UK businesses can claim statutory late payment interest of 8% plus the Bank of England base rate on overdue invoices to other businesses, plus fixed compensation of £40, £70 or £100 per invoice. For an accountancy practice this covers company and sole-trader clients buying business services, but usually not individuals using you for personal tax. Those need clear payment terms in the engagement letter.
Key takeaways
- Statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 is 8% plus the Bank of England reference rate.
- Fixed compensation of £40, £70 or £100 per invoice applies on top, depending on the invoice size.
- The Act covers business-to-business debts, not individuals buying personal tax services as consumers.
- If no payment date is agreed, payment is generally due 30 days after the invoice or the work, whichever is later.
- Most late payment is prevented by terms, timing and automated reminders rather than recovered by claiming interest.
Can accountants charge interest on late-paid fees?
Yes, in many cases. The Late Payment of Commercial Debts (Interest) Act 1998 lets a business claim interest when another business pays an invoice late. According to GOV.UK’s guidance on charging interest, the statutory rate is 8% plus the Bank of England base rate for business-to-business transactions.
There are two important limits. You cannot claim statutory interest if your contract already sets a different interest rate; the contract rate applies instead. And the Act only covers debts between businesses, or between a business and a public body. It does not cover consumers.
For an accountancy practice, that second point matters more than most guides admit. A large share of your clients may be individuals who use you for their personal tax affairs. For them, you need your own contractual terms.
Which accountancy clients does the Late Payment Act cover?
Whether the Act applies depends on whether the client bought your service in the course of a business. This table is a practical guide; borderline cases depend on the facts, so take advice where the sums are significant.
| Client | Service | Late Payment Act likely to apply? |
|---|---|---|
| Limited company | Accounts, corporation tax, payroll, VAT | Yes |
| Sole trader or partnership | Bookkeeping, business accounts, VAT | Yes, for business services |
| Landlord with a property business | Rental accounts and returns | Often yes, depending on the facts |
| Employee or pensioner | Personal Self Assessment return | Usually no: a consumer |
| Charity or club | Independent examination, accounts | Usually yes |
For clients outside the Act, include an interest clause and payment terms in your engagement letter that are clear and fair. Consumer contract terms must meet the fairness rules in consumer law, so a reasonable, transparent rate agreed in advance is far safer than a punitive one.
How much late payment interest and compensation can you claim?
Statutory interest is simple interest, calculated daily. The reference rate is the Bank of England base rate in force on 31 December for debts that fall due between January and June, and on 30 June for debts that fall due between July and December. Check historic rates on the Bank of England’s Bank Rate page; the base rate was raised to 4% on 5 November 2026.
On top of interest, section 5A of the Act gives a fixed sum for each late invoice:
- £40 for debts under £1,000
- £70 for debts of £1,000 to £9,999.99
- £100 for debts of £10,000 or more
Reasonable recovery costs above that sum can sometimes be claimed too.
Worked example with illustrative figures
A limited company owes a £2,400 accounts fee that fell due in August and is paid 45 days late. Assume the reference rate for the period was 3.75%, so the statutory rate is 11.75%.
- Daily interest: £2,400 × 11.75% ÷ 365 = about £0.77
- Interest for 45 days: about £34.77
- Fixed compensation for a debt of £1,000 to £9,999.99: £70
- Total claim: about £104.77
GOV.UK advises sending a new invoice if you decide to add interest. The sums are modest, which is the point: the claim matters less than the signal that your terms are enforced.
What payment terms should go in the engagement letter?
If you agree no payment date, the Act generally treats payment as due 30 days after the later of receiving the invoice or completing the work. Most practices want something firmer and clearer. Cover these points in the engagement letter and the fee schedule:
- How fees are charged: fixed annual fee, monthly instalments, or on completion of each job.
- When invoices are due: for example 14 days from the invoice date, or before filing for one-off returns.
- How to pay: online card payment, bank transfer or Direct Debit.
- Interest and costs: for business clients, either rely on the Act or state your own rate; for individuals, state a fair contractual rate.
- What happens if fees stay unpaid: for example, pausing new work after a stated period, with notice.
Our UK engagement letter checklist covers the other clauses. Whatever you choose, apply it consistently, because terms enforced for some clients and waived for others are hard to rely on later.
A credit control timetable for accountancy fees
Most overdue fees are not disputes. The client forgot, the invoice went to an old email address, or the director who pays bills was away. A steady, polite sequence fixes most of them without a phone call.
| When | Action | Tone |
|---|---|---|
| Invoice day | Invoice with a pay-online link and the due date in the subject line | Neutral |
| 3 days before due | Friendly reminder with the link | Helpful |
| Due date + 3 days | “Overdue” reminder; ask if anything is wrong with the invoice | Courteous |
| Due date + 14 days | Second reminder by a different channel (SMS or call) | Firm |
| Due date + 30 days | Letter stating that statutory interest and compensation will be added for business clients, or contractual interest for others | Formal |
| Due date + 45 days | Partner call; pause new work in line with the engagement letter | Direct |
| Due date + 60 days or more | Letter before action; consider a court claim | Formal |
Avoid the last fortnight of January for anything beyond automated reminders. Your team is at full stretch, and clients are paying their own HMRC bills.
How can a practice stop fees going late in the first place?
Interest and court claims are the last resort. The practices with the fewest overdue invoices change when and how they bill.
- Monthly fees for recurring clients. A fixed monthly amount by Direct Debit or card spreads the annual fee and removes the large January invoice.
- Bill at approval, not after filing. Send the invoice with the finished accounts or return for approval, so payment and sign-off happen together.
- Payment before release, where your terms allow. Some practices release final copies of documents once the invoice is paid. Never let this cause a client to miss a statutory deadline, and check your professional body’s guidance.
- Online payment links on every invoice. A client who can pay straight from the reminder has one less reason to put it off.
- Up-to-date billing contacts. Ask every company client who pays invoices, and record it.
For clients who are surprised by their own tax bills in January, our guide to explaining payments on account helps keep that conversation separate from your fee.
What if the client disputes the fee?
Some late payments are really disagreements. The client expected a lower fee, did not realise extra work was chargeable, or is unhappy with how long the job took. Chasing harder rarely works; separating the disputed part from the rest usually does.
- Ask what the problem is. A short call often reveals a misunderstanding, such as a fee for catch-up bookkeeping the client thought was included.
- Go back to the engagement letter and fee schedule. If the extra work was agreed in writing, share the relevant clause and the approval. If it was not, consider whether the charge is fair.
- Split the invoice. Ask the client to pay the undisputed amount now while you discuss the rest. This keeps cash flowing and shows good faith.
- Pause interest while you talk. Holding off on statutory interest during a genuine dispute keeps the conversation constructive.
- Record the outcome. Note what was agreed on the client record and update your engagement letter so the same issue does not arise next year.
In practice, many fee disputes trace back to extra work that was never priced or approved. Getting written approval for additional work before you start it, even a one-line “yes, go ahead” from the client, prevents many of them.
If a complaint is about the quality of the work rather than the price, follow your practice’s complaints procedure and your professional body’s rules, and keep the fee discussion separate.
When should you take an unpaid fee to court?
If reminders, calls and a letter before action fail, a practice can make a claim through the county court. For many fee debts, the online money claim service on GOV.UK is the simplest route, and court fees can usually be added to the claim.
Before you start, check three things. First, that the work was clearly agreed in a signed engagement letter. Second, that you have a record of every invoice and reminder sent. Third, that the client has no reasonable complaint about the work, because a fee claim often prompts a counter-claim. For sums that matter, take legal advice first.
How Zaquil handles late-paid accountancy fees
The aim is to make paying easy, chasing automatic and the paper trail complete. Here is how a practice sets that up in Zaquil.
Fees are raised as invoices with due dates from each job, or as recurring invoices for monthly bookkeeping, payroll and VAT clients, and unbilled time can be billed from the same place. Clients see every invoice in the secure client portal and pay online.
An automation follows the timetable above: a friendly reminder before the due date, an overdue reminder three days after it, and a second chaser by SMS at 14 days. Replies from the client land in the unified inbox with the invoice history alongside, so whoever picks it up knows the context.
Where your engagement terms allow it, finished documents can be locked until the invoice is paid: the client can see that the accounts are ready and unlocks them by paying. The approval and e-signature happen in the same portal visit.
Every invoice, reminder and reply is recorded against the client record, which is exactly the evidence you need if a debt ever reaches a letter before action.
See the accounting and tax practice setup or compare plans, each with a 14-day free trial and no card required.
Frequently asked questions
What is the statutory late payment interest rate in the UK?
For business-to-business debts, statutory interest is 8% plus the Bank of England reference rate. The reference rate is the base rate on 31 December for debts due in January to June, and on 30 June for debts due in July to December. It is simple interest calculated daily.
Can I charge late payment interest to individual clients?
The Late Payment of Commercial Debts (Interest) Act does not apply to consumers, so individuals using you for personal tax affairs are usually outside it. You can still agree interest in your engagement letter, but the term must be clear and fair under consumer law. Take advice if unsure.
How much fixed compensation can I claim for a late invoice?
Under section 5A of the Act you can claim £40 for debts under £1,000, £70 for debts from £1,000 to £9,999.99, and £100 for debts of £10,000 or more. The sum applies per late invoice. Reasonable recovery costs above that amount can sometimes also be claimed.
When is an invoice late if no payment terms were agreed?
If no payment date was agreed, the Act generally treats payment as due 30 days after the later of the client receiving the invoice or the work being done. Interest can run from the day after that. Agreeing a clear date in your engagement letter avoids arguments about when the debt fell due.
Do I need to tell the client before adding interest?
The right to statutory interest arises under the Act, but it is good practice to warn clients in your terms and reminders. GOV.UK suggests sending a new invoice if you decide to add interest. Clear notice makes payment more likely and avoids disputes.
Can my contract set a different interest rate?
Yes. If your contract with a business client sets its own interest rate for late payment, that rate applies instead of statutory interest, provided it is a substantial remedy. GOV.UK notes you cannot claim statutory interest where a different contractual rate exists.
Can an accountant refuse to release accounts until fees are paid?
Many practices tie the release of final documents to payment through their engagement terms. Check your professional body’s guidance on liens and client records, and never act in a way that causes a client to miss a statutory filing deadline. Make the policy clear before the work starts.
What is a letter before action?
A letter before action is a formal letter telling the debtor how much is owed, why, and that you will start court proceedings if it is not paid within a stated period. Courts expect it before most claims. It often prompts payment without further steps.
How do I make a court claim for unpaid fees?
For many debts, you can use the online money claim service on GOV.UK to issue a claim in the county court, adding the court fee and any interest claimed. Make sure you have the engagement letter, invoices and reminders before you start, and take advice for larger sums.
Is it worth claiming late payment interest on small invoices?
The amounts are often modest, but the fixed compensation of £40 or £70 per invoice can matter across many small debts. More importantly, consistently applying your terms tells clients that due dates matter, which reduces late payment over time. Apply the same approach to every business client so nobody feels singled out.
What is the best way to reduce late payment of accountancy fees?
Move recurring clients to monthly fees by Direct Debit or card, invoice when you send work for approval, put a pay-online link on every invoice, and automate reminders before and after the due date. These steps prevent far more late payment than interest claims recover.
Does the Bank of England base rate change the interest I can claim?
Yes, but only at fixed points. The reference rate for statutory interest is set by the base rate on 31 December and 30 June, and applies to debts falling due in the following six months. A base rate change mid-period does not alter the rate on debts already in that period.
Run this part of your business in one place
Zaquil puts every email, document, approval, invoice, call and automation for your accounting and tax practice setup in a single workspace — set up for UK practices on day one.
- Client portal with document requests, organisers, e-signatures and online payment
- Jobs with templates, checklists and recurring work; invoices and unbilled time
- One inbox for email, chat, SMS, WhatsApp and calls across every brand