Charging Interest on Late Payment

Charging interest on late payments can be a useful way of getting your customers to pay you promptly, and also means that if they pay you late you do not lose out.

There are two ways in which you can charge interest on a late payment:

• statutory interest – the Late Payment of Commercial Debts (Interest) Act 1998 (as amended by the Late Payment of Commercial Debts Regulations 2013 and the Late Payment of Commercial Debts (No 2) Regulations 2013) (the Act) gives a supplier the right to claim interest from a customer who fails to pay their bills on time; or
• contractual interest – instead of relying on the Act, you can make your own arrangements in your contracts in relation to charging interest on late payments.