How to Correctly Calculate and Backdate Statutory Interest on Commercial Debts

For qualifying late commercial payments, statutory interest is calculated at eight percentage points above the Bank of England reference rate. For debts becoming late between 1 July and 31 December 2026, the reference rate is 3.75%, so the statutory rate is 11.75% a year. The rate is simple interest, calculated daily on the outstanding debt.

The important point is that the statutory reference rate is fixed for each six-month period. The Bank Rate on 30 June applies from 1 July to 31 December, while the rate on 31 December applies from 1 January to 30 June. A later Bank Rate change during that six-month period does not change the rate already applicable to a debt that became late in that period.

What you are entitled to claim

Under the Late Payment of Commercial Debts (Interest) Act 1998, qualifying business-to-business debts for goods or services can attract statutory interest automatically when payment becomes late. Our guide on how to claim 8% statutory interest explains the basic process, while part one of our guide to the Late Payment of Commercial Debts Act covers compensation.

The fixed compensation can be claimed once for each qualifying late payment. Reasonable recovery costs above the fixed sum may also be recoverable where the fixed amount does not cover them.

How to calculate the interest correctly

The formula is:

Outstanding debt × statutory annual rate ÷ 365 × days overdue

At 11.75%, a £5,000 invoice paid 60 days late produces about £96.58 in statutory interest, plus £70 fixed compensation.

Part two of our guide on how to calculate interest and fixed fee compensation provides fuller examples, while our late payment interest calculator can help with the arithmetic.

Check the Bank of England when identifying the relevant reference rate. For statutory late-payment interest, use the six-month reference-rate system rather than automatically changing the calculation whenever Bank Rate moves.

When interest starts and how far back you can go

If a payment date was agreed, interest normally starts the day after that date. If no payment date was agreed, the payment generally becomes late 30 days after the later of receiving the invoice or receiving the goods or services.

Our article on 60 day payment terms and late invoice interest explains longer commercial terms.

In England and Wales, an action founded on a simple contract is generally subject to a six-year limitation period from when the cause of action accrued. That means “six years of backdated interest” is not an automatic entitlement in every case; the underlying debt, acknowledgements, payments and procedural history all matter. Scotland has different prescription rules, with many contractual obligations subject to a five-year period. Our guide to claiming late payment interest explains the practical approach.

What can stop you claiming it

The statutory regime can be displaced where the contract provides a substantial contractual remedy for late payment. A token or inadequate clause may not be enough. Our article on contract clauses that reduce late payment explains the issue.

If the underlying invoice is genuinely disputed, resolve entitlement to the principal sum first.

Making it part of your process

A credit check can help assess whether further recovery action is commercially worthwhile. Businesses using outsourced credit control can also apply a consistent late-payment process instead of calculating interest only after a debt escalates.

If the debtor still does not engage, our guide to statutory demands done right explains when insolvency action may be appropriate.

Late-payment rights can also arise in construction debt collection. For overseas customers, the position depends on governing law and the contract’s connection with the UK; the 1998 Act contains specific conflict-of-laws rules. Our international debt collection service handles cross-border recovery.

Get the sum right and get it recovered

As a commercial debt collection agency with over 20 years of debt collection experience, Taurus Collections can calculate statutory interest and recovery costs and pursue qualifying commercial debts on its advertised no-collection, no-fee terms. Check the applicable terms before instructing the service.