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Late payment interest calculator
Work out what an overdue invoice has actually cost: the interest accrued to date, the amount added every single day it stays unpaid, and the new total. Simple or daily compounding, any currency, and no invoice data leaving your browser.
The rate in your contract, or the statutory rate for your market.
Interest accrued
US$0.00
0 days late · 0% of the invoice value
Total now due
US$2,500.00
Invoice plus interest
Cost of one more day
US$0.55
At 8% a year
What waiting costs
How late payment interest is calculated
Simple interest — the method used by most late-payment statutes — is the annual rate applied to the outstanding amount, pro-rated by the days the invoice is overdue:
interest = amount × (annual rate ÷ 100) × (days late ÷ 365)
For a 2,500 invoice at 8% that is 45 days late, that is 2,500 × 0.08 × 45 ÷ 365 = 24.66, so the client now owes 2,524.66. The daily cost is 0.55 — small on its own, which is exactly why interest works better as leverage than as income. On a six-month-old balance of 25,000 the same rate accrues 986.30, and that number changes the conversation.
Compounding is a contract feature, not a statutory default. Daily compounding produces a slightly higher figure because each day's interest is added to the balance before the next day is calculated. If your terms do not say “compounded”, use simple interest.
The calculator uses a 365-day year throughout, so a leap year cannot quietly reduce the rate you charge. It also calculates on the full outstanding amount, including tax, because that is the sum the client has had the use of.
What rate applies in your market?
Statutory late-payment regimes differ, and a rate that is enforceable in one country may be a penalty in another. These are the starting points — always read the current government guidance and your own contract before invoicing interest.
| Market | Default position | Authority |
|---|---|---|
| United Kingdom | 8% above the Bank of England base rate, plus fixed compensation of £40–£100 depending on the debt size.Late Payment of Commercial Debts (Interest) Act 1998 | GOV.UK guidance |
| European Union | 8 percentage points above the ECB reference rate for business-to-business debts, with flat compensation of at least €40.Directive 2011/7/EU on combating late payment | EUR-Lex text |
| Canada | The contract rate applies; where none is stated, the federal Interest Act provides a default of 5% per year for certain debts.Interest Act (R.S.C., 1985, c. I-15) | Justice Laws |
| South Africa | The prescribed rate is published by the Department of Justice and is linked to the SARB repo rate; a contract may set a different lawful rate.Prescribed Rate of Interest Act 55 of 1975 | Department of Justice |
| United States | No federal rate for private invoices: the contract governs, and state statutes set limits and default rates where the contract is silent.State law and contract terms | Consumer Financial Protection Bureau |
This table is general information, not legal advice, and rates change. For a disputed invoice, confirm the current rate with the relevant authority or a local professional.
Writing a late-payment clause that holds up
A rate that appears for the first time on an overdue invoice is easy to dispute. The clause needs to exist before the work does, and it needs three things: a rate, a start date and a method.
“Payment is due within 14 days of the invoice date. Overdue balances carry interest at 8% per year above the Bank of England base rate, calculated daily on the outstanding amount from the day after the due date until payment is received.”
- Rate: a number or a formula, not “interest at the statutory rate” if the statutory rate may change or may not apply.
- Start date: “the day after the due date” removes the argument about whether a grace period was implied.
- Method: simple or compounded, and on what balance — the full outstanding amount, or principal only.
Then repeat the terms on the invoice itself. Our guide to invoice payment terms has ready-to-use wording for deposits, discounts and late fees, and the due date calculator turns those terms into the exact date the clock starts.
Frequently asked questions
What interest rate can I charge on an overdue invoice?+
Whatever your contract specifies, or the statutory rate where the law provides one. In the UK, business-to-business debts carry 8% plus the Bank of England base rate under the Late Payment of Commercial Debts (Interest) Act 1998. Across the EU, the Late Payment Directive sets 8 percentage points above the ECB reference rate. Without a contractual or statutory rate, many jurisdictions fall back to a prescribed or court rate.
Should interest be simple or compounded?+
Simple interest is the default in most late-payment legislation: the annual rate applied to the outstanding amount for the number of days late. Compounding only applies when a contract explicitly says so, which is why this calculator lets you switch but does not assume it.
Do I charge interest on the VAT portion of the invoice?+
If the invoice total is what the client owes, interest is normally calculated on that total, tax included — the client has had the use of the whole amount. Check your local rules and your contract, because treatment varies.
When should I start charging late payment interest?+
The day after the due date, if your terms include an interest clause and you have given the client notice. Many businesses send a final notice with the calculated amount before adding it to the balance, which keeps the relationship workable and the charge credible.
Is a late fee the same as interest?+
No. A late fee is usually a flat charge for missing a deadline; interest is time-based and grows with the delay. Contracts can include both, but the combined charge must still be enforceable and not a penalty under local law.
Can I charge interest if my invoice never mentioned it?+
Sometimes, if statute supplies a default rate; often not, if the only basis would be an implied term. The reliable route is to put the rate in your terms before the work starts, and to repeat it on the invoice. This page is not legal advice — for a disputed debt, ask a local professional.