Chasing late invoices in the UK: interest, fixed fees and the steps before court

Author: Adam Khalid, Founder and CEO, Intel Made Simple. Sources last checked 28 October 2026.

Most firms know that a late invoice is a problem. Fewer know that the law gives a supplier a right to interest and a fixed sum on top of the debt, with no contract wording needed. This guide sets out what the rules say, in the order you would use them: when an invoice becomes late, what you can add to it, what a court expects you to do before a claim, and a four-step chasing ladder that puts the rules to work.

It describes the position for business-to-business debts in England and Wales. GOV.UK notes that there are different processes for making a court claim in Scotland and Northern Ireland (opens in a new tab). This is general information from the sources linked below, not legal advice, and the facts of your debt may change the answer.

When does an invoice become late?

GOV.UK says that if you agree a payment date, it must usually be within 30 days for public authorities or 60 days for business transactions (opens in a new tab). You can agree a longer period than 60 days for business transactions, but it must be fair to both businesses. If you do not agree a payment date, the law says the payment is late 30 days after either the customer gets the invoice or you deliver the goods or provide the service, if that is later.

The Act sets out the same structure. Under section 4 of the Late Payment of Commercial Debts (Interest) Act 1998 (opens in a new tab), statutory interest starts to run on the day after the relevant day for the debt. Where there is an agreed payment day, that is the relevant day, and where there is not, it is the last day of the relevant 30-day period. The section also provides that where the purchaser is not a public authority and the last day of the relevant 60-day period falls earlier than the agreed payment day, the 60-day date applies, unless the agreed day is not grossly unfair to the supplier.

The practical point is that the payment term on your invoice matters twice. It decides when you can chase, and a very long agreed term may not hold if it is grossly unfair. Put the term in writing before you do the work.

How much statutory interest can you charge?

GOV.UK states that the interest you can charge is statutory interest, which is 8% plus the Bank of England base rate for business to business transactions (opens in a new tab). You cannot claim statutory interest if there is a different rate of interest in a contract. GOV.UK also says you cannot use a lower interest rate if you have a contract with public authorities, and that you should send a new invoice if you decide to add interest to the money you are owed.

GOV.UK works an example: a debt of £1,000 with the base rate at 0.5% gives annual statutory interest of £85, which is 23p a day, and £11.50 after 50 days.

Here is our own example, with an assumed base rate so you can see the shape. Take an invoice of £12,500 and a base rate of 4%. Statutory interest is 12% a year, which is £1,500 a year or £4.11 a day. After 30 days late, the interest is about £123. Check the current Bank of England base rate before you use the method, because the rate we assumed is an illustration and not a statement of today's rate.

What is the fixed recovery sum?

On top of interest, the supplier can claim a fixed sum. Section 5A of the 1998 Act (opens in a new tab) entitles the supplier, once statutory interest begins to run, to £40 for a debt under £1,000, £70 for a debt of £1,000 or more but under £10,000, and £100 for a debt of £10,000 or more. If the supplier's reasonable costs of recovering the debt are not met by the fixed sum, the supplier is also entitled to the difference. GOV.UK adds (opens in a new tab) that you can only charge the business once for each payment.

Taken together, a £12,500 invoice that is 30 days late could support about £123 of interest and £100 of fixed sum on our assumed rate, plus any further reasonable recovery costs. The sums are modest against a large invoice, which is why they work best as a signal of seriousness and a deterrent for repeat late payers. They are not a profit line.

What must you do before you issue a court claim?

The Civil Procedure Rules include a Practice Direction on Pre-Action Conduct and Protocols (opens in a new tab) that applies where no specific protocol does. The steps it describes are short:

• The claimant writes to the defendant with concise details of the claim, including the basis of the claim and a summary of how the amount is calculated.
• The defendant responds within a reasonable time: 14 days in a straightforward case and no more than 3 months in a very complex one. The reply says whether the claim is accepted and, if not, which facts are disputed.
• The parties disclose key documents relevant to the issues in dispute.

The Practice Direction also says that litigation should be a last resort and that parties should consider whether negotiation or another form of alternative dispute resolution could settle the dispute. If proceedings are issued, the court may require evidence that ADR was considered, and a party's silence in response to an invitation to participate, or a refusal, might be considered unreasonable and lead to an order to pay additional court costs. The court will take non-compliance into account when giving directions and making costs orders.

The Practice Direction does not extend time. Paragraph 17 states that it does not alter the statutory time limits for starting court proceedings, and that a defendant can use an expired limitation period as a defence. For a simple contract that period is six years from the date the cause of action accrued (opens in a new tab), under section 5 of the Limitation Act 1980.

Does the Debt Pre-Action Protocol apply to your debt?

Sometimes. The Pre-Action Protocol for Debt Claims (opens in a new tab) applies to a business claiming payment of a debt from an individual, including a sole trader. Paragraph 1.1 says it does not apply to business-to-business debts unless the debtor is a sole trader. So a debt owed by a limited company follows the general Practice Direction described above, and a debt owed by a sole trader follows the Protocol.

The Protocol asks for more. A Letter of Claim should state the amount of the debt, whether interest or other charges are continuing, how the debt arose, why any instalment offer is not acceptable, how the debt can be paid, and where to send the completed Reply Form. It should enclose an up-to-date statement of account, an Information Sheet and Reply Form, and a Financial Statement form. It should be posted, and may also be sent by email where you hold an address.

The timings differ too. If the debtor does not reply within 30 days of the date at the top of the letter, the creditor may start court proceedings, subject to any other obligations it owes the debtor. If the debtor says they are seeking debt advice, the creditor must allow a reasonable period, and should not start proceedings less than 30 days from receiving the completed Reply Form or from providing any documents the debtor asked for, whichever is later.

Before you chase a sole trader, check which type of debtor you have. Using the 14-day business letter on an individual puts the file out of step with the Protocol the court expects.

How do you check whether a large customer pays on time?

GOV.UK runs a service to check when large businesses pay their suppliers (opens in a new tab). The reports show the average time a large business takes to pay its suppliers and the proportion of payments it does not make on time. A large business here is a company or limited liability partnership with at least two of: £54 million turnover, £27 million on its balance sheet, or 250 employees. It must publish its reports at least twice a year.

That gives a supplier a dated, public number before agreeing terms with a big customer. If the published average is longer than the term you are about to accept, the debtor-day half of your lock-up is already decided. Look it up before you sign, and write the result on the file.

What should a late-payment diary record?

The pre-action steps reward a clean paper trail, since the court takes non-compliance into account on directions and costs. For each late invoice our diary template holds:

• Invoice number, amount, due date and the date the customer received it.
• The agreed term and where it was agreed, with a copy of the signed engagement letter or order.
• Each contact: date, who, channel, what was promised and by when.
• Interest and fixed sum calculated to date, and whether a revised invoice has been sent.
• The limitation date, six years from when the cause of action accrued, set as a diary alert.

Should you claim in court or try mediation?

GOV.UK explains that you can apply to a county court to claim money you are owed by a person or business, online or by post, and that a mediation service could be quicker and cheaper than going to court (opens in a new tab). Court fees and the steps after issue are set out there. Read that guide before you choose between a claim and mediation, because the right route depends on the size of the debt and the strength of the dispute.

Can you reclaim VAT on a bad debt?

HMRC's VAT guide (Notice 700) (opens in a new tab) says that if you make taxable supplies to a customer who does not pay, you may be able to reclaim relief from VAT on the bad debt, and points to VAT Notice 700/18 for the detail. Ask your accountant whether a long-overdue balance qualifies before you write it off in full.

What does a four-step chasing ladder look like?

The ladder below is our suggested routine. It is a process, not legal advice, and you should adapt the timings to your terms.

1. On the due date plus one day, send a short reminder to the person who approves payment, quoting the invoice number, amount and due date. Keep the tone neutral.
2. At 14 days late, send a written notice that states the statutory interest and fixed sum now applying, with a revised invoice for those amounts as GOV.UK advises. Offer a phone call.
3. At 30 days late, send a letter that follows the Practice Direction's shape: the basis of the claim, how the sum is calculated, a 14-day reply period and the key documents attached. Propose mediation.
4. If there is still no reply, decide between a county court claim and mediation, using the GOV.UK guide, and check the limitation date on the file.

How do you make chasing routine?

The ladder only works if every step happens on its date. That is a job for a diary or a workflow, not for memory. Our AI workflow automation service sets up reminders and a call list from the ledger, and the commercial property page shows how we apply the same debtor routine where rent and service charge arrears build up. Our free Leak Scan can show how much of your ledger is already past the dates above, and our pricing page lists the fixed options.

Late payment questions firms ask

When is a business invoice legally late in the UK?

GOV.UK says that if a payment date is agreed it must usually be within 60 days for business transactions, and 30 days for public authorities. If no date is agreed, the payment is late 30 days after the customer gets the invoice or after you deliver the goods or provide the service, whichever is later.

How much interest can you charge on a late business invoice?

Statutory interest of 8% plus the Bank of England base rate, unless a contract sets a different rate. GOV.UK says to send a new invoice if you decide to add interest to the money you are owed.

What fixed sum can you claim for a late payment?

Under section 5A of the Late Payment of Commercial Debts (Interest) Act 1998 the sum is £40 for a debt under £1,000, £70 for £1,000 to under £10,000, and £100 for £10,000 or more. If your reasonable recovery costs exceed the fixed sum, you can also claim the difference.

What must you do before a court claim for an unpaid business invoice?

Under the general Practice Direction on Pre-Action Conduct, write to the customer with concise details of the claim and how the amount is calculated, allow a reasonable time for a reply, usually 14 days in a straightforward case, and consider mediation. If the debtor is a sole trader, the Pre-Action Protocol for Debt Claims applies instead, with a 30-day reply period.

How long do you have to sue for an unpaid invoice?

For a simple contract, section 5 of the Limitation Act 1980 sets six years from the date the cause of action accrued. Take legal advice on the accrual date for your particular contract.