What "late payment interest" actually means
Statutory late-payment interest is a legal remedy for qualifying overdue commercial debts. It differs from bank interest and from a rate negotiated in a contract: the law can supply a remedy when an agreement is silent, but a substantial contractual remedy, an exclusion, or a national implementing rule can change the result.
Two limits matter up front. These frameworks concern commercial transactions involving businesses or public authorities, not consumer debts. The legally relevant due date also depends on the agreement and the governing rule; default periods can apply when no date was agreed. Confirm the parties, transaction, contract, due date, and governing law before selecting any rate.
The UK formula: base rate plus eight, locked for six months
Under the 1998 Act, statutory interest on a qualifying commercial debt is the Bank of England base rate plus 8 percentage points. The 8-point margin is fixed by statute and never moves. The only variable is the base rate — and here the law does something clever to keep the math stable.
The base rate is not tracked day by day. Instead, the rate in force on a reference date is locked in for a full six-month run. For debts that become late between 1 January and 30 June, you use the base rate as it stood on the previous 31 December. For debts that become late between 1 July and 31 December, you use the rate as of 30 June. That reference rate then governs the entire period, even if the Bank of England changes its base rate in the meantime. So a debt that fell late in, say, March uses the base rate as it stood on the previous 31 December — and that single rate applies for the whole time the debt stays unpaid, even if the Bank of England changes its base rate in a later half-year.
Each new reference date sets the rate only for debts that first fall overdue in that half-year — not for one already running. Rather than commit a number to memory, pull the live figure from the UK late-payment commercial rate page, which pairs the current base rate with the fixed 8-point margin.
The EU minimum framework and country rates
Directive 2011/7/EU defines a minimum framework based on a reference rate plus at least 8 percentage points. For euro-area states the Directive identifies an ECB reference, while other member states use the equivalent reference set by their national central bank. National law may be more favourable to the creditor and can supply a different effective base, rate, or procedural rule.
That is why there is no safe single "EU rate" for every claim. The StatuteRates ECB benchmark records the ECB main refinancing rate at each half-year boundary and can illustrate an eight-point minimum addition. It is not a country entitlement. Confirm the official EU country-rate table and the member state's implementing law.
A worked example (illustrative figures)
Once the legally correct annual rate and dates are known, simple-interest arithmetic is principal × rate × days ÷ 365. Suppose a qualifying £10,000 debt uses an illustrative 12% annual rate for 60 days. That is about £3.29 per day and roughly £197 in interest, before any separate recovery compensation.
The 12% figure is deliberately fictional. The late-payment calculator can estimate a supported UK period; its EU mode only illustrates the recorded ECB benchmark plus eight and must not replace the official country rate. The full calculator index covers other carefully bounded scenarios.
Fixed compensation and recovery costs
For a qualifying claim, the applicable framework can provide a fixed sum for recovery costs in addition to interest.
- United Kingdom: a fixed charge that scales with the size of the debt — £40 for debts under £1,000, £70 for debts from £1,000 up to £9,999.99, and £100 for debts of £10,000 or more. Reasonable recovery costs above that fixed sum can also be available.
- European Union: the Directive provides a minimum €40 recovery-cost framework, while the governing member state's implementation controls the entitlement, amount, and procedure and may be more favourable to the creditor.
These remedies do not require proof of hardship, but transaction eligibility, national law, contractual terms, and enforcement procedure still have to be checked for each invoice.
How to claim it — and a word of caution
A careful claim starts with the rule, not the arithmetic:
- Confirm the debt is a qualifying commercial transaction and identify the governing country.
- Check whether the contract supplies a different substantial remedy or other controlling term.
- Identify the legally correct due and accrual dates.
- Use the official UK rate or the official EU country rate for the relevant period.
- Keep principal, interest, fixed compensation, and any documented recovery costs separate in a demand.
- Follow the governing national procedure if the debt remains unpaid.
This is general information, not legal advice. Cross-border deals, disputed sums, public authorities, and contractual remedies can change the analysis. Verify the current official source and see the methodology for the site's data boundaries. American businesses will find no direct equivalent; prejudgment interest is a different, claim-specific concept.