An unpaid invoice doesn’t just cost you the amount owed. Under UK law, you’re generally entitled to statutory interest and fixed compensation on top of it, and there’s a clear escalation path available before court ever needs to come into it.
The Benefits:
- Interest: 8% above the Bank of England base rate applies automatically, even without a contract clause
- Contract: Not required, an email exchange or verbal agreement is generally enough
- Time limit: Six years from the date the invoice became overdue
- First move: A clear, written reminder sent the day after the due date passes
Send Clear, Documented Reminders First
Start with a polite, direct reminder as soon as the due date passes, ideally the next working day. Keep every message in writing, even a phone call is worth following up with a short confirmation email, since a documented trail matters considerably more later if the dispute escalates than most people realise at this early stage. If a week or two passes without a response, send a firmer follow-up, clearly restating the amount owed and the original due date.
You’re Entitled to More Than Just the Invoice Amount
Many business owners don’t realise this applies even when their own contract says nothing about late fees. Under the Late Payment of Commercial Debts (Interest) Act 1998, you have an automatic right to charge:
- Statutory interest, currently 8% above the Bank of England base rate, calculated from the date the invoice became overdue
- Fixed compensation on top of that, ranging from £40 to £100 depending on the size of the debt, payable per invoice regardless of how much interest has accrued
- Reasonable recovery costs you’ve genuinely incurred while chasing the debt, such as recorded delivery postage or a credit check
This applies automatically to business-to-business debts, you don’t need to have written it into your original terms for the right to exist.
Free Help Before You Escalate
This is genuinely underused. Before considering formal legal steps, the Office of the Small Business Commissioner offers a free service specifically designed to help small businesses resolve late payment disputes, particularly useful where you’re chasing a larger company. It won’t suit every situation, but for many small businesses it’s a route worth trying before spending money on legal action, since it costs nothing to raise an enquiry.
Send a Letter Before Action
If reminders haven’t worked, the next formal step is a letter before action. Courts generally expect to see this step taken before any claim is filed, even where the debt itself isn’t genuinely in dispute. It should clearly state the amount owed, including any statutory interest and compensation calculated so far, a firm deadline (commonly 14 days), and a clear statement that court proceedings will follow if payment isn’t received.
What If the Client Disputes the Invoice?
This is a nuance worth understanding properly. A client can’t simply refuse to pay an entire invoice by vaguely claiming dissatisfaction. If they genuinely believe the work was defective, incomplete, or not as described, the burden is on them to demonstrate that and quantify the actual loss involved, not on you to prove the work was perfect. Gathering your own evidence early, delivery records, sign-offs, correspondence confirming satisfaction at the time, puts you in a considerably stronger position if a dispute like this arises later.
Taking It to Court
For debts under £10,000, the small claims track is generally the most practical route, and it’s specifically designed to be used without a solicitor. Before filing, it’s worth knowing exactly what the process will cost you. This site’s court fee calculator lets you work that figure out based on the amount you’re claiming, so there are no surprises once you commit to filing. If you’ve already read our guide on how to take someone to court for unpaid money, the process here follows the same structure, just applied to a commercial debt rather than a personal one.
Let’s Understand it Easily
A freelance graphic designer completes a project and issues an invoice with 30-day payment terms. The due date passes with no payment, and after a polite reminder goes unanswered for two weeks, they send a firmer follow-up including the statutory interest now accruing. Still no response. They raise an enquiry with the Small Business Commissioner, but the client, a larger agency, doesn’t engage with that process either. A letter before action follows, giving 14 days to pay, and when that deadline also passes without payment, the designer files a small claims case for the original invoice plus the accrued statutory interest and fixed compensation.
What to Do Before You Chase an Invoice?
- Double-check the invoice details and payment terms are correct and were clearly communicated
- Calculate the statutory interest and compensation you’re entitled to add
- Keep every communication in writing from the very first reminder onward
- Consider whether the Small Business Commissioner’s free service fits your situation before moving to formal legal steps
Quick Answers
Yes. The Late Payment of Commercial Debts (Interest) Act 1998 gives you this right automatically on business-to-business debts, regardless of what your own contract says on the matter.
This gets considerably more complex, since jurisdiction and enforcement depend on where the client is based and what agreements exist between that country and the UK. It’s worth getting specific advice rather than assuming the same process applies.
Generally six years from the date the invoice became overdue, under the Limitation Act 1980, though acting well before that limit gives you a much stronger practical position.
