Section 5A · Late Payment of Commercial Debts (Interest) Act 1998

The fixed sum you can add to every late invoice

Two things about it surprise almost everybody. It is per invoice, not per customer. And it is a minimum, not a cap.

It applies to business-to-business debts by default. Your terms do not have to mention it.

Per invoice, not per customer

This is where the number gets interesting. Each late payment carries its own fixed sum. A customer sitting on four late invoices owes it four times, and that total is often larger than the interest on any single one of them.

Plus £341.67 of statutory interest on that stack, so £621.67 on top of the £19,750.00 already owed. Work out your own on the calculator.

The fixed sum is a minimum, not a cap

This is the part almost everyone misses, including people who know the bands by heart. GOV.UK is explicit: a supplier can also claim reasonable costs each time they try to recover the debt, above the fixed sum.

So if recovering the money genuinely cost you more than £100 — a tracing agent, a solicitor's letter, a collection agency's fee — the excess is claimable rather than absorbed. You should expect to evidence what you actually spent, and "reasonable" does the work in that sentence: it is not an invitation to bill your own time at consultancy rates.

Source: GOV.UK, claiming debt recovery costs . Checked 7 August 2026.

When it does not apply

• Consumer debts. The Act covers business-to-business only.
• Where your contract sets its own remedy. A contractual late-payment term can replace the statutory one. Read your terms.
• Genuinely disputed invoices. Resolve the dispute first; adding compensation to a contested debt weakens your position.
• More than once per payment. One fixed sum per invoice, however many times you chase it. The reasonable costs above are the thing that scales with effort, not the fixed sum.

Questions

How much is late payment compensation?

£40 for a debt up to £999.99, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. It is set by section 5A of the Late Payment of Commercial Debts (Interest) Act 1998 and applies to business-to-business debts.

Is it per invoice or per customer?

Per invoice. Each late payment carries its own fixed sum, so a customer sitting on four late invoices owes it four times. You can only charge it once for each payment, but four invoices are four payments.

Is £100 the most I can claim?

No, and this is the part most people miss. The fixed sum is a minimum, not a cap. GOV.UK states that a supplier can also claim reasonable costs each time they try to recover the debt. If recovery genuinely cost you more than the fixed sum, the excess is claimable, though you should expect to evidence it.

Do I need it in my terms and conditions?

No. It applies by default to commercial debts. If your contract sets its own remedy for late payment, that can replace the statutory one, so it is worth reading your terms before relying on either.

Can I claim it from a private customer?

No. The Act covers debts between businesses. A consumer debt is outside it entirely, and the figures on this page do not apply.

How long do I have to claim it?

A simple contract debt is generally subject to a six-year limitation period in England and Wales, running from when the debt fell due. That is a general position rather than advice on your particular debt, and a long-forgotten invoice is worth taking advice on.