Late payment rights for UK freelancers
Late payment: the statutory rights most freelancers never use
The Late Payment of Commercial Debts (Interest) Act 1998 gives every commercial creditor the right to charge 8% above the Bank of England base rate on overdue invoices — plus fixed compensation of up to £100 per invoice — without putting anything in the contract. Most freelancers never invoke it. The ones who do get paid faster.
Solicitor-drafted · Anchored to UK statute · Late payment rights built in
Covers the Late Payment of Commercial Debts (Interest) Act 1998 as amended · England and Wales
What the Act gives you
The Late Payment of Commercial Debts (Interest) Act 1998 applies automatically to qualifying debts — invoices for the supply of goods or services between businesses where both parties are acting in the course of a business. If your client is a business and you are a business, the Act almost certainly applies to your invoices.
The Act gives you three things when a debt becomes late, and you can test them against your invoice with our late payment interest calculator. If you want to calculate the numbers before re-issuing an invoice, use our late payment interest calculator.
Statutory interest
8% per annum above the Bank of England base rate, running from the day the debt becomes late until the day it is paid in full. On a £5,000 invoice overdue by 90 days, that is roughly £120 in interest at current rates.
Fixed compensation
A fixed sum payable immediately on the debt becoming late: £40 for debts under £1,000, £70 for debts between £1,000 and £9,999, and £100 for debts of £10,000 or more. Payable per invoice, not per client.
Reasonable recovery costs
Where your reasonable costs of recovering the debt exceed the fixed compensation sum, you can claim the difference. This covers solicitor letters, debt collection fees, and court filing costs.
When a debt becomes late
A qualifying debt becomes late at the end of the agreed payment period. If no payment period is agreed, the default under the Act is 30 days for business-to-business transactions. The 30 days runs from the later of:
- the date the invoice is delivered to the client; and
- the date the goods or services are delivered.
If your contract specifies a payment period — 7 days, 14 days, 30 days — that period applies instead of the 30-day default. The Act prohibits extending the payment period beyond 60 days in a way that is not grossly unfair to the supplier, so clients cannot simply insert 90-day or 120-day terms and expect them to displace your statutory rights.
The practical implication: if your contract says payment is due within 14 days and the client pays on day 30, interest runs from day 15. If your contract is silent on payment terms, interest runs from day 31.
The fixed compensation amounts
Section 5A of the Act provides for fixed compensation on each late debt. The amounts are:
| Debt amount | Fixed compensation |
|---|---|
| Under £1,000 | £40 |
| £1,000 to £9,999 | £70 |
| £10,000 or more | £100 |
These amounts are payable as soon as the debt becomes late. If you want to calculate statutory late payment interest and compensation on a live invoice, run the figures through our statutory late payment interest calculator first. You do not need to prove any loss. You do not need to ask for permission. You add the fixed compensation to the invoice when you re-issue it or when you send your letter before action. If you have multiple overdue invoices, the fixed compensation applies to each one separately.
Why most freelancers never use it
Late payment is the single most common legal problem for UK freelancers, and the statutory remedies are among the most underused protections in commercial law. The reasons are mostly psychological, not legal.
Fear of losing the client
The client relationship feels more valuable than the invoice. But a client who pays late — repeatedly and without consequence — is not a client worth keeping. Enforcing your rights professionally rarely ends relationships; it usually ends the late-payment pattern.
Not knowing the rights exist
Most freelancers have never read the 1998 Act and assume they need a specific clause in their contract to charge interest. They do not. The right is statutory and automatic.
Thinking the amounts are not worth it
At £40 to £100 per invoice plus 8% above base rate, the sums seem small. On a single invoice they are. Across twelve invoices in a year with a slow-paying client, the interest alone can add up to hundreds of pounds — and the signalling effect of invoicing for statutory interest is more valuable than the amount.
Not wanting to seem aggressive
Citing a statute sounds aggressive. In practice, a well-drafted re-invoice or letter before action that calmly states the legal position is read as professional, not aggressive. Most clients pay immediately.
Not knowing how to do it
The mechanics of claiming statutory interest and fixed compensation are not complicated, but they are unfamiliar. The process is: re-issue the overdue invoice with interest and compensation added, send a letter before action with a clear payment deadline, and if unpaid, issue a Money Claim Online.
Assuming they need a solicitor
For most freelance debts, you do not need a solicitor to claim statutory interest or to issue a small claim. The HMCTS Money Claim Online portal is designed for self-represented claimants. Solicitors become necessary for larger debts, disputed claims, or complex enforcement.
The practical escalation ladder
Most late-payment situations resolve without court proceedings if you escalate systematically and in writing. The ladder below applies to most freelance debts, and it helps to keep a running total from a statutory interest calculator as you escalate, especially before sending your formal letter before action.
Re-issue the invoice with interest added
As soon as the invoice becomes overdue, re-issue it with statutory interest calculated from the due date to the current date, and fixed compensation (£40, £70, or £100 depending on the amount) added as a separate line. Send a brief covering note stating that the invoice is overdue and that interest is accruing daily.
Send a payment chaser with a deadline
If there is no response within 5 to 7 Business Days, send a short written chaser — email is fine — identifying the overdue amount, the interest accrued to date, and a clear payment deadline (typically 7 days). Keep the tone professional and factual. Do not apologise for chasing.
Send a formal letter before action
If the deadline passes without payment, send a formal letter before action — ideally after checking your running totals in the <Link href="/resources/late-payment-interest-calculator" className="font-semibold text-navy underline decoration-navy/40 underline-offset-2 transition hover:text-navy-deep">late payment interest calculator</Link>. This should: identify the debt and the contractual basis for it; state the statutory interest claimed under the Late Payment of Commercial Debts (Interest) Act 1998; state the fixed compensation under section 5A; give a final deadline of 14 days; and state that you will issue court proceedings without further notice if payment is not received.
Issue a Money Claim Online
If the letter before action is ignored, issue a Money Claim Online (MCOL) through the HMCTS portal. The filing fee is a percentage of the claim value. Once issued, the defendant has 14 days to respond. If they do not, you can apply for a default judgment — a court order for payment — without a hearing.
Enforce the judgment
A default judgment or judgment after a hearing can be enforced through a range of mechanisms: a warrant of control (bailiffs to seize assets), a third-party debt order (freezing funds in a bank account), or an attachment of earnings order for individual defendants. Enforcement is a separate step from obtaining the judgment.
What your contract should say
The Act gives you statutory rights that apply whether or not your contract mentions them. But a contract that expressly references the Act serves two purposes: it signals to clients that you know your rights, and it removes any ambiguity about the payment terms, due dates, and consequences of late payment.
Payment terms
State the payment period clearly — 7 days, 14 days, or 30 days from invoice date. Shorter payment terms are easier to enforce and start the interest clock running sooner. The default 30-day period under the Act is a floor, not a target.
Interest clause
A clause that expressly references the right to charge statutory interest under the 1998 Act, and the right to fixed compensation under section 5A, makes it easier to add those amounts to a re-issued invoice without argument. It also makes it clear to the client at the outset that late payment has consequences. Bracton contracts include both references as standard.
Suspension right
A clause permitting the freelancer to suspend work until outstanding invoices are paid — including accrued interest and compensation — is one of the most effective late-payment deterrents available. Most clients who would ignore an overdue invoice will not risk losing access to ongoing work. The right to suspend should be conditional on giving written notice and should not apply to disputed amounts.
Staged payments
For larger projects, staged payments tied to objective milestones reduce the financial exposure of non-payment at the end. A deposit before work begins, a midpoint payment on a defined milestone, and a final balance on delivery means that a late-paying client is only ever withholding one instalment rather than the entire project fee.
Contracts with late payment rights built in
Every Bracton freelance contract includes statutory interest under the 1998 Act, fixed compensation under section 5A, and a suspension right for unpaid invoices — referenced explicitly so you never need to add them separately.
Freelance Services Agreement
Statutory interest, section 5A fixed compensation, and suspension right included as standard. Staged payment structure with deposit and completion balance.
Consultancy Agreement
Three-instalment milestone payment structure. Statutory interest and section 5A compensation. Suspension right on non-payment.
Subcontractor Agreement
Express anti-pay-when-paid provision. Statutory interest and section 5A compensation. Suspension right protecting the subcontractor in the payment chain.
Retainer Agreement
Contractual interest from due date plus statutory remedies where the Act applies. Suspension right for unpaid monthly fees.
Frequently asked questions
No. The Late Payment of Commercial Debts (Interest) Act 1998 gives commercial creditors an automatic statutory right to interest at 8% above the Bank of England base rate, plus fixed compensation, without any contractual provision. The right applies whether or not your contract mentions it. Including a clause that references the Act makes enforcement clearer and signals to clients that you know your rights, but it is not legally necessary.
Generate a contract with late payment rights built in.
Solicitor-drafted templates that include statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998, section 5A fixed compensation, and a suspension right for unpaid invoices — referenced explicitly so you never need to add them separately.