What late payment interest can a builder actually claim? Worked sums

If a business customer pays you late, the law lets you add interest and a fixed fee to what they owe. Most builders have heard of this and almost none use it, partly because nobody has told them what it comes to in pounds. So we ran the sums.

The short version: GOV.UK says the statutory interest rate is "8% plus the Bank of England base rate for business to business transactions". On the day we checked, the Bank of England's Bank Rate was 3.75%, held on 17 September 2026. That makes the annual rate 11.75% on the unpaid amount. On top of the interest you can charge a fixed sum for the cost of recovering the debt: £40 for a debt under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. GOV.UK adds that you can only charge the business once for each payment.

Who it applies to, and who it does not

This is a business-to-business rule. It covers a builder invoicing another business: a letting agent, a property developer, a main contractor, a shop fitting out its unit. It does not cover a private homeowner paying for their kitchen. If your customer is a household, do not quote the Act at them; our letter template for chasing an unpaid invoice shows what to say to each kind of customer.

The sums

We ran the formula (debt × 11.75% ÷ 365, per day) on four invoice sizes that a small trades firm sends out. The figures are from our saved output, using Bank Rate as it stood on 2026-10-01.

Look at the small invoice. A late £850 bill gains 27 pence a day, so the interest alone is not worth a phone call. The £40 fixed fee is more than twice the interest at 60 days. On the larger invoices the interest starts to matter: £12,000 left unpaid for 90 days adds nearly £350 before the fee.

What this means in practice

First, the amount is modest. This is not a way to get rich off slow payers. Its value is that it moves the conversation. A customer who sees a line on the final letter saying "statutory interest of £3.86 a day is accruing under the Late Payment of Commercial Debts (Interest) Act 1998" is more likely to treat your invoice as the one to pay this week.

Second, put it in your terms before you need it. Write the payment terms and a one-line reference to the Act on every invoice and quote, so nobody is surprised by the final letter. Our quote follow-up template includes a payment terms paragraph you can reuse.

Third, check the rate before you quote it. Bank Rate changes, and the GOV.UK page tells you to look up the current figure rather than giving one. Our table is the sum as of 1 October 2026, and the Act's own rules decide which Bank Rate figure applies to a given invoice, so treat the table as a guide to size, not a figure to paste into a court claim. Nothing here is legal advice.

The part nobody does: doing it every time

The sums are easy. The hard part is that somebody has to notice an invoice is a day late, send the reminder, and send the firmer letter at seven and fourteen days. In a nine-person firm that somebody is the owner at 9pm or a partner who is in two days a week. That is the job an AI Credit Controller set up by Overlyft does: it raises the invoice, chases on a fixed schedule, and only sends the statutory-interest letter to business customers after you have approved it.

If you would rather not do this yourself, that is what we set up. See the box below.