Late Payment Act 1998 allows interest charges on overdue business invoices
UKPulse Money Desk
Businesses can legally charge interest on overdue business-to-business invoices under the Late Payment of Commercial Debts (Interest) Act 1998, even if not previously mentioned.
- The Late Payment of Commercial Debts (Interest) Act 1998 grants a statutory right to charge interest on overdue business-to-business invoices.
- Statutory interest can be charged at 8% above the Bank of England base rate, calculated daily from the day after payment was due.
- Invoices should include the sender's and customer's names and addresses, a unique invoice number, issue date, description of work, amount owed, and a due date.
Businesses have a statutory right to charge interest on overdue business-to-business invoices, according to the Late Payment of Commercial Debts (Interest) Act 1998. This right applies regardless of whether it was mentioned in advance.
Statutory interest can be charged at 8% above the Bank of England base rate, calculated daily from the day after payment was due. The current base rate should be checked before quoting a figure.
For an invoice to be sent, it should include six key details: the sender's name and address, the customer’s name and address, a unique invoice number, the date it was issued, a description of the work, and the amount owed with a stated due date. Emailing the invoice on the day work finishes is advised, with chasing recommended the morning after it falls due.
While 30 days is the legal default payment term if nothing else is agreed, businesses can request 14 days for smaller jobs. For larger amounts, taking a deposit of 25% to 50% upfront, with the balance due on completion, is suggested.
Why this matters: This information highlights legal rights for businesses seeking timely payment and outlines best practices for invoicing to help ensure financial stability.
What this means for you: If you are a sole trader or business owner, understanding these invoicing practices and your rights under the Late Payment of Commercial Debts (Interest) Act 1998 can help you manage payments and address overdue invoices.