Late payment interest calculator
Late payment legislation & interest calculator
The late payment of commercial debts (interest) Act 1998
In November 1998, the UK Government introduced legislation to give businesses a statutory right to claim interest from other businesses for the late payment of commercial debt. The UK was one of the first countries in the EU to introduce late payment legislation to help promote a culture of prompt payment.
From 7 August 2002, the Late Payment of Commercial Debts (Interest) Act 1998 was amended and supplemented to incorporate the features of European Directive 2000/35/EC on combating late payment in commercial transactions.
Under the revised legislation, all business owners and managers can claim reasonable debt recovery costs and can benefit from the simplification of the calculation of Statutory Interest. Additionally small and medium sized enterprises can ask a representative body to challenge grossly unfair contract terms used by their customers which do not provide a substantial remedy for late payment of commercial debts.
| Size of unpaid debt | Sum to be paid to the creditor |
|---|---|
| Up to £999.99 | £40.00 |
| £1,000.00 to £9,999.99 | £70.00 |
| £10,000.00 or more | £100.00 |
The revisions to the legislation also include the simplification of the calculation of statutory interest. A reference rate is now used to determine the late payment interest rate, which is fixed for a six-month period. The late payment interest rate that applies in the UK is the reference rate + eight per cent. The new fixed-reference periods are:
| The six month period | |
| The Bank of England base rate on 31st December will be the reference rate for: | 1st January to 30th June |
| The Bank of England base rate on 30th June will be the reference rate for: | 1st July to 31st December |
| Period | Reference Rate | Interest Rate (Reference rate plus 8%) |
| 1st July - 31st December 2010 | 0.5% | 8.5% |
| 1st January - 30th June 2010 | 0.5% | 8.5% |
| 1st July - 31st December 2009 | 0.5% | 8.5% |
| 1st January - 30th June 2009 | 2% | 10% |
| 1st July - 31st December 2008 | 5% | 13% |
| 1st January - 30th June 2008 | 5.5% | 13.5% |
| 1st July - 31st December 2007 | 5.5% | 13.5% |
| 1st January - 30th June 2007 | 5% | 13% |
| 1st July - 31st December 2006 | 4.50% | 12.50% |
| 1st January - 30th June 2006 | 4.50% | 12.50% |
| 1st July - 31st December 2005 | 4.75% | 12.75% |
| 1st January - 30th June 2005 | 4.75% | 12.75% |
| 1st July - 31st December 2004 | 4.50% | 12.50% |
| 1st January - 30th June 2004 | 3.75% | 11.75% |
| 1st July - 31st December 2003 | 3.75% | 11.75% |
| 1st January - 30th June 2003 | 4% | 12% |
| 7th August - 31st December 2002 | 4% | 12% |
