---
title: "What is Late Payment Interest? - AR Dictionary"
description: "Late payment interest is interest charged on an overdue invoice for each day it stays unpaid. See how it differs from a late fee and from compound interest."
url: https://www.paidnice.com/dictionary/late-payment-interest
---

# Late Payment Interest

## What is late payment interest?

**Late payment interest is interest a seller charges on an overdue invoice for each day it stays unpaid after the due date.** It differs from a flat late fee, which is a one-off charge. Interest keeps building until the invoice is paid.

In the UK, a business can claim statutory interest on late business-to-business and public sector invoices under the Late Payment of Commercial Debts (Interest) Act 1998. The rate is 8% above the Bank of England base rate, plus a fixed sum of £40, £70 or £100 per invoice, unless the contract provides its own substantial remedy. UK statutory interest is simple interest, not [compound interest](https://www.paidnice.com/dictionary/compound-interest).

In the US, Australia and New Zealand the right to charge interest usually comes from the contract rather than a statute for business invoices, so the rate is normally set out in your payment terms. Check the rules where you trade.

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