Your Late Payment Rights as a Sole Trader in the UK

UK tradesmen have had a statutory right to charge interest on late commercial payments since 1998. Most never use it. Knowing it exists - and mentioning it in your final reminder - is often enough to get an overdue invoice paid without any further action.

What law covers late payments in the UK?

The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses the right to claim statutory interest, fixed compensation, and reasonable recovery costs on overdue commercial payments. It applies automatically - you do not need a clause in your contract.

Does this apply to private homeowners?

No. The 1998 Act applies only to contracts where both parties are businesses. If your customer is a private individual - a homeowner, a private tenant - the Act does not apply. Your rights in consumer contracts are governed by the terms of your agreement and general contract law.

If your customer is a business of any size - another sole trader, a limited company, a housing association - the 1998 Act applies.

When is a payment legally late in the UK?

Payment is due by the date agreed in your contract. If no specific payment date was agreed, the default is 30 days from:

• The date the invoice was delivered to the customer, or
• The date the goods or services were delivered (whichever is later)

Contracts can specify longer payment terms, but any term beyond 60 days must be specifically agreed and must not be grossly unfair.

What can you claim on a late payment in the UK?

1. Statutory interest

You are entitled to interest at 8% above the Bank of England base rate, calculated on the outstanding amount from the day after payment was due.

Example: Invoice of £3,000 overdue by 45 days, BoE base rate at 5%. Interest rate = 13%. Daily interest = £3,000 x 13% / 365 = approximately £1.07/day. After 45 days: approximately £48.

2. Fixed debt recovery compensation

You are entitled to a fixed compensation amount per invoice, automatically:

This is per invoice. Multiple overdue invoices each carry their own compensation entitlement.

3. Reasonable recovery costs

Where the fixed compensation does not cover your actual costs of recovering the debt - for example, solicitor fees or a debt recovery agency - you can claim the difference as reasonable recovery costs.

How to claim your late payment rights in practice

Reference the Act in your final notice

You do not need to go to court to use these rights. In your final payment reminder, note that you intend to claim statutory interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998 if the invoice remains unpaid. This is a legitimate statement of your legal position.

Most commercial customers will pay the original invoice immediately rather than face a claim with interest and compensation added.

Issue a statutory interest invoice

Once the invoice is overdue, you can issue a supplementary invoice for the statutory interest and fixed compensation. Mark it clearly as a statutory late payment claim under the 1998 Act.

Small claims for amounts up to £10,000

The UK small claims court (or Money Claim Online for straightforward cases) handles debts up to £10,000 in England and Wales. Filing costs start at £35. You do not need a solicitor. Judgments are legally enforceable.

Debt recovery for larger or persistent debts

For debts over £10,000 or where the customer has significant assets, a solicitor or debt recovery agency may be cost-effective. Their fees may be recoverable as reasonable recovery costs under the 1998 Act.

Should you include late payment terms on your invoices?

Your statutory rights apply automatically. But stating your terms clearly has practical benefits:

• Sets expectations before payment is due
• Signals to commercial customers that you know your rights
• Reduces ambiguity about when payment was due

A simple line works: “Payment due within 14 days. Statutory interest will apply on overdue amounts under the Late Payment of Commercial Debts Act 1998.”

Summary: late payment rights for UK sole traders

• Law: Late Payment of Commercial Debts (Interest) Act 1998
• Applies to: B2B commercial transactions only - not private consumers
• Default payment period: 30 days if no term agreed
• Statutory interest: BoE base rate + 8% from the day after the due date
• Fixed compensation: £40 / £70 / £100 per overdue invoice depending on invoice value
• Recovery costs: Reasonable additional costs beyond the fixed compensation

For the practical chasing system, see our guide on how to chase late payments without the awkward phone call.

For Irish late payment law, see late payment rights for tradesmen in Ireland.

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