Four worked examples of interest on an overdue invoice
Four late invoices worked through by the same method as the calculator, each chosen because it shows something the formula alone doesn’t. The figures are produced by the calculator’s own code, so they match what you would get on the home page.
For UK business-to-business invoices. Last checked against GOV.UK, legislation.gov.uk and the Bank of England.
The method in one line
Interest is the invoice amount × (Bank Rate on the reference date + 8%) ÷ 365 × the number of days late, and the fixed sum is added once. The rules are in section 4 (interest runs from the day after the due date) and section 5A (the fixed sum), with the rate set by article 4 of the 2002 Order. GOV.UK has the same method in plain English. Bank Rates come from the Bank Rate history.
1. A small invoice, two weeks late: the fixed sum is most of the claim
A £850.00 invoice was due on 14 Aug 2026 and paid on 28 Aug 2026, 14 days later. Interest started on 15 Aug 2026, so the reference date is 30 June 2026 and the Bank Rate then was 3.75%.
| Step | How | Result |
|---|---|---|
| Days late | Interest runs from 15 Aug 2026 to 28 Aug 2026 | 14 days |
| Reference rate | Base rate in force on 30 Jun 2026 (interest starts in August) | 3.75% |
| Statutory rate | 3.75% + 8% | 11.75% a year |
| Daily interest | £850.00 × 11.75% ÷ 365 | £0.2736 |
| Statutory interest | £0.2736 × 14 days | £3.83 |
| Fixed compensation | Debt under £1,000 | £40.00 |
| Total on top of the invoice | £3.83 interest + £40.00 fixed sum | £43.83 |
Interest is £3.83, and the fixed sum is £40.00. On a short delay the fixed sum is the bigger part, which is why it is worth claiming even when the interest looks trivial. It is still one amount per invoice, whether the payment is two weeks late or two months.
2. On the £1,000 line
Same dates as above, two invoices a penny apart. The fixed sum depends on whether the debt is “less than £1000”, and £1,000.00 is not.
| Invoice | Interest | Fixed sum | Total |
|---|---|---|---|
| £999.99 | £4.51 | £40.00 | £44.51 |
| £1,000.00 | £4.51 | £70.00 | £74.51 |
The interest differs by a fraction of a penny; the fixed sum jumps from £40.00 to £70.00. The same step happens at £10,000. Section 5A(2) puts £1,000 in the middle band and £10,000 in the top one. You can try your own amounts in the compensation checker.
3. One day apart, a different rate: the 31 December line
Two £12,000.00 invoices, both paid on 27 Feb 2026. One fell due on 30 Dec 2025, the other a day later. Bank Rate was cut to 3.75% on 18 December 2025, which falls between the two reference dates the Order uses.
| Due date | Interest starts | Reference date | Rate | Days | Interest |
|---|---|---|---|---|---|
| 30 Dec 2025 | 31 Dec 2025 | 30 Jun 2025: 4.25% | 12.25% | 59 | £237.62 |
| 31 Dec 2025 | 1 Jan 2026 | 31 Dec 2025: 3.75% | 11.75% | 58 | £224.05 |
The first invoice’s interest started on 31 December 2025, which is in the “1 July to 31 December” half-year, so it uses the 30 June 2025 rate of 4.25%. The second started on 1 January 2026, so it uses the 31 December 2025 rate of 3.75%. The rate differs by 0.5% a year, so the first invoice earns £13.57 more interest; the one extra day accounts for only about £4.03 of that. Neither rate is “wrong”: the Order picks the rate by when interest starts, not by when you are paid.
4. Nearly a year late, in a leap year
A £4,200.00 invoice due on 31 Jan 2024, finally paid on 31 Dec 2024. Interest started on 1 Feb 2024, so the rate is the 31 December 2023 Bank Rate of 5.25%, and it does not change when Bank Rate moves later in the year.
| Step | How | Result |
|---|---|---|
| Days late | Interest runs from 1 Feb 2024 to 31 Dec 2024 | 335 days |
| Reference rate | Base rate in force on 31 Dec 2023 (interest starts in February) | 5.25% |
| Statutory rate | 5.25% + 8% | 13.25% a year |
| Daily interest | £4,200.00 × 13.25% ÷ 365 | £1.5247 |
| Statutory interest | £1.5247 × 335 days | £510.76 |
| Fixed compensation | Debt of £1,000 to £9,999.99 | £70.00 |
| Total on top of the invoice | £510.76 interest + £70.00 fixed sum | £580.76 |
There are 366 days in 2024 but the daily rate is still the annual rate ÷ 365, as in the formula on GOV.UK. Interest is simple, not compounded: 335 days at about £1.52 a day is the whole of it. That comes to £510.76 on top of the £70.00 fixed sum.
If your own invoice is unpaid, put today’s date as the payment date in the calculator to see what it has built up so far. These examples assume a single payment of the whole invoice. Part-payments, contractual rates and public-authority customers need different treatment, so check the GOV.UK guidance or take advice. The statutory interest guide explains the basics.
Common questions
Why does my total differ by a penny from another calculator?
We work out interest once, at the end (amount × rate ÷ 365 × days), and round to the nearest penny. Calculators that round the daily figure first, as the example on GOV.UK does, can land a penny or so away.
Do I charge VAT on the interest and compensation?
Statutory interest and the fixed sum are generally treated as outside the scope of VAT, so the examples show none. Check with HMRC or your accountant if you are unsure for your business.
General information, not legal advice