Late payment interest calculator: what to charge on an overdue invoice

Late payment interest is the invoice amount times the annual rate times the days late, divided by 365. Enter your invoice, due date and rate below to get the days late, the daily amount and the total to add to your next reminder. The calculator also handles the two rules people most often ask about: US federal Prompt Payment Act interest and UK statutory interest.

How to use the late payment interest calculator

Pick the rule that sets your rate. For most freelancers and small businesses that is your own contract or the late-payment line on your invoice. Enter the invoice amount, the due date and the date it was paid, or press Today for an invoice that is still open. The result updates as you type, and the invoice line underneath is ready to paste into a reminder.

If your terms say "1.5% per month," leave the rate on per month. If they give a yearly rate, switch it to per year.

How late payment interest is calculated

There are three methods in the calculator, one for each rule.

Your contract rate: simple interest

Interest = invoice amount x annual rate x days late / 365
Days late = days from the due date to the payment date
A monthly rate is turned into a yearly one by x 12

Between private businesses in the US there is no single federal late-fee rate. The rate normally comes from what you agreed in writing, and some states cap what you can charge, so check your state's rules and your contract before you add interest. If your invoice never mentioned late interest, adding it now is harder to enforce than asking politely for payment.

US federal Prompt Payment Act

If a US federal agency pays you late, it owes interest under the Prompt Payment Act. The rate for July 1 to December 31, 2026 is 4.75% (Bureau of the Fiscal Service). The rule counts interest from the day after the due date to the payment date, adds unpaid interest to the principal at the end of each 30-day period for up to one year, and does not require payment of interest under $1 (5 CFR 1315.10). The calculator uses the Fiscal Service's own compounding formula:

Interest = P x (1 + r/12)^n x (1 + r/360 x d) - P
P = invoice amount, r = yearly rate
n = full 30-day periods late, d = days left over

The rate that applies is the one in effect on the day after the due date. For an invoice due before July 2026, enter that period's rate from the Fiscal Service page.

UK statutory interest

In the UK, a business paid late by another business can claim statutory interest of 8% plus the Bank of England base rate, unless the contract sets a different rate (GOV.UK). The base rate used is the one in force on 30 June for interest that starts running from July to December, or on 31 December for January to June (the Late Payment Order). Bank Rate was 3.75% on 30 June 2026 (Bank of England), so the rate for interest starting from July to December 2026 is 11.75%. You can also claim fixed compensation of £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more (GOV.UK).

This page explains what the rules say. It is not legal advice, and for a large or disputed debt it is worth getting some.

Worked example: interest on an overdue invoice

These are example invoices. Check the dates and the rate in your own contract.

Contract terms: 1.5% per month on a $2,400 invoice
Due 1 August 2026, paid 30 September 2026 = 60 days late
Yearly rate:   1.5% x 12 = 18%
Interest:      $2,400 x 0.18 x 60 / 365 = $71.01
Per day:       $2,400 x 0.18 / 365 = about $1.18
Total due:     $2,400 + $71.01 = $2,471.01

UK statutory: £5,000 invoice, due 31 July 2026,
paid 29 September 2026 = 60 days late
Interest:      £5,000 x 0.1175 x 60 / 365 = £96.58
Compensation:  £70 (debt between £1,000 and £9,999.99)
Total due:     £5,000 + £96.58 + £70 = £5,166.58

Prompt Payment (Fiscal Service example): $1,500 at 6%,
due 1 April, paid 15 June = 75 days late = 2 periods + 15 days
Interest:      $1,500 x (1.005)^2 x (1 + 0.06/360 x 15) - $1,500
             = $18.83

What to do with the number

Interest works best as a nudge, not a threat. Send a short reminder that states the original amount, the days late and the interest to date, and give a date by which paying the original amount alone will settle it. Seeing the number grow gives a client a reason to pay now rather than next month. If you want to keep the relationship, waiving the interest in exchange for payment this week is often a better trade than collecting it.

Then fix the cause for next time. Put your late-payment terms on every invoice and in the contract, send invoices the day the work is done, and chase on day 1 rather than day 30. If late payers are squeezing your cash flow, it may be your rate that needs a rethink: our freelance rate calculator shows what you need to charge to cover gaps like this. For a sharper reminder subject line, try the email subject line optimizer, and browse our other free tools for more admin shortcuts.

Questions people ask

How do you calculate interest on a late payment?

Multiply the invoice amount by the yearly interest rate and by the number of days late, then divide by 365. For example, $2,400 at 18% a year for 60 days is $2,400 x 0.18 x 60 / 365, which is $71.01. If your terms give a monthly rate, multiply it by 12 first to get the yearly rate.

What is a normal late payment interest rate?

For private invoices there is no standard figure: the rate is whatever your contract or invoice terms say, within any limit your state's law sets, so check those limits before you pick a number. For US federal agencies the Prompt Payment rate applies, and for UK business debts the statutory rate is 8% above the Bank of England base rate.

Can I charge late payment interest if it is not in my contract?

In the US it is much harder to enforce interest you never agreed with the client, so put late-payment terms on every contract and invoice before the work starts. In the UK, statutory interest can apply to business-to-business debts even without a written rate, unless the contract sets a different one. Check the rules where you and the client are based.

What is the UK late payment interest rate now?

For interest that starts running between 1 July and 31 December 2026, the UK statutory rate is 11.75%. That is 8% plus the Bank of England base rate of 3.75% in force on 30 June 2026. For interest starting in the first half of 2027, the base rate on 31 December 2026 will set the rate instead.

What is the Prompt Payment interest rate for 2026?

The US Prompt Payment interest rate for July 1 to December 31, 2026 is 4.75%, set by the Bureau of the Fiscal Service. It applies when a federal agency pays a contractor or vendor late. Interest runs from the day after the due date, compounds every 30 days for up to a year, and amounts under $1 need not be paid.