Late Payment Interest: Your Late Payer Owes You Interest (and €40)
Quick answer
Yes — in the EU, when a business pays another business late, the creditor is entitled to statutory interest at the European Central Bank reference rate plus at least 8 percentage points, plus a fixed €40 per late invoice for recovery costs. Interest runs automatically from the day after the due date, without needing a reminder.
The story in the video
Bruno is late paying again, so our lawyer chases him all the way to a superyacht — jet ski, fishing rod and a dramatic telenovela twist included. The question on the deck: can you charge interest on a late invoice? In the EU, the answer is a firm yes.
The EU rules in 5 points
The EU Late Payment Directive (2011/7/EU) sets minimum rules for business-to-business and public-sector payments, implemented in every member state's law:
- Statutory interest: the ECB reference rate plus at least 8 percentage points per year.
- Fixed compensation: at least €40 per late invoice to cover recovery costs, plus reasonable extra recovery costs.
- Default payment term: 30 days if no term was agreed.
- Long terms: payment terms over 60 days between businesses must be expressly agreed and not grossly unfair to the creditor.
- No reminder needed: interest is due from the day after the due date if you have performed your side.
Member states can set higher rates or stricter rules, so national law may give you more.
How to calculate late payment interest
The formula is simple: invoice amount × annual statutory rate × days late ÷ 365. The applicable reference rate is generally the ECB rate in force on 1 January or 1 July of the relevant half-year.
Example: a €10,000 invoice paid 90 days late, assuming a statutory rate of 10% a year, earns about €246.58 in interest (10,000 × 10% × 90 ÷ 365) — plus €40 in fixed compensation. Every extra day adds more.
The UK rules
The UK has similar rules under the Late Payment of Commercial Debts (Interest) Act 1998: statutory interest at the Bank of England base rate plus 8%, and fixed compensation of £40, £70 or £100 per invoice depending on its size, plus reasonable extra recovery costs.
Should you actually charge it?
Many businesses don't, for fear of upsetting customers. But late payment interest is a legal right, and simply stating it changes behaviour: customers who know late payment costs money tend to pay on time. You can always waive it as a goodwill gesture once the invoice is settled.
- Put your payment terms and late-payment conditions on every invoice and in your terms and conditions.
- Mention the statutory interest and the fixed compensation in your reminders.
- Claim it in full when escalating to a collection agency or court.
How Collecty can help
Collecty recovers the invoice, the statutory interest and the recovery costs from late payers in 190 countries. No win, no fee.
Related resources
Frequently asked questions
Can I charge interest on a late invoice?
Yes. In the EU, B2B creditors are entitled to statutory interest on late payments, and the UK has similar rules. You don't need to send a reminder first.
What is the statutory late payment interest rate in the EU?
At least the ECB reference rate plus 8 percentage points per year. Some member states set a higher margin.
What is the €40 late payment compensation?
It is a fixed minimum amount a business creditor can claim for each late invoice to cover recovery costs, in addition to interest and other reasonable recovery costs.
How do I calculate late payment interest?
Multiply the invoice amount by the annual statutory rate and by the number of days late, then divide by 365.
Does late payment interest apply to consumers?
No. These rules apply to transactions between businesses and between businesses and public authorities, not to consumers.
What is the default payment term if none was agreed?
In the EU, 30 days. Terms longer than 60 days between businesses must be expressly agreed and not grossly unfair.
This guide is general information, not legal advice. Rules vary by country — speak to a qualified lawyer about your situation.
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