The statutory framework
GOV.UK states that qualifying business-to-business debts may carry statutory interest at 8% plus the Bank of England base rate, unless the contract sets a different interest rate.
The applicable base rate is fixed for a six-month period. Always use the official rate and guidance applying to the relevant dates rather than relying on an old example.
What the calculation needs
Record the unpaid principal, contractual due date, calculation date and any part-payments. Interest normally changes as the outstanding principal changes.
- Original invoice balance
- The date payment became late
- Applicable statutory or contractual rate
- Part-payment dates and amounts
- The date through which interest is calculated
Fixed recovery costs
The official guidance also describes fixed recovery amounts for qualifying late commercial payments. Eligibility still needs checking, and additional reasonable recovery costs may raise separate questions.
86Hours provides an indicative calculation and keeps the figures with the case record. The user remains responsible for checking the contractual and legal basis before sending them.
When to pause
Pause before adding interest where the customer disputes performance, the parties are not both businesses, the contract contains its own remedy, insolvency is involved or the claim is cross-border. Those situations may need tailored advice.