment term or give you a right to interest.

How to mention interest in your payment reminders

Our payment reminders never add interest or fees by themselves. The ready-made texts ask for the amount you entered and, from 14 days late, ask for payment within 7 days, but they do not mention interest. To mention it, write your own text for the later stages under Reminder settings, which is available on the Pro plan and in the free trial.

There is no placeholder for an interest amount, because the tool does not calculate one. Name the rate and the fixed sum in words, and send the interest as a separate invoice, which you can add to Payment reminders like any other invoice. For example, for the 14-day stage in the UK:

Invoice {invoice} for {amount} was due on {due_date} and is now {days} days overdue. Please pay it within 7 days.

Under the Late Payment of Commercial Debts (Interest) Act 1998, we are entitled to statutory interest of 8% a year above the Bank of England base rate and a fixed sum for our recovery costs. We would rather not claim them, so if something is holding up payment, please reply and let us know.

And for a customer in the EU:

Invoice {invoice} for {amount}, due on {due_date}, is now {days} days overdue. Please pay it within 7 days.

Under our payment terms and the late payment law that applies to our contract, overdue payments between businesses carry statutory interest and a fixed compensation of at least €40. If we do not receive payment, we will invoice these separately.
  • Only mention interest you are entitled to and are prepared to claim.
  • Keep the first reminders friendly; many late payers have simply forgotten. Interest belongs in the 14-day or 30-day reminder.
  • Own texts are kept per language. Write the text with the interest wording in each language you remind customers in; invoices in a language without your own text get the ready-made one, which does not mention interest.
  • Keep a record. Each invoice’s history in Payment reminders shows the date and time of every reminder.

Before claiming interest, check your contract, the date your customer received the invoice and the rate for the right period. The worked examples on this page are illustrations, not a calculation for your invoice.

Questions

Do I have to warn my customer before interest starts?

Under the EU directive, interest and the €40 fixed sum are due without a reminder. In the UK, the Act writes the right to interest into business contracts automatically. In practice, it still helps to state your payment terms on every invoice and to remind the customer before you claim anything, because a reminder is often all it takes.

Can I charge late payment interest to consumers?

The EU directive and the UK Act only cover transactions between businesses, and in the EU with public authorities. For consumers, you can generally only charge what was clearly agreed in advance, and consumer protection rules apply. Check the rules in your country before adding fees to a consumer’s bill.

Can I claim both interest and the fixed sum?

Yes. In the EU, the fixed sum of at least €40 comes in addition to interest, and you can claim reasonable recovery costs above it. In the UK, the fixed sum of £40, £70 or £100 comes on top of statutory interest, and you can claim reasonable recovery costs above it too.

Which country’s rules apply if my customer is abroad?

Usually the law named in your contract or terms of business. If none is named, the rules on cross-border contracts decide, and for sales of goods and services that is often the law of the supplier’s country. For important amounts, get advice before you claim.

Does the payment reminders tool calculate interest?

No. It reminds your customer of the amount you entered for the invoice. On the Pro plan you can mention your right to interest in your own reminder texts, and add the interest as a separate invoice so that it gets its own reminders.

Sources

General information, not legal advice. Laws and dates change; check the sources or ask an adviser for your situation.