What rate of interest can be charged?

At the start of a six-month period the official dealing rate of the Bank of England (the base rate) will be made a fixed "reference rate" for the subsequent six months. The table below shows how this works.

  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

To determine what interest rate you should use when calculating interest on a late payment, you need to add 8% to the "reference rate" that covers the six-month period in which your debt became late.

How do I find the correct base rate to use?

The correct interest rate to be used can be found by viewing this reference rate table.

Period Reference Rate Interest Rate (Reference rate plus 8%)
1st January - 30th June 2024 5.25% 13.25%
1st July - 31st December 2023 5.00% 13.00%
1st January - 30th June 2023 3.50% 11.50%
1st July - 31st December 2022 1.25% 9.25%
1st January - 30th June 2022 0.25% 8.25%
1st July - 31st December 2021 0.10% 8.10%
1st January - 30th June 2021 0.10% 8.10%
1st July - 31st December 2020 0.10% 8.10%
1st January - 30th June 2020 0.75% 8.75%
1st July - 31st December 2019 0.75% 8.75%
1st January - 30th June 2019 0.75% 8.75%
1st July - 31st December 2018 0.50% 8.50%
1st January - 30th June 2018 0.50% 8.50%
1st July - 31st December 2017 0.25% 8.25%
1st January - 30th June 2017 0.25% 8.25%
1st July - 31st December 2016 0.50% 8.50%
1st January - 30th June 2016 0.50% 8.50%
1st July - 31st December 2015 0.50% 8.50%
1st January - 30th June 2015 0.50% 8.50%
1st July - 31st December 2014 0.50% 8.50%
1st January - 30th June 2014 0.50% 8.50%
1st July - 31st December 2013 0.50% 8.50%
1st January - 30th June 2013 0.50% 8.50%
1st July - 31st December 2012 0.50% 8.50%
1st January - 30th June 2012 0.50% 8.50%
1st July - 31st December 2011 0.50% 8.50%
1st January - 30th June 2011 0.50% 8.50%
1st July - 31st December 2010 0.50% 8.50%
1st January - 30th June 2010 0.50% 8.50%
1st July - 31st December 2009 0.50% 8.50%
1st January - 30th June 2009 2.00% 10.00%
1st July - 31st December 2008 5.00% 13.00%
1st January - 30th June 2008 5.50% 13.50%
1st July - 31st December 2007 5.50% 13.50%
1st January - 30th June 2007 5.00% 13.00%
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 4.00% 12.00%
7th August - 31st December 2002 4.00% 12.00%

How do I calculate the interest charge?

The interest owed on a late payment is simple, not compound, interest. It is calculated like this:

Debt times interest rate divided by 365 times the number of days late

Do I calculate inclusive or exclusive of VAT?

You charge interest on the gross amount of the debt (including any element of VAT), but you do not pay VAT on the interest.

Example
If the base rate is 4% for the six-month period when the debt became late, then the statutory interest rate is 12% (4% base rate plus 8%)

Debt is £851.06 plus £148.94 VAT = total £1,000
If this debt is 30 days late, then the interest owed is: £1,000 x 12% = £120 (the annual rate)
£120 ÷ 365 = 32.9p (the daily rate)
32.9 pence x 30 days = £9.86 (the interest owed to date)

When does the interest stop running?

Interest stops running on a debt once the principal has been paid i.e. once payment is received but not yet cleared if relevant. If the purchaser owes the principal, interest and compensation, unless payment is accepted on other terms, any part payment of the debt will go to reduce the amount of the interest and compensation first.


Compensation arising from late payment

How much compensation am I allowed?

The table below shows how much compensation you are entitled to.

Size of the unpaid Debt
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