How to Chase Unpaid Invoices: UK Late Payment Law Guide

If your client is another business, the Late Payment of Commercial Debts (Interest) Act 1998 gives you three things once an invoice is overdue: statutory interest at 8% plus the Bank of England base rate, a fixed compensation sum for each late invoice, and the right to recover reasonable additional costs of collecting the debt.

The fixed compensation is £40 for debts under £1,000, £70 for debts from £1,000 to £9,999.99, and £100 for debts of £10,000 or more—per invoice, no court case required. If no payment terms were agreed, the law sets a default: payment is late 30 days after the customer receives your invoice or the goods or services, whichever is later. Note this covers business-to-business debts; consumer clients are covered by your contract terms instead.

The statutory rate is 8% plus the Bank of England base rate. To calculate what you're owed: multiply the debt by the combined rate for the annual figure, then divide by 365 for the daily rate, and multiply by the number of days overdue.

A worked example: suppose the base rate were 4%, making the statutory rate 12%. On a £2,000 invoice, that's £240 per year, or about 66p per day. Sixty days late, you'd be owed roughly £39.60 in interest plus the £70 fixed compensation—£109.60 on top of the invoice. The sums aren't life-changing, but quoting them in a reminder concentrates minds wonderfully: it signals you know your rights and keep count.

Most late payments are cured by well-timed reminders, not legal threats. A schedule that works: a friendly heads-up 3 days before the due date, a same-day note when the invoice falls due, a polite chase at 7 days overdue, a firmer follow-up at 14 days that mentions statutory interest, and a formal 'letter before action' at 30 days.

The before-due reminder matters more than people think—a large share of late payments are simple forgetfulness, and a nudge before the deadline prevents the problem entirely. Consistency matters too: chase every late invoice on the same schedule, every time, and clients learn that your invoices don't drift. ZeroDue sends these reminders automatically on the schedule you choose, so nothing depends on you remembering.

First chase (7 days overdue): 'Hi [name], just a quick note that invoice [number] for [amount] fell due on [date] and doesn't appear to have been paid yet. Could you let me know when payment will be made? If it's already on its way, please ignore this. Thanks!'

Firm follow-up (14 days overdue): 'Hi [name], invoice [number] for [amount] is now 14 days overdue. Please arrange payment within the next 7 days. I'd rather not apply charges, but note that overdue commercial invoices attract statutory interest at 8% plus the Bank of England base rate, plus fixed compensation, under the Late Payment of Commercial Debts (Interest) Act 1998.'

Letter before action (30 days overdue): 'Dear [name], despite previous reminders, invoice [number] for [amount], due on [date], remains unpaid. Unless full payment is received within 14 days of the date of this letter, I will begin court proceedings to recover the debt, statutory interest, and compensation without further notice. I would prefer to resolve this without court action.' Keep every template professional—you may be showing these to a judge later.

If a letter before action produces nothing, you have several routes. Money Claim Online lets you issue a county court claim for up to £100,000 from your desk; claims under £10,000 are usually allocated to the small claims track, where costs are limited and you don't need a solicitor. Mediation is worth offering first—courts expect you to have tried to settle.

For larger debts, a solicitor's letter often works where yours didn't, and debt collection agencies will chase for a percentage. A statutory demand is a heavier tool for undisputed debts over £750 against companies. Before any of this, though, weigh the relationship: a client who pays 20 days late every time may still be worth keeping—with shorter terms and a deposit next time.

The cheapest unpaid invoice to chase is the one that never goes overdue. Invoice immediately after the work—every day you delay sending adds a day to payment. Agree payment terms in writing before starting. State a concrete due date and include your bank details on the invoice itself. For new clients or large projects, take a deposit.

And automate the chasing. Businesses that send reminders consistently get paid dramatically faster than those who chase 'when they get round to it'. ZeroDue tracks every invoice, marks them overdue automatically, and sends polite, escalating reminders without you lifting a finger—see how it works for your trade at zerodue.co/industries/contractors or zerodue.co/industries/freelancers.

Can I charge statutory interest if my contract doesn't mention it? Yes—for business-to-business debts the right exists under the Act automatically. A contract can substitute its own interest rate, but only if it's a 'substantial remedy'; a token rate won't override the statute.

How far back can I claim? You can claim statutory interest on late-paid invoices up to six years back in England and Wales, even if the invoice itself has since been paid.

Does this apply to consumer clients? No. The Act covers commercial debts between businesses. For consumers, you can only charge late payment interest if your contract provides for it and the term is fair.

Will chasing damage the client relationship? Handled professionally, rarely. Consistent, polite reminders are normal business practice—most clients respect a supplier who runs their books properly. The relationships that can't survive a payment reminder are usually the ones costing you money.

You now know your rights: 8% plus the Bank of England base rate, fixed compensation per invoice, and a clear escalation path from friendly nudge to court claim. The final step is making the process automatic. Try ZeroDue free—it tracks due dates, fires reminders at the right moments, and flags overdue invoices so you only step in when a human touch is needed.