Late payment rights UK tradespeople (2026): Bank Rate + 8% and what to do

Late payment rights UK tradespeople (2026): Bank Rate + 8% and what to do

By InvoiceAdept Team26 February 2026Updated 1 September 202612 min read

Last reviewed: 1 September 2026
Author: InvoiceAdept Editorial
Sources checked today: GOV.UK late commercial payments, GOV.UK interest page, GOV.UK debt recovery costs, Bank of England Bank Rate, BoE Bank Rate history, OSBC interest calculator guidance, GOV.UK make a court claim for money.

This is a practical guide for UK trades and small suppliers who are waiting on overdue commercial invoices. It is not legal advice. Rules change; confirm on GOV.UK before you claim. For the arithmetic (daily rate, worked examples, reference dates), use the sister guide How to calculate late payment interest UK (2026) and the live late payment calculator.

Quick answer

Under the Late Payment of Commercial Debts (Interest) Act 1998 (as updated), when another business pays you late for goods or a service you can usually claim:

1. Statutory interest at Bank of England Bank Rate + 8% (simple interest, not compound).

2. Fixed compensation of £40, £70 or £100 per late invoice, depending on the debt size.

Checked on 1 September 2026: Bank Rate is 3.75% (held 30 July 2026; next MPC decision due 17 September 2026). While Bank Rate is 3.75%, the statutory annual rate is 11.75%. You do not always use “today’s” Bank Rate — use the six-month reference date rule (below).

This statutory route is for B2B debts. It does not automatically apply when you invoice a consumer / homeowner. InvoiceAdept helps you raise invoices, send reminders, and keep digital records — it does not file Money Claim Online, County Court claims, VAT returns, Self Assessment, MTD updates, or CIS300 returns for you.

What the Late Payment Act actually gives you

The working GOV.UK hub is Late commercial payments: charging interest and debt recovery. In plain English, for eligible commercial debts you get two money rights on top of the original invoice:

You do not need the buyer’s permission to claim statutory interest on an eligible B2B debt. Warning them is still good practice — most firms pay faster when they see a named daily £ figure.

Fixed compensation bands (do not mix these with interest rates)

Older blogs (including a previous version of this page) wrongly put “12%” in the same table as the £40 / £70 / £100 bands. Compensation is a fixed £ sum. Interest is a separate % rate. Keep them apart:

Three overdue invoices of £800 each can support three £40 claims (£120) plus interest on each — not one £40 for the whole relationship. You cannot charge interest and compensation again on the interest-and-compensation invoice itself if that second invoice is paid late (OSBC FAQ).

Current rates for 2026 (Bank Rate 3.75% → statutory 11.75%)

Do not copy stale “around 4.5% base / 12.5% statutory” figures from older articles. Do not copy GOV.UK’s teaching example that used a 0.5% base rate — that is an illustration only.

Which Bank Rate applies? The six-month reference rule

You do not always use today’s Bank Rate. OSBC’s interest calculator guidance sets the statutory reference dates:

For debts becoming overdue in 2026, both halves currently point at 3.75%:

If Bank Rate moves after 30 June 2026, that change does not rewrite the reference rate for debts that already became late in H2 2026. Always pick the rate from the correct reference date, then add 8%. Full worked examples live on How to calculate late payment interest UK.

Daily interest formula (GOV.UK style, 365-day year)

Daily interest = Invoice amount (incl. VAT) × (Bank Rate + 8%) ÷ 365
Interest owed  = Daily interest × number of days late

Interest starts the day after the payment was due. Quick sense-check at 11.75%:

Recalculate with your own days late and the late payment calculator. Round to the nearest penny when you raise the interest invoice.

Many UK tradespeople also find it helpful to review how to chase late invoice payments at this stage.

When is a payment “late”?

From the GOV.UK hub:

• If you agree a payment date, it must usually be within 30 days for public authorities or 60 days for business transactions. Businesses can agree longer than 60 days if it is fair to both.

• If you do not agree a payment date, payment is late 30 days after either the customer gets the invoice, or you deliver the goods / provide the service (whichever is later).

So “default 30 days” is the no-terms rule — not a ban on agreeing 14-day terms with other trades or main contractors. Put clear terms on the quote and mirror them on the invoice. See How to invoice a client (UK tradesperson).

Clock-start examples for trades

Business customers vs domestic customers

For consumers, a surprise statutory-style “Bank Rate + 8%” clause is risky under unfair-terms rules. Prefer deposits, clear scope, and easy payment. See the deposit invoice template UK.

Genuine disputes matter: OSBC guidance is that you cannot charge interest and compensation on an invoice paid late because of a dispute. Sort the dispute first, then chase undisputed overdue sums.

Contractual interest vs statutory interest

You can write your own late-payment clause into quotes and terms. Two GOV.UK points matter:

1. If the contract already sets a different interest rate, you generally cannot also claim statutory interest on top (GOV.UK interest page).

2. Public authorities cannot push you below the statutory floor.

A token 0.1% clause may not be a “substantial remedy.” A clear, commercially serious rate applied consistently is cleaner. If paperwork is silent on interest, statutory interest remains available for eligible B2B debts.

Suggested invoice wording for commercial clients (plain English, not a solicitor template):

> Late payment of commercial debts may incur statutory interest at 8% above the Bank of England Bank Rate under the Late Payment of Commercial Debts (Interest) Act 1998, plus fixed compensation of £40, £70 or £100 as set out on GOV.UK.

Practical escalation timeline for UK trades

Most overdue commercial invoices move when the buyer sees a specific daily figure and an easy way to pay. Escalate in steps — do not jump straight to court language on day one.

Adapt the calendar to job size and relationship. A trusted commercial client who is one week late after years of on-time payment deserves a phone call before a formal notice. A new main contractor who ghosts a £12,000 completion invoice does not.

What to put on the interest-and-compensation invoice

GOV.UK says: send a new invoice if you add interest. Keep it auditable:

1. Your business name, address, and (if VAT-registered) VAT number.

2. Buyer’s legal name as on the original job.

3. A unique interest-invoice number and issue date.

4. Clear reference: “Statutory interest and compensation on invoice INV-#### dated DD Month YYYY.”

5. Days late, annual rate used (e.g. 11.75%), daily rate, interest subtotal.

6. Fixed compensation band and amount.

7. Payment details (sort code / account, or Stripe link).

8. A short note that interest continues to accrue on the unpaid principal until that principal is paid (it does not restart on this interest invoice).

Do not invent “admin fees” that are neither the fixed sum nor evidenced reasonable costs.

If you are sorting this alongside other compliance work, read dealing with clients who will not pay.

Using Money Claim Online and the small claims track

For many debts within the small-claims band, Money Claim Online (MCOL) is the public route. Court fees are set by HMCTS and can usually be added to the claim. Keep invoices, quotes, variations, emails, reminder letters, and call notes as evidence.

High-level process (confirm live fees and steps on GOV.UK):

1. File the claim online with the amount owed, interest claimed, and compensation where applicable.

2. The defendant has a short window to pay, defend, or acknowledge.

3. No response → you may request a default judgment.

4. Defended claim → directions / hearing on the small claims track for suitable cases.

5. Judgment unpaid → enforcement options (bailiff / enforcement officer, attachment of earnings, charging order — take advice).

InvoiceAdept does not run MCOL for you, does not act as your solicitor, and does not file anything to HMRC or the court. If the sum or the dispute is material, speak to an adviser or solicitor before you issue.

Prevention beats recovery

Interest is a backstop. Cash on the due date is the goal.

InvoiceAdept plans (excl. VAT, from the live pricing page): Free — 5 invoices/month; Pro — £7.99/month; Pro+ — £12.99/month with CIS on the invoice. Company: Tech Me Today Ltd, Companies House 15917255, ICO ZB944663.

Same-day invoicing checklist

1. Photo or sign-off of completed work on site.

2. Materials and labour lines that match the quote (or a written variation).

3. Payment terms in plain English on the PDF and in the email / WhatsApp message.

4. Bank details and a card link if you are on Pro.

5. Send before you leave the driveway when the buyer is a business.

Late interest rarely fixes a quote that never stated terms. Put terms on the quote first, then mirror them on the invoice.

Deposits and staged billing

For jobs over a few hundred pounds, a deposit invoice plus a final invoice beats one giant bill stuck in a purchase-ledger queue. Staged billing on longer commercial works (first fix / second fix / completion) also reduces how much is exposed if the final certificate slips. Structure ideas: deposit invoice template UK.

Public-sector buyers

GOV.UK treats public authorities more tightly on payment periods (usually within 30 days) and will not let a public contract push interest below the statutory rate. If your customer is a council, NHS trust, academy, or similar, check the purchase order and framework terms — but do not assume a soft verbal “we always pay at 60 days” overrides the statute.

Related: see cashflow management for tradespeople for practical next steps.

What InvoiceAdept does — and does not — do

Digital invoice records, yes. Filing to HMRC or the court, no. Do not read this guide as tax or litigation filing advice.

Worked snapshot (aligns with the sister calculator guide)

Illustrative only — recalculate with your figures and the correct reference rate.

Commercial plumbing invoice £2,400 (incl. VAT), 14-day terms, 28 days late, overdue in H1 2026 → 11.75%:

Full tables and a larger £12,500 example: How to calculate late payment interest UK (2026). Cross-check with the late payment calculator.

Worth pairing this with our guide to handling deposit payments as a tradesperson.

FAQ

Can I charge statutory late payment interest to a homeowner?

Not under the commercial Late Payment Act route. That Act is for B2B. For consumers you need a fair contractual term, and consumer unfair-terms rules apply. Prefer deposits, clear terms, and easy payment methods.

What is the statutory interest rate right now?

While Bank Rate is 3.75%, statutory interest is 11.75% (Bank Rate + 8%). Always apply the six-month reference date rule — you may not use “today’s” rate if the debt became overdue in a different half-year. Confirm on the BoE Bank Rate page and OSBC guidance.

Is statutory interest compound?

No. It is simple interest on the overdue invoice amount (including VAT per OSBC). It does not compound onto previously accrued interest.

Do I have to warn the customer before charging interest?

Legally, for eligible B2B debts, the right is automatic. In practice, warn them: name the daily £ amount and the compensation band. Most buyers pay when they see the figure.

Does the fixed £40 / £70 / £100 apply per customer or per invoice?

Per payment (each late invoice), according to GOV.UK’s debt recovery costs page — not once per customer relationship.

Can a customer’s contract wipe out my statutory rights?

A contract can set a different interest rate (then you usually claim that rate instead of statutory). It cannot leave you with no substantial remedy for late payment, and public authorities cannot push you below the statutory floor. See GOV.UK for detail.

How long can I claim late payment interest for?

OSBC guidance points to interest for up to 6 years from the date following the end of the contracted payment terms (Limitation Act territory). Do not leave old debts until year five without advice.

Can I claim if we never agreed payment terms?

Yes for eligible B2B debts. GOV.UK: if you do not agree a payment date, payment is late 30 days after the customer gets the invoice or you deliver (whichever is later).

Should I threaten court on the first reminder?

No. State the facts, the daily rate, and the compensation band. Offer an easy way to pay. Save MCOL language for when reminders and an interest invoice have been ignored.

Will claiming interest damage the relationship?

A commercial client who routinely pays late is already damaging your cash flow. Asserting statutory rights is professional. Many trades find that naming interest in reminders is enough — you do not always collect every penny of interest if the principal clears quickly.

Does InvoiceAdept file late-payment claims or MTD returns for me?

No. The calculator helps with arithmetic. Pro can send reminders and card links. You decide whether to issue an interest invoice or go to MCOL. InvoiceAdept does not file court claims or HMRC returns.

Where do I get the official rules?

Start here: GOV.UK late commercial payments, GOV.UK interest, GOV.UK debt recovery costs, BoE Bank Rate, OSBC interest calculator guidance.

About this guide

Written for UK trades and small suppliers by InvoiceAdept Editorial (Tech Me Today Ltd 15917255, ICO ZB944663). Last reviewed 1 September 2026 against GOV.UK late-payment pages, Bank of England Bank Rate (3.75%, held 30 July 2026, next MPC 17 September 2026), BoE rate history for the 2026 reference windows, and OSBC interest-calculator guidance (reference dates; include VAT; fixed compensation per invoice; 6-year outer limit; no interest-on-interest invoice).

This rewrite removes the previous unsourced “£22 billion” opener and the incorrect table that mixed compensation bands with a “12%” interest column. Rates are aligned with the sister page How to calculate late payment interest UK (2026).

Not legal advice. If the debt is large, disputed, cross-border, or close to limitation, take advice from a solicitor or a qualified debt adviser before you issue a claim.

Useful links

• GOV.UK — Late commercial payments hub

• GOV.UK — Interest on late commercial payments

• GOV.UK — Claim debt recovery costs

• Bank of England — Bank Rate

• Bank of England — Bank Rate history

• OSBC — Interest calculator guidance

• InvoiceAdept late payment calculator

• How to calculate late payment interest UK

• How to invoice a client (UK tradesperson)

• Deposit invoice template UK

• InvoiceAdept pricing

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