Late Payment Interest in the UK: A Guide for US and Overseas Suppliers
A US or overseas supplier can often charge a UK customer 8% over base rate on a late invoice, plus up to £100 per invoice. Whether you can depends on one clause.
You shipped the goods. Your UK customer loves them. The invoice is now 40 days late, and your polite reminders are all marked "Seen". If you sell to UK companies from the US or anywhere else abroad, UK law may let you charge statutory interest at 8% above the Bank of England base rate, plus a fixed compensation payment of up to £100 per invoice, on top of the debt.
There's a catch that most exporters only discover when it's too late: whether that law applies to you usually depends on one clause in your contract. This guide explains how UK late payment interest works, how to calculate it, how to claim it without starting a war, and what to check before your next shipment to Britain.
First, a short film. Darlene makes neon signs in Milwaukee. Deano runs karaoke bars in Manchester. He hasn't paid her. Instead, he's made it content.
The short answer
If your contract with a UK business customer is governed by English law (or the law of Scotland or Northern Ireland), and both of you are acting in the course of business, the Late Payment of Commercial Debts (Interest) Act 1998 generally lets you claim three things on a late invoice:
- Statutory interest at 8% above the Bank of England reference rate. For invoices falling due in the second half of 2026, that's 8% + 3.75% = 11.75% a year.
- Fixed compensation of £40, £70 or £100 per invoice, depending on its size.
- Reasonable recovery costs above the fixed sum, in some cases.
Interest runs from the agreed due date. If no date was agreed, it runs from 30 days after the later of delivery or the customer receiving your invoice. You don't need a court judgment to start claiming it; you add it to your demand.
What the Late Payment Act actually gives you
The Act was designed to stop large companies using small suppliers as a free credit line. It applies to contracts for goods or services where both sides are businesses. It doesn't apply to consumers.
Statutory interest. The rate is 8% plus the Bank of England "reference rate". The reference rate is fixed twice a year: the base rate in force on 31 December applies to debts that fall due between January and June, and the rate in force on 30 June applies to debts that fall due between July and December. The base rate was 3.75% on 30 June 2026, so the statutory rate is 11.75% for invoices due from July to December 2026. It is simple interest, not compound, and it keeps running until you're paid.
Fixed compensation. On top of interest, you can claim a fixed sum for each late invoice:
| Size of the unpaid invoice | Fixed compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
It applies per invoice, not per customer. A customer who is late on ten invoices of £12,000 each owes ten fixed sums, not one.
Recovery costs. If your reasonable costs of recovering the debt are higher than the fixed sum, the Act allows you to claim the difference in some circumstances. Keep records of what you spend.
Can the customer contract out? Only partly. A contract can replace statutory interest with its own late-payment terms, but only if those terms give the supplier a "substantial remedy". A clause setting interest at 0.5% a year, for example, is unlikely to qualify. If the clause doesn't qualify, the statutory rate applies instead.
The clause that decides everything: governing law
This is the part most overseas suppliers miss. The Late Payment Act is part of UK law, so it generally applies when UK law governs your contract. It doesn't follow the debtor around.
When a contract doesn't say which law governs it, UK courts use the retained "Rome I" rules to decide. For a sale of goods, the default is usually the law of the country where the seller is based. So if Darlene's paperwork said nothing about governing law, her contract would most likely be governed by US (Wisconsin) law. The UK Act might not help her at all, and she would be left with whatever interest rules her own state provides.
In the film, Darlene's contract says English law. Her customer is in Manchester and the signs were delivered there, so the contract has a real connection with England. That means the Act applies, and her "quick maths" holds up.
What this means for you:
- Choose the law on purpose. If most of your customers are in the UK and you want the Late Payment Act on your side, an English-law clause does that. If you prefer your home law, write your own interest clause. Many US states' default rules for late payment are less generous and less automatic.
- Put the terms where the contract is made. Governing law and interest terms belong in your quote, order confirmation or signed terms of sale. Printing them only on the invoice may be too late, because the invoice usually arrives after the contract was agreed.
- State your own interest rate anyway. A clear contractual rate that gives a substantial remedy avoids any argument about which statute applies.
This is general information, not legal advice. For a large or unusual contract, have a lawyer check your terms.
Working out the numbers
The formula is simple:
Daily interest = unpaid amount × statutory rate ÷ 365
Here is Darlene's invoice, which fell due on day 30 and was paid on day 72:
| Item | Amount |
|---|---|
| Unpaid invoice | $48,000.00 |
| Statutory rate (8% + 3.75% base) | 11.75% a year |
| Interest per day ($48,000 × 11.75% ÷ 365) | $15.45 |
| Days late (day 30 to day 72) | 42 |
| Statutory interest | $648.99 |
| Fixed compensation (invoice over £10,000) | £100 |
| Total owed | $48,648.99 + £100 |
Two tips. First, send a statement showing the interest to date and the daily figure going forward: "plus $15.45 for every day after today" concentrates minds. Second, if the reference rate changes on 30 June or 31 December, invoices that fall due in the new period use the new rate. The rate for an invoice already overdue stays the same.
How to claim it without starting a war
Most UK finance teams know the Act exists. Many simply wait to see whether a foreign supplier knows it too. You don't need to be aggressive; you need to be specific.
- Check who you're dealing with. Companies House is free to search. Look at the company's status, its directors, and whether its accounts are overdue. Overdue accounts are an early warning sign.
- Put it in writing. Send one clear demand: the invoice, the due date, the statutory interest to date, the fixed compensation, and a deadline, usually 14 days.
- Send a letter before action if the deadline passes. UK courts expect creditors to warn a business customer before suing. A letter from a UK address, in the language UK courts expect, is taken much more seriously than a friendly email from abroad.
- Offer the easy way out. Many debtors pay the principal quickly once interest appears on the page. You can choose to waive the interest in exchange for immediate payment. That's your decision to make, not theirs.
For the full UK process as it applies to foreign creditors, see our guide to UK debt collection for foreign creditors.
When your debtor goes public
Deano is fictional, but debtors who complain, joke or post about their suppliers online are not. If it happens to you, stay calm and collect evidence rather than likes.
- Keep records. Take dated screenshots of anything the debtor posts or writes about the invoice. A public admission that the goods arrived and the bill is unpaid can help show there is no genuine dispute. That matters later, because some UK enforcement routes, such as a statutory demand, can't be used for a debt that is genuinely disputed.
- Don't name and shame. Replying angrily in public, or posting about the debtor yourself, can expose you to defamation or harassment complaints. It can also make a judge less sympathetic. Darlene only states the law and thanks him for the evidence; she never insults him.
- Don't negotiate in the comments. Move every conversation to writing, and to your collector if you have one.
What happens if they still don't pay
If a UK company ignores your demand and your letter before action, the usual next steps are:
- A statutory demand. For company debts over £750, a statutory demand gives the company 21 days to pay before you can petition to wind it up. It is a serious step, and should only be used where the debt is clearly not in dispute.
- A court claim. In England and Wales, your claim can include the statutory interest and the fixed compensation.
- Enforcement. If a judgment isn't paid, enforcement officers, charging orders and similar tools follow.
Each step costs time and money. A good collector will usually recover the debt, with interest, well before you reach court. If you're wondering what that costs, here is how much debt collection agencies charge.
A checklist for overseas suppliers selling to UK customers
- Decide which law governs your contracts, and put it in your terms of sale.
- Include your own late-payment interest rate, and make it a substantial remedy.
- Make sure the customer accepts your terms before you ship, not after.
- Write invoice dates in full (4 March 2026, not 04/03/26), because day and month are reversed between the US and the UK.
- Check the customer on Companies House before extending credit.
- Calculate the interest the day an invoice goes overdue, and show it on every reminder.
- Keep every message, screenshot and delivery record.
- Escalate after two unanswered reminders, not seventy-one.
Frequently asked questions
Can a US company charge late payment interest to a UK customer?
Often, yes. If the contract is a business-to-business contract governed by the law of part of the UK, the Late Payment of Commercial Debts (Interest) Act 1998 generally lets you claim statutory interest at 8% above the Bank of England reference rate, plus fixed compensation of £40 to £100 per invoice. If your contract is governed by US law, the UK Act may not apply, so check your governing-law clause or include your own interest rate.
What is the UK statutory interest rate for late payment in 2026?
It is 8% above the Bank of England reference rate. For debts falling due between 1 July and 31 December 2026, the reference rate is the 3.75% base rate that was in force on 30 June 2026, so statutory interest is 11.75% a year, charged as simple interest.
Is the £100 late payment compensation charged per invoice?
Yes. The fixed sum is £40 for invoices under £1,000, £70 for invoices from £1,000 to £9,999.99, and £100 for invoices of £10,000 or more, and it applies to each late invoice separately. You may also be able to claim reasonable recovery costs above the fixed sum.
Can I claim statutory interest if my invoice didn't mention it?
Usually, yes. Statutory interest is implied into qualifying business contracts by law, so you don't need to have mentioned it on the invoice. What matters is that the contract is governed by UK law and that its terms don't already provide a substantial contractual remedy for late payment.
When does late payment interest start in the UK?
From the day after the agreed payment date. If no payment date was agreed, interest starts 30 days after the later of the delivery of the goods or services and the customer receiving your invoice.
Should I post about a customer who won't pay me?
No. Publicly naming a debtor can expose you to defamation or harassment claims and can weaken your position if the case reaches court. Keep screenshots of anything the debtor posts, keep your own communication factual and private, and let a collector or lawyer handle the pressure.
Get paid, with the interest
Darlene got her $48,000, the interest and the £100, and she never had to raise her voice. INTERCOL recovers B2B debts from UK and international customers for overseas suppliers, with people on the ground and letters from a UK address. We work on a no cure, no pay basis: if we don't recover, you don't pay. Tell us about your unpaid invoice.