Late Payment Guide for Trades

Sol WrightCo-founder, Tradehand

Published 6 May 2026Updated 19 August 2026

Know your rights, charge what you're legally owed, and follow a clear 3-step process to recover late payments across maintenance jobs without burning customer relationships or paying a solicitor.

What's included

Your statutory rights under the Late Payment of Commercial Debts Act 1998
Default payment terms and what applies if nothing is agreed in writing
How to calculate statutory interest (8% above Bank of England base rate)
Fixed late payment compensation amounts by invoice value
Step-by-step 3-stage recovery process (reminder → letter → court)
Template reminder invoice text for 7 days overdue
Template formal letter before action for 21 days overdue
Prevention tips: deposit upfront, payment link on completion

Guide preview

Your rights

Late Payment of Commercial Debts Act 1998

The Late Payment of Commercial Debts (Interest) Act 1998 gives you the automatic right to charge interest on late business-to-business invoices. It applies even if your contract doesn't mention it. Consumer (B2C) work is covered under different rules.

Default terms

30-day default payment terms if nothing agreed in writing

If you haven't agreed payment terms in writing, the default is 30 days from the invoice date (or delivery of goods/services, whichever is later). Always confirm terms in your quote.

Interest

Statutory interest: 8 percentage points above the Bank of England base rate

From the day after payment was due, you can charge 8 percentage points above the Bank of England's base rate (the rate set on the preceding 31 December applies for interest starting Jan–Jun, and the rate set on the preceding 30 June applies for Jul–Dec). At the Bank Rate of 3.75%(held 30 July 2026), that's 11.75% a year, or roughly £0.64/day on a £2,000 invoice. Check the current Bank Rate before you calculate, since it moves.

Compensation

Fixed late payment compensation amounts

On top of interest, you can claim fixed compensation of £40 for invoices up to £999.99, £70 for £1,000 to £9,999.99, and £100 for £10,000+. You don't need to go to court to claim these.

Step 1

Reminder invoice at 7 days overdue

Send a friendly reminder with the original invoice attached: "This invoice is now 7 days overdue. Please arrange payment at your earliest convenience." Keep a record of the date sent.

See where admin is costing you time

Answer a few questions about your trade business and see what your assistant could take off your plate.

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Frequently asked questions

How much interest can I charge on a late invoice?

Statutory interest is 8 percentage points above the Bank of England base rate, running from the day after payment was due. At the Bank Rate of 3.75% that is 11.75% a year, which works out at roughly £0.64 a day on a £2,000 invoice. Check the current Bank Rate first, because the rate that applies is the one in force on the preceding 31 December or 30 June.

Source: The Late Payment of Commercial Debts (Rate of Interest) (No.3) Order 2002, Article 4 (rate = 8% above Bank of England base rate)

What are my payment terms if I never agreed any in writing?

The law treats the payment as late 30 days after the customer receives the invoice, or after you deliver the goods or service, whichever is later. Agreeing terms in your quote is still worth doing, because it removes the argument about which date the clock started on.

Source: gov.uk: Charge interest and claim debt recovery costs if a payment is late

Can I charge anything on top of the interest?

Yes. You can claim fixed compensation for debt recovery costs on each late invoice: £40 for invoices up to £999.99, £70 for £1,000 to £9,999.99, and £100 for invoices of £10,000 or more. You do not need to go to court to claim it.

Source: gov.uk: Claim debt recovery costs on late commercial payments (fixed compensation bands)

Does this apply to work I do for homeowners?

No. The Late Payment of Commercial Debts (Interest) Act 1998 covers business-to-business debts, so it does not apply to a homeowner paying for work on their own home. Consumer work is covered by different rules, so put your payment terms in the quote instead.

Source: Late Payment of Commercial Debts (Interest) Act 1998

What should I do first when an invoice goes overdue?

Send a short reminder with the original invoice attached at 7 days overdue, then a formal letter before action at 21 days, and only then consider court. Keep a dated record of every message you send, because that record is what makes the later steps straightforward.