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Can I claim interest on money owed to me by a customer?

Yes you can! Either because of a term in your commercial contract or thanks for a little piece of legislation you may not know about. Read on for more info...

You may already have what is known as ‘contractual interest’, an entitlement to charge interest on late payments, set out in your commercial agreements. It’s important to check that first, just in case as that will be your first port of call. The wording may look something like this :

“If the Customer fails to make a payment under this agreement by the due date, then the Supplier may charge and the Customer will pay interest on the overdue sum from the due date until payment of the overdue sum. Interest will accrue each day at 4% a year above the Bank of England’s base rate from time to time, but at 4% a year for any period when that base rate is below 0%”.

If you don’t have a written agreement, or your agreement doesn’t have any wording about the right to charge interest, you can rely on a piece of law called The Late Payment of Commercial Debts (Interest) Act 1998 (which was amended in 2000, 2002 and 2013 but we won’t bore you with the legal stuff). Interest

What this handy piece of law says is that you can charge interest on overdue payments from the due date for payment. Happy days!

The rate that you can charge is 8% above base rate (this just means the Bank of England base rate which you can easily Google to find out what it is or ask us for our handy interest calculator so you can work out what interest you would be entitled to on your unpaid invoice (no obligation just drop us an email at and we will send it over to you).


As well as interest you can also charge compensation for having to chase the debt. The rates of compensation are :

Debts less than £1,000


Debts over £1,000 and less than £10,000


Debts over £10,000


AND reasonable expenses...

You can also recover reasonable expenses you may have to pay in instructing a solicitor or debt collection agency to recover the unpaid invoice for you. This has to be reasonable and is usually set at somewhere between the compensation rate and the reasonable costs of the law firm or collection agency costs.

So whilst it’s really annoying that you have to chase non-paying customers, there is a little bit of a silver lining in the level of compensation you can recover from them for failing to pay on time.

The purpose of the legislation was to discourage businesses from overly delaying payment to each other and to compensate businesses that do fall victim to late payment.

And the moral of the story, make sure you pay invoices on time and if you can’t contact the person you owe the money to as they are less likely to insist on interest or instruct a solicitor to recover the debt for them.

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