Late Payment Demand Letter Template UK
Chasing overdue invoices is exhausting. A formal demand letter citing the right legislation puts pressure on debtors and starts the clock towards court action if they still won't pay.
What the Law Says
Late Payment of Commercial Debts (Interest) Act 1998
Every business and public authority has an implied statutory right to claim interest on late payment of commercial debts. The statutory interest rate is 8% per annum above the Bank of England base rate. Additional fixed compensation is payable depending on the size of the debt.
Money you're owed is growing: From the date payment was due, you can charge 8% + Bank of England base rate statutory interest per year, plus fixed compensation of £40–£100 depending on the debt amount. The longer they delay, the more they owe you.
This Act applies to business-to-business (B2B) and business-to-public-authority transactions. If you're a consumer chasing a business, you'd rely on contract law and the county court process instead. The Act cannot be contracted out of — any contract term that tries to remove the right to statutory interest is void.
What You Can Claim
| Debt Amount | Fixed Compensation | Statutory Interest |
|---|---|---|
| Up to £999.99 | £40 | 8% + BoE base rate per annum (currently ~13.25% total) |
| £1,000 – £9,999.99 | £70 | |
| £10,000+ | £100 |
On top of the fixed compensation and interest, you can also claim reasonable recovery costs — this includes the cost of sending demand letters, credit reference checks, and professional debt recovery fees.
When You Have a Valid Claim
You can send a late payment demand when:
- The payment is overdue — if you agreed payment terms, the debt is late once those terms expire. If no terms were agreed, the default is 30 days from delivery of goods/services or the invoice date (whichever is later)
- You've provided the goods or services — the debt must be for goods or services that have actually been supplied
- The transaction is commercial — both parties are acting in the course of business (not consumer-to-business)
- You've issued an invoice — while not strictly required, an invoice establishes the debt and the payment terms clearly
Consumer Debt Recovery
If you're an individual chasing money from a business (e.g., a refund, deposit return, or payment for freelance work), the Late Payment Act doesn't apply directly. However, you can still:
- Send a formal demand letter citing your contract
- Claim interest under Section 69 of the County Courts Act 1984 (8% per annum from the date the debt became due)
- Use the Letter Before Action protocol to start court proceedings
What Your Letter Should Include
Late Payment Demand Letter Checklist
- Your business name, address, and contact details
- The debtor's name and address
- Invoice number(s) and date(s)
- Original amount owed
- Payment terms that were agreed (or "30 days" if none agreed)
- Number of days the payment is overdue
- Statutory interest calculation (amount + daily rate)
- Fixed compensation amount (£40, £70, or £100)
- Total amount now owed (original + interest + compensation)
- Reference to the Late Payment of Commercial Debts Act 1998
- Payment deadline (7–14 days)
- Statement that court proceedings will follow if unpaid
- Your bank details for payment
Chasing an overdue invoice? LetterLift generates a formal Letter Before Action with correct statutory interest calculations — ready to file with MCOL if needed.
Write Your Letter — £2.99Takes 90 seconds. No account needed.
What Happens If They Don't Pay
Send a Letter Before Action (LBA)
If the initial demand is ignored, send a formal LBA giving a final 14–30 days to pay. This is a required pre-action step under the Pre-Action Protocol for Debt Claims. The letter must state the total owed, the deadline, and that court proceedings will follow.
Issue a County Court Claim (Money Claims Online)
Use MCOL (Money Claims Online) or Form N1 to issue a claim. Court fees range from £35 (claims up to £300) to £455 (claims up to £10,000). The debtor has 14 days to respond. If they don't respond, you can request a default judgment.
Enforce the Judgment
With a county court judgment (CCJ), you can instruct enforcement officers (bailiffs) to seize assets, apply for an attachment of earnings order, or register a charging order against their property. A CCJ also damages their credit rating for 6 years.
Statutory Demand or Winding-Up Petition (Large Debts)
For debts over £750, you can serve a statutory demand. If unpaid after 21 days, you can petition to wind up their company. This is nuclear — but the threat of insolvency proceedings usually gets attention fast.
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Professional late payment demand letter with statutory interest calculations. Personalised with your invoice details and debt amount.
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Frequently Asked Questions
Common questions about late payment rights for UK businesses and freelancers.
Does the Late Payment Act apply to consumer debts?
No — the Late Payment of Commercial Debts Act 1998 applies to B2B transactions where at least one party is a business. If you're an individual claiming from a consumer, you'd rely on general contract law or the Consumer Rights Act instead.
What is the statutory interest rate for late payment?
The statutory rate is 8% per annum above the Bank of England base rate. This accrues daily from the date payment was due. You also have the right to claim fixed compensation: £40 for debts under £1,000, £70 for £1,000–£9,999, and £100 for debts of £10,000 or more.
What if we didn't agree a payment date?
If no payment date was agreed, the law implies payment must be made within 30 days. Statutory interest begins to accrue automatically from day 31. You don't need a formal contract — an invoice with a due date, accepted work, or an email thread confirming the arrangement is sufficient.
What happens if they still don't pay after a formal letter?
You can file a claim through Money Claim Online (MCOL) for debts up to £100,000. For amounts up to £10,000, it goes to small claims court — typically resolved within 4–6 months, and you can usually represent yourself without a solicitor. A formal demand letter is a required precondition before filing.