Question 1

Can freelancers legally charge interest on late invoices?

Accepted Answer

Yes, in most jurisdictions. In the UK, under the Late Payment of Commercial Debts (Interest) Act 1998, you automatically have the right to charge 8% plus the Bank of England base rate on unpaid B2B invoices — no contract clause needed. In the US, your right to charge interest depends on having a late payment clause in your signed contract; without one, you may be limited to your state's statutory interest rate.

Question 2

What is the formula for calculating late payment interest?

Accepted Answer

The standard formula is: (Invoice Amount × Annual Interest Rate × Days Overdue) ÷ 365. For a $5,000 invoice 60 days overdue at 1.5% per month (18% annual), the calculation is: ($5,000 × 0.18 × 60) ÷ 365 = $147.95 in interest.

Question 3

What interest rate should I charge on late invoices?

Accepted Answer

UK freelancers should use the statutory rate: 8% + current BoE base rate. US freelancers commonly use 1.5% per month (18% annually), which is a widely accepted standard. Always ensure your rate doesn't exceed your state's usury laws. Whatever rate you choose, it must be in writing in your contract before the work begins.

Question 4

Can I add fixed compensation fees on top of interest in the UK?

Accepted Answer

Yes. In addition to statutory interest, UK law allows you to claim a fixed compensation amount per invoice: £40 for invoices under £1,000, £70 for £1,000–£9,999.99, and £100 for invoices of £10,000 or more.

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