Yes. If you're a business chasing another business for an unpaid invoice, you can charge interest, even if your invoice doesn't mention it.
What's the interest rate?
8% + Bank of England base rate per year
Interest accrues daily from the payment due date until it's paid in full.
The Bank of England base rate changes periodically, so the total rate fluctuates. Check the current base rate when calculating.
Do I need to mention it on my invoice?
No. For business-to-business debts, the Late Payment of Commercial Debts (Interest) Act 1998 gives you automatic statutory rights to claim interest, whether or not your invoice mentions it.
How much interest can I claim?
Let's say you're owed £5,000 and the invoice is 60 days overdue.
Calculation: (£5,000 × Interest rate × 60) ÷ 365 = Interest owed
Where Interest rate = 8% + current Bank of England base rate
Daily interest going forward: (£5,000 × Interest rate) ÷ 365 = Daily interest amount
What else can I charge?
Beyond interest, you can claim fixed compensation for debt recovery costs:
- £40 for debts under £1,000
- £70 for debts £1,000-£9,999
These are automatic statutory fees to compensate you for the time and hassle of chasing payment.
What if my contract specifies a different interest rate?
You can charge your contractual rate instead, but it must be "reasonable." Courts can reduce rates they think are excessive (e.g., 30% would likely be deemed punitive).
Generally acceptable rates are 8-15%.
Does this apply to consumer debts?
No. These statutory rights only apply to business-to-business (B2B) transactions.
If you're a business chasing a consumer (individual), you can only charge interest if:
- It's stated in your original contract
- It's deemed "fair" under the Consumer Rights Act 2015
Consumer interest rates are typically limited to 2-4%.
How to calculate interest (formula)
Interest = (Invoice amount × Annual interest rate × Days overdue) ÷ 365
Where Annual interest rate = 8% + current Bank of England base rate
Example 1: £2,000 invoice, 30 days overdue
(£2,000 × Interest rate × 30) ÷ 365
Example 2: £10,000 invoice, 90 days overdue
(£10,000 × Interest rate × 90) ÷ 365
How Garfield helps
Garfield automatically calculates:
- Statutory interest (using the current Bank of England rate)
- Fixed compensation (£40/£70 depending on debt size)
- Any contractual late fees from your terms
It includes all of this in your Letters Before Action and court claims, so you claim the maximum you're entitled to without having to do the maths yourself.