Can You Charge Interest on Unpaid Invoices? What to Check in the US, UK and EU

Work out the interest owedDownload the invoice interest checklist (PDF)

The short answer

In many places you can charge interest on an overdue invoice, especially when your contract says so in advance and the rate is within the local limit. But the details change with where you are, where your client is, and whether the client is a business or a consumer. Below is what the primary sources say for the US, the UK and the EU, followed by the checks to run on any invoice.

This is general information, not legal advice. Late-fee and interest rules vary by state and country, and by whether your customer is a business or a consumer. Check the rules where you and your client are, or ask a lawyer, before you set a rate.

What the sources say

United States. There is no single federal rule for interest on business invoices. Limits on interest come mainly from state usury laws, and Cornell's Legal Information Institute explains that these limits differ from state to state, with some states, such as Nevada, having no usury law. Washington's RCW 19.52.020 is one example of a state cap: the higher of 12% a year or a Treasury-bill-linked figure, with exceptions. Whether a usury statute covers a late charge on an invoice, rather than a loan, depends on the state, so this is the point to ask a local lawyer. If your client is a federal agency, the rule runs the other way: under the Prompt Payment Act, agencies generally pay interest when they pay a vendor late, and the Bureau of the Fiscal Service lists the rate as 4.75% for July 1 to December 31, 2026.

United Kingdom. The government's guidance says that if another business pays you late you can charge statutory interest of 8% plus the Bank of England base rate, that you cannot claim statutory interest if your contract sets a different rate, and that if you add interest you should send a new invoice. It also allows a fixed sum for recovery costs: £40 on debts up to £999.99, £70 up to £9,999.99, and £100 above that. The right comes from the Late Payment of Commercial Debts (Interest) Act 1998.

European Union. Directive 2011/7/EU on late payment in commercial transactions sets statutory interest at the reference rate plus at least eight percentage points, and entitles the creditor to a minimum fixed sum of €40 for recovery costs. Each member state writes it into its own law, so check the national version.

Consumers. The UK and EU rules above are about business-to-business debts. Charging interest to consumers is usually governed by consumer protection and credit rules where the customer lives, which are often stricter.

Six checks before you add interest

1. Business or consumer?

The statutory schemes above cover business clients. If your client is a person buying for themselves, look at consumer rules instead.

2. Which law applies?

Note where you are, where your client is, and which law your contract names. Cross-border work can involve more than one set of rules.

3. What do your terms say?

Find the interest or late fee wording in the quote, contract and invoice the client received. If there is none, adding interest now is much harder to justify in most places; in the UK, statutory interest on business debts is the main exception. Our post on late fee wording for invoices has clauses for next time.

4. Check the limit

Convert your rate to a yearly figure before comparing it with any cap; our post on converting 1.5% a month to a yearly rate shows how.

5. Work out the amount

Interest by the day is amount × yearly rate ÷ 365 × days late. In the invoice late fee calculator, choose Yearly interest, enter the rate, the due date and the payment date (or today), and any grace period. A $4,000 invoice at 10% a year, 40 days late, is $43.84.

6. Show it clearly

Send a new invoice or statement that shows the original amount, the interest as its own line, the rate and the dates. A client who can check the arithmetic is more likely to pay it.

Three awkward situations

The client says they never agreed to interest. Look at what they accepted: the quote, the contract, the terms on the invoice. If the rate is there and they accepted the document before the work, show them where. If it is not, in most places your stronger position is a polite reminder and, next time, terms that include it.

They paid part of the invoice. Work interest out on the unpaid balance only, from the date each part became overdue. The calculator handles one amount and one period at a time, so run it once for each part.

They dispute the invoice. If the client disagrees with the amount, sort that out first. Adding interest to a figure you are still discussing makes agreement harder and, if it ever reaches a court or tribunal, can look unreasonable. Many late payment policies say so explicitly.

Interest or a late fee?

Interest charged by the day and a fixed late fee are different tools. Interest tracks exactly how late the payment is; a fee is simpler to explain and to apply. Some businesses use one, some both, and some neither, relying on reminders and a clause that pauses work. Whichever you choose, put it in your terms before the work starts.

If you invoice in Fynl, the automatic late fee in Invoice settings adds a percentage of the overdue balance or a flat amount after the days you set, repeating on your schedule up to a cap. It does not calculate daily interest, so for an interest clause, work the figure out in the calculator and add it as a line on the invoice.

For the invoice itself, our free tools include an invoice generator that prints your terms on the PDF.

Questions people also ask

Sources

• GOV.UK — Late commercial payments: charging interest
• GOV.UK — Late commercial payments (full guide)
• legislation.gov.uk — Late Payment of Commercial Debts (Interest) Act 1998
• EUR-Lex — Directive 2011/7/EU on combating late payment
• Cornell Law School LII — Usury
• Washington State Legislature — RCW 19.52.020
• Bureau of the Fiscal Service — Prompt Payment