Can you charge late payment interest? A UK consultant’s guide to overdue business invoices

When does a consultancy invoice become overdue?

Start with the payment terms you and the client agreed. Read the signed proposal or engagement letter alongside any purchase order and later written changes. For consultancy work, pay particular attention to whether payment is linked to a milestone, delivery or approval.

Build a short evidence trail: what you delivered, when you sent the invoice, what payment date you recorded and what the client has said since. Ask accounts payable to identify any missing information rather than accepting a vague explanation that the invoice is being processed.

The supplied notes do not establish the statutory default payment deadline or the rules for agreeing longer terms. If the contract is silent, inconsistent or dependent on an unclear approval process, check GOV.UK’s late commercial payment guidance or ask a professional adviser before asserting when statutory interest began.

• Find the agreed payment terms and any subsequent changes.
• Confirm the correct client entity and invoice recipient.
• Keep evidence of the consultancy work delivered.
• Reconcile payments received and any agreed credits.
• Ask whether the client disputes the work, the amount or only the payment timing.

Does your contract allow statutory late payment interest?

The secondary guide in the research describes a statutory B2B interest route that does not require a late-fee clause in the contract. However, that summary should not be treated as confirmation that your particular consultancy invoice qualifies.

Look for clauses covering interest, late-payment charges and recovery costs. If you have agreed a contractual remedy, do not assume you can ignore it, replace it with the statutory rate or charge both. The supplied extracts do not explain the legal test governing how contractual remedies affect statutory rights; ask an adviser to check that point where necessary.

Make the commercial decision separately from the legal check. For an otherwise reliable client with a clearly identified processing problem, you might first seek a firm payment commitment. Where promises keep slipping, a properly supported claim may be worth considering. Either way, avoid presenting an unverified charge as an automatic entitlement.

How to calculate interest using the applicable rate and overdue period

The secondary source states that statutory interest is 8% plus the Bank of England base rate. It gives an annual rate of 11.75% for invoices falling overdue between 1 July and 31 December 2026, based on a 3.75% reference rate. These are that source’s claims, not independently verified current GOV.UK guidance. Confirm the applicable reference rate, date rules and calculation method before using them.

A conditional worked calculation shows the arithmetic without confirming an entitlement: if the eligible unpaid balance were £10,000 and the verified annual rate were 11.75%, annual interest would be £10,000 × 0.1175 = £1,175. Using a 365-day calculation convention gives approximately £3.22 per day. Retain the unrounded daily figure when multiplying by the verified number of overdue days, then round the resulting charge.

For the actual claim, record the eligible balance, annual rate, start date, calculation end date and day count. If the client has made a part-payment or you have issued a credit, do not simply apply the original balance across the whole period; check how the calculation should be adjusted. The supplied notes do not settle those details.

1. 1Verify eligibility and the correct interest route.
2. 2Confirm the applicable rate using current GOV.UK guidance.
3. 3Establish the eligible unpaid balance and chargeable period.
4. 4Calculate the interest and retain a clear working record.
5. 5Check the result before sending it to the client.

When can you claim fixed compensation and additional recovery costs?

Interest and fixed compensation are separate items. The secondary source gives the compensation bands below for qualifying overdue invoices. Confirm the amounts and their application against current GOV.UK guidance before adding them to a claim.

Do not turn every reminder into another fixed charge or add an arbitrary fee for your time. Identify precisely what debt the compensation relates to and check the basis for charging it, particularly where a project has several milestone invoices.

The supplied extracts do not establish when additional recovery costs are recoverable or how they interact with fixed compensation. Keep evidence of any actual expenditure and ask a professional adviser whether it is recoverable before passing it on. A cost you have incurred is not, by itself, proof that the client must reimburse it.

How to notify your client: a late payment interest email template

Once you have verified the basis and amount, write to the person who can resolve payment. Keep the tone measured: identify the debt, explain the proposed charges and ask for a specific response. Include your calculation rather than expecting the client to accept an unexplained total.

Subject: Outstanding consultancy invoice [reference] — payment and late-payment charges Hello [name], Invoice [reference] for [consultancy work], with an outstanding balance of [£amount], was due on [date] under [agreed payment terms]. Our records show that payment remains outstanding. I have calculated interest under [verified contractual or statutory basis] at [annual rate] for [period], totalling [£interest]. I am also claiming [£compensation and/or recovery costs, if applicable], on the basis set out in the attached breakdown. The total requested as at [calculation date] is [£total]. Please confirm by [response date] when payment will reach us. If your records differ, payment has already been made, or you dispute any part of the invoice or charges, please send the details so we can address them promptly. Thank you, [name]

Remove any line that does not apply. Do not use the statutory wording until you have checked entitlement, and distinguish the requested response date from the original payment deadline. Keep a copy of the email and the calculation you sent.

What to do if the client disputes the charge or still does not pay

Ask the client to separate any dispute about your consultancy work from a dispute about interest or costs. Request the relevant clause, calculation or delivery concern in writing. Respond with evidence and correct any error promptly; repeated demands will not resolve an unclear scope or an incorrect balance.

If there is no substantive dispute but payment still does not arrive, prepare a concise recovery file containing the agreement, invoice, delivery evidence, payment history and correspondence. Seek professional advice on proportionate next steps and likely costs before threatening formal action or suspending further work.

Keep proposed reforms separate from verified existing rights. The government press release describes stronger late-payment measures and says the Small Business Commissioner will be given new powers. That announcement, and the supplied consultation-response extract, do not establish which provisions are in force for your invoice. Before publication or escalation, check current GOV.UK guidance and commencement information rather than treating an announcement as an operative rule.

How Invoices and payments helps

HappyNoodle’s invoices and payments workflow lets you create invoices from the work, make payment simple and keep polite reminders connected to the right client. For this approach, use that workflow for clear invoicing and consistent follow-up, while separately checking your agreement and any legal basis for interest or recovery costs. Once you have decided what to request, keep the reminder focused on the relevant invoice and the action you need from the client. The legal checks and charge calculations still need your review.