The UK statutory late-fee framework, in plain English

If you're freelancing in the UK and your clients pay late, you're legally entitled to charge them a fixed compensation fee plus interest — and most people don't. The rules are simple, well-established (the Late Payment of Commercial Debts (Interest) Act 1998), and completely one-sided in your favour once an invoice is overdue.

Here's the exact framework, in the order it matters.

The two things you can charge

Once a commercial invoice is overdue (the day after your agreed payment terms lapse), you can add:

1. A fixed compensation fee, based on the invoice value:
   • Under £1,000 → £40
   • £1,000 to £9,999 → £70
   • £10,000 and up → £100
2. Statutory interest at the Bank of England base rate + 8% per annum, calculated daily from the day after the due date.

Both are charged per overdue invoice, not per client. If a client owes you three invoices, you can add three compensation fees.

A worked example

Suppose your client owes you £2,400, due 30 June, unpaid on 5 August (36 days late). BoE base rate is 5.25%.

• Fixed compensation: £70 (invoice is between £1k and £10k)
• Daily interest rate: (5.25 + 8) / 365 = 0.0363%
• Interest: £2,400 × 0.0363% × 36 days = £31.35
• Total you can legally add: £101.35

That's compensation on top of the original £2,400 — and it grows every day the client delays.

Why nobody uses it

Three reasons come up over and over:

• "I don't want to lose the client." Fair, but consider: a client who won't pay 40 days late isn't a client, they're a debt. And clients who will pay when nudged tend to pay faster when there's a real cost to delaying.
• "The maths is annoying." True if you calculate manually. This is a solved problem — Tallylark applies statutory late fees automatically the day after due date, with the interest ticking up in real time on the client's pay page.
• "I'm worried I'm not allowed to." You are. This isn't a grey area. The law was written specifically because small suppliers were being systematically abused by larger buyers, and it explicitly overrides any contract clause that tries to waive it.

How to actually charge it without sounding like a debt collector

The mechanic that works, in my experience:

1. State it upfront on every invoice, in a footnote. Something like: "Payment due within 14 days. Overdue invoices attract statutory compensation of £40–£100 plus interest at BoE base rate + 8% p.a. under the Late Payment of Commercial Debts (Interest) Act 1998." Clients read that. They also don't argue.
2. Apply it automatically, not manually. The moment you have to decide "do I add the fee this time?", you'll skip it. Automate the trigger to the day after the due date and let the software be the bad guy.
3. Make the first overdue reminder a notification, not a threat. "Invoice INV-0042 became overdue today. Statutory compensation of £70 has been added, and interest of £0.87/day is accruing." No emotion, just facts.

The result: paying-you-late becomes measurably more expensive than paying-you-on-time, and clients — even the drifty ones — figure this out fast.

What Tallylark actually does with this

We calculate the fee live on every overdue invoice, show the current total (compensation + accrued interest) on the pay page as a running number, and let you toggle statutory-mode on a per-invoice basis in case you want to waive it for a favourite client.

You never have to remember. You never have to argue. And you'll be surprised how quickly your average payment time drops.