UK Late Payment of Commercial Debts: Freelancer Guide

The UK statute freelancers actually mean

In the UK, the headline statute for B2B late payment interest is the Late Payment of Commercial Debts (Interest) Act 1998. GOV.UK’s guide “Late commercial payments: charging interest and debt recovery” translates that into plain steps: when a payment becomes late, what interest you can charge, and what fixed recovery sums apply. The Act implies a term into qualifying commercial contracts — you do not need a fancy penalty clause to have a baseline right.

Statutory interest for business-to-business transactions is 8% plus the Bank of England base rate, per GOV.UK. You cannot claim that statutory interest if your contract already sets a different interest rate. GOV.UK also states you cannot use a lower interest rate in a contract with public authorities. Always check the current Bank of England base rate before you quote a daily figure.

This guide is for freelancers and sole traders operating as businesses. It is not legal advice. Scotland, Northern Ireland, and England and Wales share the late-payment commercial-debt framework in broad terms via the Act, but procedure and enforcement routes still deserve local confirmation when you escalate beyond a polite invoice.

• BoE base + 8% — Statutory interest formula (B2B) (GOV.UK — Interest on late commercial payments)
• 30 days — Default lateness if no date agreed (GOV.UK — When a payment becomes late)
• 60 days — Usual max agreed B2B term (fairness still required) (GOV.UK late commercial payments guide)

When a UK commercial payment becomes late

GOV.UK: if you agree a payment date, it must usually be within 30 days for public authorities or 60 days for business transactions. You can agree longer than 60 days between businesses, but it must be fair to both. If you do not agree a payment date, the payment is late 30 days after the customer gets the invoice, or 30 days after you deliver the goods or provide the service if that is later.

That default clock is why freelancers who “will invoice sometime next month” hurt themselves. Send invoices promptly, confirm receipt when amounts are large, and put Net 14 / Net 30 in writing before work starts. Clear terms make both ordinary chasing and statutory interest calculations cleaner.

Qualifying debts are commercial — business supplying goods or services to another business (or relevant public body scenarios covered by the regime). Consumer clients are a different world. If you mix B2B retainers and private individuals, segment how you chase and what rights you cite.

How to calculate and present statutory interest

GOV.UK’s worked example: if you are owed £1,000 and the Bank of England base rate were 0.5%, annual statutory interest would be £85 (1,000 × 0.085). Daily interest is that annual figure divided by 365 (about 23p a day in the example). After 50 days, interest would be about £11.50. Replace 0.5% with the actual base rate that applies for your calculation period.

The Office of the Small Business Commissioner (OSBC) publishes an interest calculator designed to align with the 1998 Act, including how base rate is taken for H1 vs H2 windows (rate at 31 December for 1 January–30 June; rate at 30 June for 1 July–31 December). OSBC guidance also notes you generally use the invoice total including VAT when calculating interest and compensation on a late payment.

GOV.UK’s practical instruction: send a new invoice if you decide to add interest to the money you are owed. Keep the original principal invoice intact in your books, then bill interest (and compensation, if claimed) as a clear add-on with dates and rates cited.

• £1,000 — GOV.UK example principal (GOV.UK interest example)
• £85 — Example annual statutory interest at base 0.5% (GOV.UK (1,000 × 8.5%))
• £11.50 — Example interest after 50 days (GOV.UK (50 × £0.23))

Fixed compensation under section 5A

Section 5A of the Late Payment of Commercial Debts (Interest) Act 1998 entitles the supplier to a fixed sum once statutory interest begins to run: £40 for debts under £1,000; £70 for debts from £1,000 up to under £10,000; £100 for debts of £10,000 or more. That fixed sum is in addition to statutory interest.

If reasonable recovery costs are not met by the fixed sum, the supplier can also claim the difference between the fixed sum and those costs (as provided in the Act). Keep evidence of chasing time and any third-party fees if you ever claim above the fixed band.

Compensation and interest are rights you may exercise — not a mandatory surcharge on every slow AP department. Many freelancers reserve the formal invoice for day 14–30 overdue after reminders fail, especially with enterprise clients who respond to documented statutory language.

Operational playbook for solo freelancers

Week to week: know who is overdue without opening five inboxes. A simple AR habit beats an angry legal letter. Use factual reminders — invoice number, amount, due date, pay link or bank details — before you mention the 1998 Act.

When you escalate: cite GOV.UK language lightly (“as you’re aware, UK late payment rules allow…”) or attach a short interest schedule. Offer a short cure window to pay principal and stop further interest. If cash is the only issue, a dated payment plan can beat a standoff — document it.

DueChat-style reminder workflows help you stay consistent so statutory tools stay rare. Consistency signals professionalism; surprise penalty invoices without prior nudges often signal poor process. Pair both: calm systems first, statute second.

Further reading

• GOV.UK — When a payment becomes late
• GOV.UK — Interest on late commercial payments
• Late Payment of Commercial Debts (Interest) Act 1998
• Act section 5A — compensation arising out of late payment
• OSBC interest calculator guidance

FAQ

Can UK freelancers use the Late Payment of Commercial Debts (Interest) Act 1998?

If you supply goods or services in a qualifying commercial (business-to-business or covered public) transaction and the debt is unpaid after it becomes late under GOV.UK rules, the Act’s implied term for statutory interest (and related compensation) may apply. Confirm your facts and contract; this is not legal advice.

What if my contract already sets late fees or interest?

GOV.UK states you cannot claim statutory interest if there is a different rate of interest in the contract. Follow the contract rate (and fairness rules) instead of stacking statutory interest on top.

Should I amend the original invoice or raise a new one for interest?

GOV.UK advises sending a new invoice if you decide to add interest to money you are owed. That keeps the principal invoice clear and documents the interest claim separately.

Where can I calculate UK interest safely?

Use GOV.UK’s method (base rate + 8%, daily pro-rata) and/or the Office of the Small Business Commissioner interest calculator, then verify against the Bank of England base rate for the relevant period.