Late Payment Interest Calculator

Enter the amount still unpaid, the date it fell due and an annual rate, and this works out the interest that has accrued, what the debt is rising by each day, and the total now owed. Where statutory fixed compensation applies, it adds that too.

The arithmetic is a single multiplication. What makes it worth a tool is everything around it: interest runs from the day after the due date rather than the due date itself, statutory interest is simple rather than compounded, the fixed compensation is claimed once per invoice rather than per day, and a rate copied from a blog post two years out of date is worse than no rate at all.

That last point is why nothing is filled in for you. Statutory interest is a central bank's reference rate plus a fixed margin, and the reference half is not today's rate: it is the rate in force on a fixed date, held for the following six months. A figure printed here would be correct for one half-year and quietly wrong afterwards, and this number goes into a letter demanding money, where being confidently wrong is expensive.

The calculation happens in your browser. An overdue invoice identifies a client who has not paid, and that is not something worth uploading in order to perform a multiplication.

Late payment interest is compensation for being out of pocket. Money that should have been in your account in March and arrived in September was, for six months, funding somebody else's business rather than yours, and interest puts a price on that. It is not a penalty, which matters legally: a charge set far above the commercial cost of the delay can be challenged as a penalty and struck out, while interest at a defensible rate is simply the cost of the credit the client took without asking.

Most jurisdictions provide a statutory rate for commercial debts so that a supplier who never thought to write an interest clause is not left with nothing. In the UK that is the Late Payment of Commercial Debts (Interest) Act 1998, which sets interest at the Bank of England base rate plus eight percentage points. The EU's Directive 2011/7/EU works the same way, at the European Central Bank reference rate plus at least eight. Both also provide a fixed sum on top, to cover the cost of chasing.

The detail that catches people out is which base rate. It is not the rate today. Under the UK order that sets it, the figure is the base rate in force on 30 June for interest that starts to run between 1 July and 31 December, and the rate in force on 31 December for interest starting between 1 January and 30 June. It is then fixed for that whole half-year. The EU directive fixes its reference rate the same way, on 1 January and 1 July. So a debt that fell due in August is calculated on June's rate even if the bank has moved twice since, and using today's rate instead is the mistake that lets a debtor challenge the whole figure.

A contract term overrides the statutory position, which cuts both ways. A clause setting a substantial rate is worth having, because it is easier to point at than a statute. A clause setting a low one, or a payment term long enough to be grossly unfair, can leave you worse off than the default would have, and in the UK and EU a term that is grossly unfair to the supplier can be set aside, which is a reason to read what you signed rather than to assume the worst.

The distinction between a commercial and a consumer debt runs through all of it. The statutory schemes above cover business-to-business debts. Money owed by a private individual is governed by different rules, usually with lower ceilings and stricter formalities, and the fixed compensation sums do not apply at all. A calculator cannot tell which kind of debt it has been given, so it is worth being clear about it yourself before quoting a figure at anyone.

There is also a practical question that the arithmetic cannot answer: whether to charge it. Interest is often more useful as a term the client knows exists than as a sum actually claimed, and waiving it explicitly (saying you have calculated it and are not pursuing it this time) is a stronger position than never mentioning it. Knowing the number is what makes that a choice rather than an omission.