Late Payment Interest Calculator

You can charge interest on late invoices

Most freelancers never do — but in many jurisdictions you're legally entitled to. The UK's Late Payment of Commercial Debts Act allows statutory interest at base rate + 8% plus fixed compensation (£40–£100 per invoice). US law varies: contract terms govern, and many freelancers add "1.5% per month" (about 18% APR) clauses — enforceable in most states if stated in the contract. The EU's Late Payment Directive sets base rate + 8 points for B2B transactions across member states.

This calculator uses simple daily interest: amount × (rate ÷ 365) × days overdue. Change the rate to match your jurisdiction or contract clause.

Why charging interest works even when you never collect it

In practice, the interest amount is often waived in exchange for immediate payment — it's leverage. A polite "Invoice #104 is 45 days overdue; with statutory interest the balance now stands at $5,049" gets noticeably faster responses than a reminder alone. It reframes you from "vendor asking politely" to "creditor with a legal claim."

Before it gets there: prevention beats collection

Use net-14 or net-7 instead of net-30, take deposits (30–50% for new clients), put the interest clause in your contract before the problem, and don't deliver final files until the final invoice clears. Automated reminder emails at due date, +7, and +14 days catch most late payers while it's still embarrassment, not litigation.

How the interest and compensation math works

Three inputs drive the result: the invoice amount, the days overdue, and the annual rate you are entitled to charge. The calculator applies simple daily interest, not compounding: each day adds amount × (annual rate ÷ 365) to the debt, so the total is amount × rate ÷ 365 × days. Balances grow linearly, and the daily-accrual figure lets you restate the demand as time passes without recomputing anything.

The rate field is where your jurisdiction or contract enters. A UK business-to-business invoice uses the statutory rate — base rate plus 8% — which moves whenever the base rate moves, so check it on the day you send the demand. A US invoice uses whatever the contract says, commonly 1.5% a month (about 18% APR); with no clause and no statute on point there may be nothing to charge, which is why the clause belongs in the agreement before work starts. EU business-to-business deals mirror the UK structure at the reference rate plus 8 points. UK and EU rules then add fixed compensation per invoice in tiered bands — claimed once per overdue invoice, not per day, and separate from interest.

Day counting starts the day after the due date, not the issue date: an invoice due on the 1st and settled on the 15th is 14 days overdue. Part-payment shrinks the principal from the payment date, so interest accrues on the original amount before it and on the remainder after — run the two periods separately and add them.

Worked example: a $4,200 invoice, 52 days late

Take figures different from the recovery playbook's walkthrough: a $4,200 invoice, 52 days overdue, at a 12% annual contract rate. Daily interest is $4,200 × 0.12 ÷ 365 = $1.38 a day, and over 52 days that is $4,200 × 0.12 ÷ 365 × 52 = $71.80 — so the demand reads $4,271.80. Note the proportions: nearly two months of waiting buys under 2% of the invoice, which is why the fee works as leverage in the demand letter rather than as compensation; your own chasing time at any real hourly rate already exceeds it. Where fixed compensation applies, add it on top of the $71.80 as a separate per-invoice line, and refresh the day count with every follow-up so the number in the email is current.

Fixed fee vs percentage vs statutory: three methods compared

Same $4,200 invoice, 52 days late, three ways to price it. A flat $100 fee lands at exactly $100. A percentage clause at 1.5% per month (about 18% APR) comes to $4,200 × 0.18 × 52 ÷ 365 = $107.70. A statutory-style 8% annual rate comes to $4,200 × 0.08 × 52 ÷ 365 = $47.87 — before compensation tiers.

The practical read: US contracts should state 1.5% per month, because it overtakes any reasonable flat fee by week seven and keeps growing. UK invoices should invoke the statute instead of a flat fee — 8% looks weakest in the table, but the automatic £40–£100 compensation per invoice (no clause needed) makes it the strongest total on typical freelancer invoice sizes. Verify any combination against the calculator above before writing it into a contract.

Simple or compound: pick the method before you charge

Run simple interest unless the agreement says otherwise: the rate applies to the original invoice amount only, so every extra day costs exactly the same as the last. Compounding charges interest on interest already accrued, which makes the balance accelerate — a 1.5%-a-month clause costs 18% a year as simple interest but 19.56% when compounded monthly (1.015¹² − 1 ≈ 0.1956). Most statutory schemes assume simple interest, and a customer disputing the bill attacks compounding first whenever the contract never spelled it out. Set the calculator and the written terms to the same method while the invoice is still current, not after it goes overdue.

How to add the charge to the invoice

Raise the interest on a separate invoice or on the next statement — never rewrite the original, which may already sit inside the customer's accounting system. Spell out the workings on the line itself: the rate, the days overdue, and the amount it was applied to, plus the clause or statute you are relying on — and give the new charge its own due date. A one-line clause in the contract prevents most arguments before they start: invoices unpaid 7 days past the due date accrue 1.5% per month on the outstanding balance until paid.

From interest to escalation: what the number unlocks

The calculator gives you the current balance; the balance gives you the demand. Interest here is leverage, not profit — nearly two months of waiting buys under 2% of the invoice in the worked example above — so its job is to make ignoring you more expensive than paying you. The sequence that converts the number into payment is the one in our client not paying guide: a polite reminder on the due date with the invoice re-attached, a firm follow-up around day 7 naming the accruing fee, a written deadline with work paused around day 14, a formal demand letter with a 7–10 day final deadline, and only then small claims or a collections referral. Each message restates the invoice number, the amount, the due date, and the freshly computed balance, so the thread itself becomes the evidence. The prevention clauses that stop most disputes — net-14 or net-7 terms, 30–50% deposits, the interest clause in the contract before work starts, final files released on payment — are the same ones in that guide, and they are worth more than any recovery tactic.

Limits of this calculator

Your contract governs most US disputes: courts generally enforce a late-fee clause both sides agreed in advance and look skeptically at interest invented after the invoice went overdue — keep the signed agreement, not just the invoice. Small-claims thresholds and filing fees vary by state, so check your own state's current rules before a demand names a specific court or fee. Statutory rates and compensation bands move with base rates and legislation, and currency conversion adds drift on cross-border invoices. Nothing here is legal advice: for a debt large enough to litigate, confirm the position with a local attorney or small-business legal clinic before filing.

Sources

UK statutory interest and compensation bands are set out in the GOV.UK late commercial payments guidance. The escalation timeline, email templates, and the prevention clauses that stop most disputes are in the client not paying guide.

The late-fee and interest examples on this page were calculated by hand from the stated terms — not copied from the calculator. How we check every page.

Related calculators

Interest is the penalty; the rest of the billing stack sits upstream of it: the freelance invoice generator puts due dates and payment terms on the document in the first place, the break-even calculator shows the monthly revenue a late payment is delaying, and the runway calculator shows how much unpaid cash your savings can absorb. What to write at each stage of chasing is in the client not paying guide, and the clauses that prevent all of it are in the freelance contract template.