Statutory Interest and How To Apply It

If you have clients who owe you overdue invoices, it’s important to know the current statutory interest rate on late payments, so that you can chase for payment of the full amount you are entitled to by law.

There are three sums of money you can add on top of the original amount you invoiced for:

• A fixed sum of £40, £70 or £100 depending on the amount owed.
• Any reasonable costs incurred on top of this when chasing a late payment.
• Statutory interest calculated per day since the payment became overdue.

The first two of these are quite simple: the fixed sum is based on how much the original invoice was worth, and the second covers any remaining costs you incur on top of this amount to recover the debt.

Statutory interest is a little harder to calculate, but is still not difficult, and your CPA debt recovery agent can help you to work out exactly how much extra you can add to the invoiced amount when you are chasing a debt.

What is the statutory interest rate now?

To work out the statutory interest rate you can charge, you need to know the Bank of England reference rate.

The reference rate is equivalent to the base rate on January 1st or July 1st, and applies for the following six-month period – you can find the base rate, and historic data for older debts, on the Bank of England website, or just ask your CPA debt recovery agent to determine the correct interest rate for you.

As of May 2017, the Bank of England base rate stands at 0.25% – a historic low, and unchanged since August 2016.

That means the reference rate has also been 0.25% throughout 2017 so far – so this applies to any invoices that have gone overdue during 2017.

Statutory interest is charged at a daily rate, at 8% more than the reference rate, which means for 2017 overdue invoices, the statutory interest rate until at least May is 8.25%.

How to calculate daily statutory interest

Statutory interest is added at a fixed daily rate, based on applying the statutory interest rate to the full invoice amount for a full year.

What that means is:

• Original invoice amount x 0.0825 = annual statutory interest.
• Annual statutory interest / 365 = daily statutory interest.
• Daily statutory interest x days overdue = total invoice interest.

You don’t have to worry about working out a compound statutory interest rate; it is applied as a simple daily sum of interest, multiplied by the number of days since the invoice went overdue.

What if the base rate changes?

On the Thursday of the first full week of each month, the Bank of England’s Monetary Policy Committee meets to decide whether to change the base rate – which is also used by the banks to decide how much interest to pay on some savings accounts, as well as to set mortgage interest rates.

This means that the base rate does change from time to time: although it has been 0.25% since August 2016, it was previously 0.5% since March 2009, and before that it had reached a high of 7.5% in June 1998.

In general, you only need to know the Bank of England reference rate on the date your invoice went overdue, and can apply the statutory interest rate from that date, multiplied by the number of days the invoice is now overdue.

However, if you are still not sure about whether to use the base rate or the reference rate, or how to calculate the exact amount you are owed, then again, just ask your CPA debt recovery agent for help.

Should I charge statutory interest on overdue invoices?

Once you know the current statutory interest rate on late payments, and the amount of statutory interest you can charge on your overdue invoices, it’s crucial to decide whether or not you should enforce the extra cost. As already mentioned above, you can charge a fixed fee and recover reasonable debt collection costs under other parts of the legislation protecting you against late payments. That means statutory interest is effectively pure profit – and at 8% plus the Bank of England reference rate, it usually pays more than you would have been able to get by investing the same amount of money over the same length of time.

So why wouldn’t you enforce the full amount of statutory interest owed to you under the late payment legislation?
As with all debt recovery of overdue invoices, it comes down to what will get you the most of your money the fastest – and it’s sometimes best to compromise.

When to charge statutory interest on overdue invoices – and when not to
You can chase debts up to six years old before they become ‘statute barred’ and you can no longer enforce payment.


For most of that time, the statutory interest rate stood at 8.5%, while for debts due since the start of 2017, it stands at 8.25%. The older the debt, the more days it has been overdue, and the more statutory interest you can add on top, potentially adding a substantial sum to the amount you are owed.

It’s almost always worth at least asking the debtor to pay the full amount of statutory interest, as it does not mean you are legally bound to chase for payment in the courts.

However, it’s sometimes also best to be realistic about what the debtor will pay, and in such cases the statutory interest can prove to be a useful bargaining chip.

By asking for the statutory interest, but then waiving it if the debtor agrees to pay the original invoice amount immediately, and in full, you don’t lose out on what you were originally owed, but you still provide a generous incentive for the client to settle their debt.

If you still have any doubt about the best way to proceed, speak to your CPA debt recovery agent, who will help you to understand exactly how much you are legally owed, and the best way to go about getting paid as much as possible, as quickly as possible, by chasing the debtor through the appropriate channels.

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