Guide
Statutory interest rate on late payments: base rate plus 8%
Updated
Most pages tell you the rate is base plus 8% and stop. The part that decides your number is which base rate: not today's, but the one fixed on the last 30 June or 31 December.
The rule in one line
The interest you can charge when another business is late paying is statutory interest, and gov.uk states it plainly: "this is 8% plus the Bank of England base rate for business to business transactions" (gov.uk). The same page adds two limits worth knowing before you invoice: you cannot claim statutory interest if a different rate of interest is set in the contract, and you cannot use a lower interest rate in a contract with a public authority.
Which base rate: the six month rule
The rate is not re-set every time the Monetary Policy Committee moves. Article 4 of the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002 fixes it at 8% over "the official dealing rate in force on the 30th June (in respect of interest which starts to run between 1st July and 31st December) or the 31st December (in respect of interest which starts to run between 1st January and 30th June) immediately before the day on which statutory interest starts to run" (legislation.gov.uk). The Scottish order uses the same words.
So the rate attaches to the debt on the day interest starts and stays with it. Section 4(2) of the Act says statutory interest runs "at the rate prevailing under section 6 at the end of the relevant day" (legislation.gov.uk). A debt that fell due in March 2026 and one that fell due in September 2026 can carry different rates, and neither changes because base rate moves next month.
The rate for 2026
| Interest starts to run | Base rate used | Reference date | Statutory rate |
|---|---|---|---|
| 1 January to 30 June 2026 | 3.75% | 31 December 2025 | 11.75% |
| 1 July to 31 December 2026 | 3.75% | 30 June 2026 | 11.75% |
The Bank of England reduced Bank Rate to 3.75% on 18 December 2025 and has held it there since, most recently in July 2026, so both 2026 reference dates give the same answer (Bank of England rate history, current Bank Rate). Check the current rate before you invoice: this page states the position on its updated date above and we correct it in place.
What the rate is not
- Not compound. The Act gives simple interest on the qualifying debt. Our calculator multiplies the daily amount by the days late; it does not add interest to interest.
- Not a penalty you can set yourself. If your contract already fixes an interest rate for late payment, that contractual rate applies and the statutory right is displaced.
- Not the same as HMRC late payment interest. This rate is for commercial debts between businesses. Interest HMRC charges on unpaid tax is a separate regime with its own rate.
Interest is only half of what you can claim. The fixed sum for recovering the debt is set by section 5A and is claimable on top.