How late payment interest is calculated
For an invoice of 10,000 paid 45 days late at an annual rate of 12%:
| Item | Calculation | Amount |
|---|---|---|
| Daily rate | 12% ÷ 365 | 0.0329% |
| Interest | 10,000 × 0.12 × 45 ÷ 365 | 147.95 |
| Total due | 10,000 + 147.95 | 10,147.95 |
Statutory late payment interest
Many countries set a default rate for business-to-business late payments when the contract says nothing:
- European Union: The Late Payment Directive sets a minimum of the central bank reference rate plus 8 percentage points, unless the contract agrees otherwise.
- United Kingdom: Statutory interest under the Late Payment of Commercial Debts Act is 8% plus the Bank of England base rate.
- Elsewhere: Rates and rules differ; your contract or local law decides.
Check the current reference rate before claiming interest, and state your late payment terms on every quote and invoice.
Write the payment terms clearly on your next quote with the free quote generator.
Frequently asked questions
What is the formula for late payment interest?
Interest = amount × annual rate × days late ÷ 365. For 10,000 at 12% for 45 days, that is 147.95.
Is it 360 or 365 days?
Most invoices and statutory rules use 365 days. Some contracts and banking conventions use 360; the calculator lets you choose.
Can I charge interest without it being in the contract?
In the EU and the UK, statutory interest applies to business-to-business debts by default. Elsewhere it depends on local law; get advice for your situation.
Does VAT apply to late payment interest?
In many countries, statutory late payment interest is outside the scope of VAT, but rules vary. Ask your tax adviser.
Last updated: 31 October 2026 · By the Offerneta team