Chasing a business client's unpaid bill: 8% plus base rate and a £40, £70 or £100 fixed sum, worked on three invoices

A business client is six weeks late with a bill and the partner asks: "can we add anything for that?" The answer is usually yes, but only for business-to-business bills, and the amounts are small enough that it helps to know them before you decide how much effort the chase deserves.

What GOV.UK says

The two GOV.UK pages I read say:

• Statutory interest is 8% plus the Bank of England base rate for business-to-business transactions.
• You cannot claim statutory interest if a contract sets a different interest rate.
• On top of interest you can charge a fixed sum by the size of the debt: £40 up to £999.99, £70 from £1,000 to £9,999.99, and £100 at £10,000 or more.
• You can only charge the business once for each payment.
• A supplier can also claim reasonable costs each time it tries to recover the debt.
• To add interest, send a new invoice.

The interest page links to the Bank of England for the current and previous base rates and does not say which date's rate applies to a given debt. It quotes no current base rate, so the figure below is an assumption, not today's rate.

The sums

I have assumed a base rate of 4.00%, so a total rate of 8% + 4% = 12% a year. Please replace it with the rate that applies to your debt. Daily interest is the invoice × 12% / 365, and each invoice here is 45 days late.

On the £800 invoice the fixed sum (£40) is 3.4 times the interest (£11.84), so for small bills the fixed sum is the bigger part of the extra. On the £12,000 invoice the interest is the larger part. The extra is £51.84 / £800 = 6.5% of the small bill and £277.53 / £12,000 = 2.3% of the large one.

Putting it into practice

• Check your terms first. If your engagement letter or terms of business set their own late payment rate, the GOV.UK page says statutory interest cannot be claimed on top. See what a client care letter should cover for a new matter.
• Send a new invoice for the extra, as the page says, and show the days, the rate and the fixed sum on it so the client can check the sum.
• Do not mix it up with client money. Interest on the client's own money is a different question; see interest on client money and the fair sum.
• Weigh the time. A firm that spends an hour on a £51.84 extra has not gained much. The admin scorecard for a small firm is a way to see where those hours go.

What I did not read

I did not read the Late Payment of Commercial Debts (Interest) Act 1998 or its regulations on legislation.gov.uk (the pages I tried returned only headings or one unrelated section), so I cannot state the rule for which base rate date applies or how it applies to a solicitor's bill to a particular kind of client. I did not read the Bank of England rate page, so 4.00% is only an assumption. I did not check the Legal Ombudsman or SRA position on charging interest to clients. Read the current pages before you send a chaser.

Overlyft builds AI staff who join your firm's team, check each overdue business invoice against your terms, work out the interest and fixed sum and draft the chasing letter, with a person approving it before it is sent.

This is general information, not legal advice. Check the current GOV.UK pages, your own terms and your regulatory obligations for each client.