Late fees on overdue invoices: what you can charge in the UK, the EU and the US

If a business pays you late, the law in the United Kingdom lets you charge 8% a year over the Bank of England base rate, 11.75% for interest starting in the second half of 2026, plus a fixed £40, £70 or £100 for each late invoice; the European Union sets a floor of eight percentage points over the central bank’s rate, 10.4% in most euro countries this half-year and 14.5% in Romania, plus €40 an invoice without so much as a reminder; and the United States has no federal rule for business invoices, so the fee is whatever your contract said before the work began, in practice 1% to 2% a month, under the state’s interest ceiling. All of it read on 13 October 2026 from the statutes, the central banks and the official guides, which are linked at the end. The one rule that holds everywhere: the fee has to be in the terms the customer agreed to before the invoice, not in the reminder after it.

United Kingdom: 8% over base, and a fixed sum for every late invoice

The Late Payment of Commercial Debts (Interest) Act 1998 gives every supplier to another business the right to statutory interest at 8% a year over the Bank of England base rate. The base rate that counts is the one in force on 30 June for interest that starts between July and December, or on 31 December for interest that starts between January and June, so a rate change in the autumn changes nothing until the new year. Bank Rate has been 3.75% since 18 December 2025, held again on 17 September 2026 with the next decision due on 5 November, so interest starting now runs at 11.75% a year. On top of the interest, a fixed sum for recovery costs is owed once per invoice, and reasonable costs beyond it if the sum does not cover them.

Three details decide whether you can use any of it. If the contract sets its own rate of interest, statutory interest does not apply; the Act voids a contract term only when the remedy it offers is not “substantial”, that is, too small to compensate you or to deter late payment. If no payment date was agreed, the invoice is late 30 days after the customer received it or the work was delivered, whichever is later; an agreed date must usually be within 60 days for business transactions. And gov.uk is specific about the paperwork: “Send a new invoice if you decide to add interest to the money you’re owed.”

Our arithmetic on a £5,000 invoice paid 30 days late this half-year: 11.75% a year is £587.50, or £1.61 a day, so £48.29 of interest, plus the £70 fixed sum, £118.29 in all. The money is small; the fixed sum is what makes a chronic late payer notice, because it arrives per invoice. For scale, Xero’s small business index for the June 2026 quarter puts the average UK small business invoice at 8.3 days late and 29.1 days from issue to payment, and the government’s press release introducing the Commercial Payments Bill on 19 May 2026 says late payment closes 38 businesses a day. That Bill would cap payment terms at 60 days and make the 8%-over-base interest mandatory; it had its Lords third reading scheduled for 20 October 2026 and is not law as this is written.

European Union: at least eight points over the ECB rate, and €40 without asking

Directive 2011/7/EU is the floor every member state built on. Statutory interest for late payment is the reference rate plus at least eight percentage points; for euro countries the reference rate is the ECB’s main refinancing rate in force on 1 January for the first half of the year and on 1 July for the second. On 1 July 2026 that rate was 2.40%, so the directive’s floor for this half-year is 10.40%; the ECB moved to 2.65% on 16 September, which matters from January. Interest is owed “without the necessity of a reminder” from the day after the agreed date, or 30 days after the invoice if no date was agreed; payment terms between businesses may not exceed 60 days unless expressly agreed and not grossly unfair; a term that excludes interest is grossly unfair by definition. And every late invoice carries a fixed €40 for recovery costs, also without a reminder, with reasonable costs above that, a lawyer or a collection agency included.

The Commission proposed replacing the directive with a regulation in September 2023, with a 30-day cap on payment terms. Parliament voted its position in April 2024; the Council did not, and the Parliament’s own tracker marked the file “blocked” by the Council as of 20 September 2026. The 60-day rule stands.

Romania: the BNR rate plus eight points, 14.5% today

Legea 72/2013 transposes the directive. Between businesses, the penalty interest where the contract sets none is the Banca Națională a României reference rate plus eight percentage points, under article 3(2¹) of Ordonanța 13/2011; the reference rate in force on the first day of a half-year applies for the whole of it. The BNR rate has been 6.50% since 8 August 2024 and was held there on 10 August 2026, so the statutory rate is 14.50%, the figure the Commission lists for Romania. Interest runs from the due date with no formal notice; a clause that demands a notice first, or excludes interest, or sets it below the legal rate, is abusive and void by articles 14 and 15. The fixed compensation is the lei equivalent of 40 euro per invoice, on top of enforcement costs, and payment terms between businesses are capped at 60 days. Our arithmetic on a 10,000 lei invoice paid 30 days late: 119.18 lei of interest plus the 40 euro.

United States: what the contract says, inside the state’s ceiling

There is no federal statute on late fees between businesses; the only federal rate is the one agencies owe their own vendors, 4.75% for the second half of 2026. The practice, as Intuit’s guide puts it, is “a 1% to 2% monthly late fee on invoices that remain unpaid past the due date”, which is 12% to 24% a year, and the condition is in the same guide: “You must include your late fee policy in your original agreement or contract. If you try to charge a fee without prior notice, your customer may have legal grounds to dispute it.” The policy goes in the agreement and as a line at the bottom of the invoice, next to the payment terms.

The ceiling is the state’s. Texas sets the maximum at 10% a year unless another law allows more, and allows 6% from the thirtieth day where no rate was agreed; its commercial ceilings run to 28%. New York’s maximum rate is 16% a year under the Banking Law, with loans of $250,000 and above outside the civil usury rules. California’s constitution sets 7% where nothing was agreed and, for business purposes, the higher of 10% or five points over the Federal Reserve Bank of San Francisco’s rate, with exemptions for lenders. Prompt-payment statutes cover government buyers only: California pays small businesses a 16.75% annual penalty on late payments in the current fiscal year, and New York’s private construction law sets 1% a month. A fee that calls itself a penalty, or one that exceeds a reasonable estimate of your cost, is the kind a court strikes, so a state’s rule is a statute to read, or a lawyer to ask, before it goes in your terms.

Why it is worth the trouble: Atradius’s September 2026 barometer has about seven in ten US companies facing late payment, 22% of business receivables paid late and 1% to 2% of invoices written off; Intuit’s July 2026 report has 59% of small businesses with invoices overdue by 30 days or more, up from 47% a year earlier, and an average of $17,700 owed to those waiting.

What the reminder has to say

• The fee was in the terms before the invoice. Everywhere, the reminder can only name what the customer already agreed to, or what the statute gives you where they agreed to nothing.
• In the UK, the interest goes on a new invoice at the rate the contract allows or at 8% over base, with the fixed sum on the same document.
• In the EU and in Romania, the interest and the €40 are owed without a reminder, so the reminder is a courtesy that states the date the interest started, the rate and the fixed sum, and asks for a date.
• In the US, the reminder repeats the line from the agreement and the invoice: the rate, the date it started, and the amount so far.
• The words themselves are in the five late payment reminder templates, by how late the invoice is; the fourteen-day one is where the fee appears.

How Castan chases them

Castan is an AI that builds and runs a company with its owner, who owns everything it makes, and chasing invoices is one of the things it does on its own schedule. It reads the invoices from the connected books, notices the one coming due and the one gone late, and drafts each reminder from the invoice, from the terms you set and from the last thing that customer said on a call or in a thread, so the fourteen-day mail names the fee your terms allow and the date it started. Nothing goes out until you approve it: the draft waits in Agents with the context beside it, you change a line or send it as it is, and it leaves under your name. The thirty-day step, a pause, an agency or a claim, stays yours.

This page is a reading of public statutes and official guides on 13 October 2026, not legal advice; rates change every half-year and a contract can change everything. If a figure has moved, write to hello@castan.ai and it will be corrected with the date of the change.

Questions people ask

Sources

• gov.uk: late commercial payments, charging interest and debt recovery, 8% over base, the fixed sums, the new-invoice rule, 30 and 60 days
• The Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, the 30 June and 31 December reference dates
• Late Payment of Commercial Debts (Interest) Act 1998, section 5A, £40, £70, £100
• Late Payment of Commercial Debts (Interest) Act 1998, section 8, contract terms and the substantial remedy
• Bank of England: Bank Rate, 3.75%, held 17 September 2026, next decision 5 November
• Bank of England: Bank Rate history, 3.75% from 18 December 2025
• Xero Small Business Insights, United Kingdom, 30 July 2026, 8.3 days late, 29.1 days to payment
• gov.uk press release on the Commercial Payments Bill, 19 May 2026, 38 businesses a day
• Commercial Payments Bill: overview, the 60-day cap and mandatory interest
• Commercial Payments Bill: stages, Lords third reading 20 October 2026
• Directive 2011/7/EU on combating late payment in commercial transactions, articles 2, 3, 6 and 7
• Your Europe: late payment, statutory rates by country, 1 July to 31 December 2026
• ECB: key interest rates, 2.40% from 17 June 2026, 2.65% from 16 September 2026
• European Parliament legislative train: the late payment regulation, blocked in the Council as of 20 September 2026
• Legea 72/2013, consolidated, articles 3, 4, 5, 10, 14 and 15
• Ordonanța 13/2011, article 3, the reference rate plus eight points between businesses
• BNR circular 35/2024, 6.50% from 8 August 2024
• BNR inflation report, August 2026, held at 6.50% on 10 August 2026
• US Treasury: prompt payment interest rate, 4.75% for July to December 2026
• Intuit QuickBooks: late payment fees, 1% to 2% a month; the policy in the original agreement
• Texas Finance Code, sections 302.001, 302.002 and 303.009, read on the texas.public.law mirror; the official site did not answer
• New York Banking Law, section 14-a, 16% a year
• New York General Obligations Law, section 5-501
• New York General Business Law, section 756-b, 1% a month on private construction contracts
• California Constitution, article XV, read on Ballotpedia; the state’s site did not answer
• California Department of Finance budget letter 26-09, late payment penalty rates for 2026-27
• Atradius: B2B payment practices in the US, 17 September 2026
• Intuit QuickBooks: 2026 small business late payments report, 7 July 2026
• Castan: five late payment reminder templates

Prices and terms at other companies change over time. Every figure on this page carries the day it was read, and the page it was read on is linked above. If one has moved since, write to hello@castan.ai and the page is corrected.