It is also known as fixed sum compensation. Unlike statutory interest on an overdue invoice, which grows with every day the invoice stays unpaid, the fixed sum depends only on the size of the debt. Both apply between businesses, including public authorities, and not to sales to consumers.
Late payment compensation in the UK
Section 5A of the Late Payment of Commercial Debts (Interest) Act 1998 gives a supplier a fixed sum once statutory interest starts to run on a debt. The amount depends on the size of the debt.
| Size of the debt | Fixed sum | Example |
|---|---|---|
| Less than £1,000 | £40 | An £850 invoice |
| £1,000 to £9,999.99 | £70 | A £6,200 invoice |
| £10,000 or more | £100 | A £14,000 invoice |
You can charge it once for each late payment, however many reminders you send, according to GOV.UK guidance on recovery costs. You do not have to show what the chasing cost you. If your reasonable recovery costs are higher, such as a collection agency's fee, you can also claim the difference.
When you can claim late payment compensation
- Both sides act in the course of a business. The Act covers contracts for goods or services between businesses, and business includes professions and public authorities.
- The payment is late. That is from the day after the agreed payment date or, without one, 30 days after the customer receives the invoice or you deliver, whichever is later. Agreed payment terms between businesses should usually be 60 days or less.
- Statutory interest applies. The fixed sum only arises once statutory interest starts to run. If your contract sets its own substantial remedy for late payment, such as an interest rate that properly compensates you, neither applies.
How to claim late payment compensation
Claim the fixed sum with the interest. GOV.UK suggests sending a new invoice for interest, and that invoice or an interest note can list the fixed sum for each late payment and name the Act. Use the same figures in any letter before action.
Example. A UK supplier's customer pays three invoices late, all due in July 2026, when statutory interest is 11.75% a year (8% over the 3.75% Bank Rate on 30 June 2026). The figures are illustrative.
- £850 paid 20 days late. Interest is £850 × 11.75% ÷ 365 × 20 = £5.47, and the fixed sum is £40.
- £6,200 paid 35 days late. Interest is £6,200 × 11.75% ÷ 365 × 35 = £69.86, and the fixed sum is £70.
- £14,000 paid 50 days late. Interest is £14,000 × 11.75% ÷ 365 × 50 = £225.34, and the fixed sum is £100.
The fixed sums come to £40 + £70 + £100 = £210 and the interest to £300.67, so the supplier can claim £510.67 on top of the invoices. On the £850 invoice the fixed sum is more than seven times the interest. Had the supplier paid a collection agency a reasonable £300 to recover the £6,200 invoice, it could claim the £70 plus the £230 difference.
The EUR 40 minimum in the EU and Poland
In the EU, Article 6 of the Late Payment Directive 2011/7/EU gives a creditor at least €40 whenever late payment interest becomes due in a commercial transaction. This EUR 40 late payment fee is payable without a reminder, and the creditor can also claim reasonable recovery costs above it, such as a lawyer's or collection agency's fees. Each country writes the rule into its own law and may set higher amounts.
The Court of Justice of the EU ruled in case C-585/20 that the €40 is due for each invoice paid late, even when several are claimed together. In Poland the sum is €40 for invoices up to PLN 5,000, €70 above PLN 5,000 and below PLN 50,000 and €100 from PLN 50,000, converted at the National Bank of Poland's average euro rate for the last working day of the month before payment fell due. The late payment interest calculator works out the compensation and statutory interest for Polish invoices.
Sunbay adds interest notes and demand letters to the reminder sequence it runs from your ERP or accounting system. Reminders go out by email and SMS at the stages you set, AI voice calls follow up on unpaid invoices and every customer reply stays next to the invoice. When the payment is posted in your ERP, Sunbay matches it and the sequence stops.
Frequently asked questions
Is late payment compensation charged per invoice?
In the UK you can charge the fixed sum once for each late payment, so three invoices paid late give three fixed sums. In the EU, the Court of Justice has confirmed that the €40 applies to each invoice paid late.
Do you need to send a reminder before claiming the fixed sum?
No. In the UK the right arises once statutory interest starts to run, the day after payment was due, and the EU directive makes the fixed sum payable without a reminder.
Can a contract exclude late payment compensation?
Only within limits. In the UK, a substantial contractual remedy for late payment replaces statutory interest and the fixed sum, and a term that cuts or removes the fixed sum must pass the reasonableness test in the Unfair Contract Terms Act 1977. In the EU, a term that excludes compensation for recovery costs is presumed to be grossly unfair.
Can you charge late payment compensation to consumers?
No. The UK Act and the EU directive cover payments between businesses and with public authorities, not sales to consumers. This entry is general information, not legal advice.
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