Late payment fees and interest on invoices, by country

Late payment fees vs late payment interest

A late fee is a flat charge added once an invoice is overdue, while late payment interest is a percentage of the debt that builds up for each day it stays unpaid. Some countries give you a legal right to interest and a fixed sum on business debts. Elsewhere, you need both to be in your agreed terms.

The two work differently in practice. A flat fee is simple to state and calculate, but it does not grow if the customer keeps waiting. Interest is fairer on large or very late debts, because the charge grows with the size of the debt and the delay, but it takes a little arithmetic. The UK and Irish rules combine both: interest plus a fixed compensation sum.

The rules below cover sales between businesses. Charging consumers is subject to different rules, so check your local consumer law before adding charges to invoices for private individuals.

Late payment rules at a glance

The table compares the three countries on the interest you can charge, the fixed sum on top, and the default payment period when none was agreed. Every figure was checked on a government page in October 2026. Rates linked to central bank rates change, so recheck the reference rate before you send a claim.

United Kingdom: statutory interest and fixed compensation

In the UK, a business that pays another business late owes statutory interest of 8% a year plus the Bank of England base rate, unless your contract sets a different rate. You can also claim a fixed sum for recovery costs: £40 on debts up to £999.99, £70 on £1,000 to £9,999.99, and £100 on £10,000 or more.

The base rate used is fixed for six months at a time. Under the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, interest that starts running between 1 July and 31 December uses the rate in force on 30 June, and interest that starts between 1 January and 30 June uses the rate on 31 December.

The Bank of England’s Bank Rate was 3.75% when we checked in October 2026, and it was held at that level at the June 2026 decision. So for a debt where interest starts running in the second half of 2026, statutory interest works out at 11.75% a year.

Some limits from GOV.UK: you cannot claim statutory interest if your contract has a different rate, and you cannot use a lower rate in a contract with a public authority. On top of the fixed sum, a supplier can claim reasonable costs each time they try to recover the debt. If no payment date was agreed, payment is late 30 days after the customer receives the invoice or you deliver, whichever is later.

UK worked example: interest and compensation to the penny

A made up supplier invoices a business customer £6,400.00, due 15 September 2026. The customer pays on 30 October 2026, which is 45 days late. Interest starts in the second half of the year, so the 30 June 2026 Bank Rate of 3.75% applies, giving 11.75%. The claim is £92.71 interest plus £70 compensation.

GOV.UK uses the same method in its own example: annual interest divided by 365 to get a daily figure. Work out the full period from the unrounded figure, as above, to avoid rounding errors. Example figures only.

Ireland: interest and compensation under the EU based rules

Ireland applies EU late payment rules through the European Communities (Late Payment in Commercial Transactions) Regulations 2012. Unless the contract says otherwise, interest is the ECB main refinancing rate plus 8 percentage points. The government sets the rate at 10.4% a year from 1 July 2026, based on an ECB rate of 2.40%.

The Department of Enterprise, Tourism and Employment explains the main points:

• Daily rate: the annual rate divided by 365.
• Compensation: €40 for invoices not exceeding €1,000, €70 for over €1,000 up to €10,000, and €100 above €10,000. The supplier is entitled to it without needing to send a reminder.
• Interest is automatic: it runs from the day after the agreed payment date, or 30 days after the invoice is received if there is no contract, until the debt is paid.
• Long terms: a period over 60 days must be expressly agreed and not grossly unfair to the supplier. Public authority contracts cannot exceed 30 days.

Worked example: a €2,500.00 invoice paid 20 days late at 10.4% carries interest of €2,500.00 × 10.4% × 20 ÷ 365 = €14.25, plus €70 compensation, so €84.25 on top of the debt. Example figures only.

Australia: it depends on your agreed terms

Australia has no general law that adds a set interest rate or fixed late fee to overdue business invoices in the way the UK and Irish rules do. Whether you can charge either depends on what you and the customer agreed before the work, usually in your quote, contract or written terms.

Government guidance reflects this. business.gov.au’s checklist for a letter of demand says to include a late payment interest rate only if it was specified in the contract. Its cash flow advice suggests discounts, late fees and deposits as ways to encourage early payment, which assumes those charges are part of your terms.

So in practice: state the fee or rate on your quote and in your terms of trade, get the customer’s acceptance, and repeat it on each invoice. Set an amount you could explain as reasonable for the cost and delay. Do not add a new charge to an invoice after the fact if it was never agreed.

The United States, Canada and other countries

We have not covered the US, Canada or other countries in detail here, because late payment rules are often set at state or provincial level and vary widely. As a working rule, charge only what your contract allows, and check your local government or court guidance on interest limits before you set a rate.

Wherever you are, the safest approach is the same. Agree the charge in writing before the work starts, put it on every invoice, and apply it consistently. Waiving a fee for a good customer is your choice; GOV.UK notes that you have the right to charge interest for late payment but can choose not to.

How to put late payment terms on your invoice

Add one plain sentence below your payment terms that states the charge and when it applies. Name the rate or fee, the date it starts, and for the UK or Ireland, which law you rely on. Keep it short and factual, and send a polite reminder before you add any charge to the account.

• UK: Overdue amounts carry statutory interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998.
• Ireland: Late payment interest and compensation apply under S.I. 580 of 2012.
• Agreed fee: A late fee of $25 applies to invoices unpaid 7 days after the due date, as set out in our terms.

Set the right defaults with the UK invoice preset or the Ireland preset, or start from the contractor invoice template. For reminder wording, see how to chase an unpaid invoice, and for site based work, invoicing as a contractor.