As a business, you have a statutory right to charge interest on late payment from another business, as well as a contractual right to charge interest, from another business, if you have specified this in your terms and conditions.
You cannot charge interest to individuals, only in the case of business to business transactions.
You can claim interest and debt recovery costs if another business is late paying for goods or a service.
If you haven’t already agreed when the money will be paid, the law says the payment is late after 30 days for public authorities and business transactions after either:
i. The customer gets the invoice
ii. You deliver the goods or provide the service (if this is later)
You can agree a longer period for payments from one business to another - but if it’s longer than 60 days it must be fair to both businesses.
The interest you can charge if another business is late paying for goods or a service is ‘statutory interest’ - this is 8% plus the Bank of England base rate for business to business transactions. You can’t claim statutory interest if there’s a different rate of interest in a contract.
You can’t use a lower interest rate if you have a contract with public authorities.
Send a new invoice if you decide to add interest to the money you’re owed.
You can also charge a business a fixed sum for the cost of recovering a late commercial payment on top of claiming interest from it.
The amount you’re allowed to charge depends on the amount of debt.
Up to £999.99 you can charge £40
£1000 to £9,999.99 you can charge £70
Up to £10,000 or more you can charge £100
These amounts are set by late payment legislation.
If you are a supplier, you can also claim for reasonable costs in recovering debt.