When an invoice goes unpaid, you can charge extra fees on top of the original amount. How much depends on whether you're chasing a business or a consumer.
Business-to-business (B2B) invoices
For B2B debts, you have automatic statutory rights under the Late Payment of Commercial Debts Act 1998.
You can charge:
1. Statutory interest
8% + Bank of England base rate (currently 13.25% per year)
- Accrues daily from the payment due date
- Calculated as: (Debt × 13.25% × Days overdue) ÷ 365
2. Statutory compensation
Fixed amounts based on debt size:
- £40 for debts under £1,000
- £70 for debts £1,000-£9,999
- £100 for debts £10,000+
3. Contractual late fees
- Any fees stated in your contract or terms (e.g., £25-£50 admin charges)
- Must be "reasonable" (courts will reduce excessive fees)
- Must be stated before providing goods/services
4. Court costs
- If you win in court, the court fees are added to what they owe
- Fixed legal costs (£80-£110 depending on claim size)
Example: £4,000 invoice, 75 days overdue
Let's say you have a £40 late payment admin fee in your terms:
- Original debt: £4,000
- Statutory interest (75 days): £109
- Statutory compensation: £70
- Contractual late fee: £40
- Letter Before Action costs: £45
Total: £4,264
That's £264 extra on top of the original £4,000.
Business-to-consumer (B2C) invoices
If you're chasing a consumer (individual), the rules are much stricter.
You can only charge:
- What's written in your original contract
- What's deemed "fair" under the Consumer Rights Act 2015
You cannot charge:
- Statutory interest or compensation (B2B rights don't apply)
- Excessive late fees (courts will reduce them)
Typical consumer late fees are limited to 2-4% interest.
What counts as "reasonable"?
Courts can reduce late fees they think are excessive or punitive (meant to punish rather than compensate).
Generally acceptable:
- £25-£50 admin charges for chasing payment
- Interest rates of 8-15%
Likely to be reduced:
- £500 late fee on a £100 invoice
- Interest rates above 20%
The fee should reflect your actual costs (time, postage, phone calls), not be a punishment.
What you CANNOT charge
- Debt collector commission (10-25%)
- Excessive admin charges not in your terms
- Fees not mentioned in your original agreement (beyond statutory rights for B2B)
How Garfield helps
Garfield automatically calculates all the fees you're entitled to:
- Statutory interest (using current Bank of England rates)
- Statutory compensation (£40/£70/£100)
- Contractual late fees from your terms
- Court costs if applicable
Everything is included in your Letters Before Action and court claims with a clear breakdown, so you claim the maximum you're entitled to without doing the maths yourself.