Three letters to send when an invoice has not been paid, and a calculator for the statutory interest and fixed compensation you can add to a commercial debt. Written for sole traders and small trade businesses in the UK. This is practical guidance, not legal advice.
The rules are not the same for every customer, and this changes what you can charge.
A business owes you - a builder you subcontracted for, a letting agent, a shop, a landlord acting as a business. You can claim statutory interest and a fixed sum for debt recovery costs under the Late Payment of Commercial Debts (Interest) Act 1998. The calculator below covers this.
A homeowner owes you - a private customer having work done on their own home. The 1998 Act does not apply, because both parties have to be acting in the course of a business. You can only charge interest if your written terms said so before the work started and the term was set out in plain, intelligible language the customer could actually see. Under the Consumer Rights Act 2015 a term that is not transparent, or that causes a significant imbalance to the consumer’s detriment, may not be binding, and fairness is judged by the circumstances when the term was agreed. A term added later, in an invoice or a chasing email, does not create a right to interest. A court can still award interest if the debt ends up in a claim. You cannot add statutory interest or the fixed compensation sum.
Send them in order and keep every version you send. A practical approach is to leave about a week between letters, but choose a cadence appropriate to the circumstances. This is not a legal waiting period.
Use when the invoice has just gone past its due date.
Use when there has been no reply. About a week after the reminder is a practical choice, not a rule. Name a date and say what happens next.
Only if your customer is a business: swap in the commercial-debt wording
Replace that last line with: If I don’t hear from you by [payment deadline], I’ll add statutory interest and a fixed sum for debt recovery costs to the balance.
Use when the deadline in the second letter has passed. Only say you will start a claim if you are prepared to.
Only if your customer is a business: add these commercial-debt lines
Statutory interest and the fixed sum apply only where both you and your customer were acting in the course of business. If that is your situation, add these two lines to the amount outstanding, above the total:
Statutory interest: [interest amount]
Fixed sum for debt recovery costs: [compensation amount]
and add this sentence after the list:
Interest is claimed under the Late Payment of Commercial Debts (Interest) Act 1998 at [rate]% a year, and continues to accrue daily until the debt is paid.
For commercial debts only. If your customer is a private homeowner, statutory interest does not apply and the calculator will say so.
Answer the questions above to see a calculation.
Interest that starts running between 1 July and 31 December 2026: 11.75% a year
Bank of England base rate on 30 June 2026 (3.75%) plus 8%
Rate checked 14 August 2026. The next reference date is 31 December 2026, which sets the rate for interest starting in the first half of 2027.
The base rate used is the one in force on the 30 June or 31 December before interest started running, and it is then fixed for that debt. It does not change if the Bank of England moves rates later.
You cannot claim statutory interest if your contract sets a different interest rate. In that case the contract rate applies instead.
You can also claim a fixed sum, once per invoice:
Debt
Fixed sum
Under £1,000
£40
£1,000 to £9,999.99
£70
£10,000 or more
£100
Check the amount and the paperwork first: the invoice, your terms, and every message you have sent. Then consider a claim through the court service for the part of the UK where the claim belongs, or a solicitor’s letter if the sum justifies the cost. The routes differ: A claim is a commercial decision, not an automatic next step. Weigh the amount against the time and the relationship.
England and Wales: make a court claim for money through the county court.
Scotland: make a court claim for money. Simple Procedure covers claims up to 5,000 pounds; larger claims use Ordinary Cause.
Northern Ireland: recover debts owed to you through the NI Courts and Tribunals Service. Small claims cover up to 5,000 pounds.
For the wider process, including when to stop work and how to keep records that stand up later, read our guide on how to chase an unpaid invoice.
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