There's a law in the UK that lets you charge interest AND a fixed compensation fee on every late invoice.
Most freelancers don't know it exists. Most who know it exists don't use it. That's leaving real money on the table.
The Late Payment of Commercial Debts (Interest) Act 1998
Intimidating name. Simple concept.
If a business client doesn't pay your invoice on time, you're legally entitled to:
- Statutory interest — 8% + Bank of England base rate annually. Currently that's about 12.5% per year.
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Compensation — A fixed fee per overdue invoice:
- £40 if the invoice is under £1,000
- £70 if it's £1,000–£9,999
- £100 if it's £10,000+
This is automatic. No contract clause needed. No negotiation required. It's there by default in law.
"Per invoice" not "per client"
That's the bit people always misread.
If a client is late on 3 invoices at £600 each, that's 3x £40 = £120 in compensation, plus interest on each invoice from its due date.
When does it kick in?
The statutory 30-day payment period starts either when you deliver the invoice, or when the goods/services are delivered — whichever is later.
If you've agreed different payment terms (Net 14, Net 60, etc.), the clock starts when that term expires.
B2B only
This doesn't apply to invoices to consumers. It's for business-to-business transactions — which covers most freelance work.
How to actually use it
Don't open with threats. Use the same 4-touch follow-up system:
- Due date: Friendly reminder
- 7 days overdue: Firm follow-up, reference the invoice
- 14 days overdue: Note that interest is accruing under the Late Payment Act
- 30 days overdue: Final notice, state exact interest + compensation owed
Most clients pay at step 3. The mention of a specific legal act with a specific number attached changes things psychologically.
Calculate what you're owed
There's a free calculator at landolio.com/tools/late-payment-interest-calculator.html — enter your invoice amount and due date, it spits out exactly what you can charge.
If you want the complete late payment system — including exact email templates, the Letter Before Action template, and the small claims court process — the Getting Paid Toolkit covers all of it (£19).
Late payments are the number one cash flow killer for UK freelancers. The law is on your side. Use it.
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