Work out the interest owed on an overdue invoice, using your contract rate or UK statutory interest, and copy a reminder that states the amount.
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Overdue invoice
Interest rate
Result
Days overdue
45
Sat, Aug 29, 2026 to Tue, Oct 13, 2026
Interest accrued
$110.96
18.00% a year, $2.47 a day
Late fee
$0.00
Total now owed
$5,110.96
Reminder text
Invoice [number] for $5,000.00 was due on Sat, Aug 29, 2026 and is now 45 days overdue. Under our payment terms, late payment interest of 18.00% a year has accrued ($110.96 to Tue, Oct 13, 2026), bringing the total to $5,110.96. Please arrange payment at your earliest convenience, or let us know if there is an issue with the invoice.
Simple interest, not compounded. Not legal advice: check your contract and local rules before charging.
Stating the interest is often enough
Most clients who pay late are not refusing to pay. Your invoice is simply lower in their payment queue than someone else’s. A reminder that states the exact interest that has accrued changes that ordering, because it turns a vague overdue notice into a number that grows every day.
The rate you can charge depends on your contract and where you and the client are. In the UK, statutory interest and fixed compensation apply to business debts automatically. Elsewhere, the rate usually needs to be in your payment terms before the work starts, which is why it belongs in every contract and invoice footer.
How the calculation works
Late payment interest is simple interest on the unpaid amount: amount x annual rate / 365 gives the interest per day, and that daily amount x the days overdue gives the total. Days are counted from the day after the due date up to the day the money arrives.
A monthly rate is turned into an annual one first (1.5% a month = 18% a year), so a 31-day month and a 28-day month cost the client the same per day. That is how most contract clauses are read, and it avoids arguments about partial months.
Worked example: a $5,000 invoice at 1.5% a month that is 45 days late. 18% x $5,000 / 365 = $2.47 a day, and $2.47 x 45 days = $110.96 of interest, so the client owes $5,110.96 plus any flat late fee in your terms.
What a $10,000 invoice costs the client when it is late
Simple interest on $10,000, before any flat late fee. UK statutory interest with a 4% base rate is 12% a year, the same as the first row, plus fixed compensation.
Rate
Per day
30 days late
60 days late
90 days late
1% a month (12% a year)
$3.29
$98.63
$197.26
$295.89
1.5% a month (18% a year)
$4.93
$147.95
$295.89
$443.84
20% a year
$5.48
$164.38
$328.77
$493.15
The amounts look small next to the invoice, which is why interest alone rarely changes behaviour. What changes it is putting the growing number on every reminder, so the overdue invoice stops being the easiest one for the client’s AP team to leave until next week.
UK statutory interest, worked through
Under the Late Payment of Commercial Debts (Interest) Act 1998, a business supplier can claim 8% a year above the Bank of England base rate on a late B2B invoice, plus fixed compensation: £40 for debts under £1,000, £70 from £1,000 to £9,999.99, and £100 for £10,000 or more. You can also claim reasonable recovery costs above the fixed amount.
Worked example: a £12,000 invoice, 60 days late, with a 4.00% base rate in force on the relevant reference date. The rate is 12%, so interest is £12,000 x 12% / 365 = £3.95 a day, or £236.71 over 60 days. Add £100 fixed compensation and the client owes £12,336.71.
The reference base rate is the one in force on 30 June (for debts that became overdue between 1 July and 31 December) or 31 December (for debts overdue between 1 January and 30 June). It does not change while the debt is outstanding.
Putting the rate in your terms
Outside the UK, interest generally has to be agreed before the work starts to be enforceable, and many jurisdictions cap what you can charge. A clause that names the rate, says it is simple interest, and says when it starts (the day after the due date) removes most disputes. Put the same sentence in the invoice footer so the client sees it every time.
Most finance teams use interest as leverage rather than revenue: they state it on the second and third reminder and waive it if the invoice is paid within a set window. Charging it every time tends to start a negotiation about the interest instead of the invoice.
Frequently asked questions
How is late payment interest calculated?
Most contracts use simple interest: invoice amount x annual rate x days overdue / 365. A rate quoted per month is converted to a daily rate the same way (monthly rate x 12 / 365). Interest runs from the day after the due date until payment arrives.
What is statutory late payment interest in the UK?
For business-to-business debts, the Late Payment of Commercial Debts (Interest) Act lets you charge 8% a year above the Bank of England base rate, plus fixed compensation of £40, £70, or £100 depending on the size of the debt. The base rate to use is the one in force on 30 June or 31 December before the payment became overdue.
Can I charge interest if it is not in my contract?
In the UK, statutory interest applies to B2B debts even if the contract is silent. In the US and many other countries, you generally need the rate to be in the contract or invoice terms, and state usury limits can cap it. Check the rules that apply to you.
Should I actually charge the interest?
Often the value is in stating it rather than collecting it. Showing the accrued amount on a reminder moves your invoice up the client’s payment queue. Many firms waive it if the invoice is paid within a set window.
Does interest compound?
Statutory and most contractual late payment interest is simple, not compound. This calculator uses simple interest.
Need the rate written into your terms first? Generate a late fee clause and invoice footer in a minute.