How to add late payment fees to invoices in Xero in 2026

Xero has no built-in way to add late payment fees or interest to your invoices.

It will flag an invoice as overdue, but it won't calculate what you're owed, apply a charge, or raise a fee invoice for you. To add late fees in Xero you either do it manually, by adding a line to the invoice or raising a separate fee invoice, or you automate it with an app like Paidnice that applies your fee rules the moment an invoice goes overdue. This guide shows you both: how to add late fees manually in Xero, the rules on how much you can charge, and how to automate the whole process.

Key takeaways

Does Xero charge late payment fees automatically?

No. Xero has no native feature to calculate late payment interest or apply a late fee to an overdue invoice. It marks invoices as overdue, but working out what you're owed, adding the charge, and sending it is all on you.

This is one of the longest-running requests on the Xero Product Ideas board. The thread Sales invoices: add interest to late invoices has been open for years, and as of Xero's last update on it (mid-2025) there were still no committed plans to build the feature. If you want Xero to add it natively, it's worth adding your vote there.

Until that changes, you have two options: add fees manually inside Xero, or use a tool that sits on top of Xero and does it for you.

How much can you charge in late fees?

The rules depend on where you are.

In the UK, for business-to-business debts you can claim statutory interest of the Bank of England base rate plus 8% per annum, plus a fixed compensation amount per invoice: £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. The base rate moves when the Bank of England changes rates, so your figure has to track it.

In the US, late fees and maximum rates are set state by state and typically land between 1% and 1.5% per month, with some states capping them under usury laws. Our guide to late fee laws by US state breaks down the limits.

Wherever you are, your customer needs to have agreed to the fee, ideally in writing in your payment terms, before you apply it.

A quick working example

Say three invoices go overdue: #1001 for £1,000, #1002 for £500, and #1003 for £750.

As individual invoice late fees at 10%, Paidnice applies £100, £50 and £75, for £225 across the three.

As consolidated statement interest at 18% per annum on the combined £2,250 balance, with the invoices at different ages, Paidnice calculates the daily interest and raises a single monthly charge (around £67 here) rather than three separate ones.

Frequently asked questions

Close the gap between invoice and payment

Xero is excellent at creating and sending invoices. It just doesn't do anything when they go unpaid. Late payment fees, applied consistently, are one of the most effective ways to fix that, and automating them means it happens every time.

Try Paidnice free and start applying late fees to your Xero invoices automatically, or book a demo and we'll set it up with you.