How To Claim Late Payment Interest While Borrowing Costs Stay High In June 2026

The Bank of England Bank Rate is 3.75%, with the next Monetary Policy Committee decision due on 18 June 2026. CPI inflation eased to 2.8% in April 2026, down from 3.3% in March, but borrowing costs remain high compared with the near-zero rate environment many businesses became used to in the early 2020s.

For UK SMEs, that matters. If you are paying for an overdraft or business loan while customers delay payment, late invoices are a direct finance cost.

The law already gives you a way to recover part of that cost. Under the Late Payment of Commercial Debts (Interest) Act 1998, you may be able to reclaim late payment interest on overdue business-to-business invoices at 8% above the Bank of England base rate, unless your contract contains a valid alternative interest remedy. At the current 3.75% Bank Rate, statutory interest is 11.75% per year.

What The Current Rate Means For You

Statutory interest was designed to discourage late payment and compensate suppliers for being kept out of their money. At 11.75% per year, the sums are worth claiming.

The fixed compensation is £40 for debts up to £999.99, £70 for debts from £1,000 to £9,999.99, and £100 for debts of £10,000 or more. You can usually charge this once per late payment, alongside interest.

Understanding the Late Payment of Commercial Debts Act covers in terms of interest and fixed fee compensation is a useful starting point before you decide whether to pursue a customer formally.

The Commercial Payments Bill [HL], introduced in the House of Lords on 19 May 2026, is expected to strengthen the regime by making statutory interest harder to exclude in future commercial contracts within scope. But you do not need to wait for that Bill to progress before using the rights available now.

How To Claim It In 3 Practical Steps

Step 1: Identify Every Overdue Invoice On Your Ledger

Start with your aged debtors report. For each overdue invoice, record the invoice number, customer name, invoice value, due date, days overdue, contractual payment terms, and whether any part payment has been received.

Check that the invoice has been correctly issued. Errors in names, purchase order numbers, VAT details, delivery references or payment terms can give the debtor an excuse to delay or dispute when the invoice became due.

Also review part and short payments. If a customer has paid only part of the invoice, confirm in writing what balance remains outstanding. Keep the principal, interest and compensation figures clearly separated.

Step 2: Calculate Interest And Add It To Your Demand

Use this formula:

Invoice value x 11.75% ÷ 365 x days overdue.

Then add the fixed compensation sum that applies to the invoice value. Show both figures in your late payment demand letter, together with the original invoice amount, the due date, the daily interest amount and a clear payment deadline.

You should also check your contract before sending the demand. If the contract includes a different interest clause, it may affect whether statutory interest can be claimed. For public authority debts, a lower contractual interest rate cannot be used to replace the statutory position.

A professional late payment demand letter service can help ensure the demand is clear, firm and properly structured.

Step 3: Escalate If Payment Is Still Not Made

If the customer pays the principal but ignores the interest and compensation, you can still pursue the remaining statutory charges where they are validly due. Do not let the debtor assume those amounts disappear simply because the original invoice has been settled late.

If the full debt remains unpaid, a professional business debt recovery process can pursue the principal, interest, compensation and eligible recovery costs together.

Warning signs should trigger faster action. Repeated missed promises, silence from accounts payable, sudden requests for copy invoices, unexplained deductions or rumours of cash flow pressure are all reasons to review when to escalate an invoice to debt collection services.

If several accounts regularly reach this stage, credit control outsourcing may give you a more consistent process.

FAQs

Can I Claim Interest On Invoices That Have Been Outstanding For Months?

Yes, where the invoice qualifies. Interest normally runs from the date the payment became late until the date it is paid. In England and Wales, many simple contract debt claims have a 6-year limitation period, but limitation and prescription rules can differ in Scotland and Northern Ireland, so do not leave old debts unattended.

Does This Apply To All B2B Customers?

It applies to qualifying business-to-business contracts for the supply of goods or services. The size of the customer is not the key issue under the current Late Payment of Commercial Debts regime. The key questions are whether the debt is commercial, whether it is late, and whether the contract contains a valid alternative interest remedy.

What If My Customer Disputes The Interest?

Ask them to set out the dispute in writing. If they dispute only the interest and compensation, keep the original invoice position separate. If the statutory charges are valid, you can issue a further demand and escalate if needed.

Start Claiming What You Are Owed Today

Every day an invoice sits unpaid while you fund the gap through borrowing is a day your customer is using your cash. Use the statutory framework consistently.

Taurus Collections is a commercial collection agency UK businesses use to recover principal, interest and compensation professionally. Whether you need cashflow finance service support in the short term, invoice factoring to bridge the gap, or business debt recovery to pursue overdue accounts, we can help.

Contact us today and let us take a look at your ledger.