Late payment between businesses in the UK: statutory interest and fixed sums

This page reports what the official source says. It is not legal advice: ask the office named here. The sources are the Late Payment of Commercial Debts (Interest) Act 1998 on legislation.gov.uk and the GOV.UK guide on late commercial payments, both read on October 9, 2026. Text is restated in our own words under the Open Government Licence v3.0.

Which contracts the Act covers

Section 2 says the Act applies to a contract for the supply of goods or services where the purchaser and the supplier are each acting in the course of a business. The section says "business" includes a profession and the activities of any government department or local or public authority. It leaves out consumer credit agreements and contracts meant to work as a mortgage, pledge, charge or other security. It also says a contract of service or apprenticeship is not a contract for the supply of goods or services.

GOV.UK opens its guide with a matching limit: it says interest and debt recovery costs can be claimed where another business is late paying for goods or a service.

What the Act says is implied

Section 1 makes it an implied term of a covered contract that a qualifying debt carries simple interest. Section 3 defines a qualifying debt as a debt created by an obligation to pay the whole or part of the contract price. It says a debt does not carry statutory interest to the extent it consists of a sum with its own right to interest under another enactment. It also says a debt does not carry statutory interest if a right to demand interest under a rule of law is exercised.

The Act's Part II lets contract terms oust or vary the right in some cases. Section 9 says a remedy for late payment counts as a substantial remedy unless it is insufficient to compensate the supplier or deter late payment and it would not be fair or reasonable to let it replace statutory interest. The section lists matters to weigh, among them the strength of the parties' bargaining positions, whether one party imposed the term by standard terms or otherwise, and whether the supplier received an inducement to agree.

When a payment counts as late

Section 4 says interest starts to run on the day after the relevant day for the debt. Where the parties agreed a payment day, that day is the relevant day, with two limits. If the purchaser is a public authority and the 30 day period ends earlier than the agreed day, the relevant day is the last day of the 30 day period. If the purchaser is not a public authority and the 60 day period ends earlier, the relevant day is the last day of the 60 day period, unless the agreed day is not grossly unfair to the supplier. Where no payment day was agreed, the relevant day is the last day of the relevant 30 day period.

GOV.UK puts the same in everyday words. An agreed payment date must usually be within 30 days for public authorities or 60 days for business transactions. A longer period than 60 days for business transactions can be agreed, but it must be fair to both businesses. With no agreed date, the guide says the payment is late 30 days after the customer gets the invoice or after the goods are delivered or the service is provided, if that is later.

The rate and the fixed sums

Section 6 leaves the rate to an order by the Secretary of State, who may set a formula or a rate. GOV.UK says the statutory interest for business to business transactions is 8 percent plus the Bank of England base rate, that it cannot be claimed where a contract sets a different interest rate, and that a lower rate cannot be used in a contract with public authorities. The guide gives a worked example with a debt of GBP 1,000, and says a fresh invoice is sent if interest is added to the money owed.

Section 5A adds a fixed sum once statutory interest begins to run. The sums are the same in the Act and on GOV.UK.

Size of the debt	Fixed sum
Less than GBP 1,000	GBP 40
GBP 1,000 or more, but less than GBP 10,000	GBP 70
GBP 10,000 or more	GBP 100

Section 5A(2A) adds that if the supplier's reasonable costs of recovering the debt are not met by the fixed sum, the supplier is also entitled to a sum equal to the difference. GOV.UK says the business can be charged the fixed sum once for each payment, on top of interest, and that a supplier can also claim reasonable costs each time it tries to recover the debt.

Where the figures can change

The Act hands the interest rate to an order, and the fixed sums sit in the section text as amended in 2002 and 2013. The GOV.UK pages link to the Bank of England base rate and do not print it. This page prints no base rate figure for that reason. For courts and small claims in the United Kingdom, see small claims limits in the United Kingdom.