Late payment is the single biggest cash flow threat for UK freelancers. Here's what the law says, how to charge statutory interest, and how to get paid without burning the relationship.
Late payment is endemic in UK business. According to the Federation of Small Businesses, small businesses are owed an estimated £23.4 billion in late payments at any one time. For freelancers and sole traders, a single late invoice can derail an entire month.
The good news: UK law gives you real tools to pursue payment. Most freelancers don't use them — but they should.
When you agree to provide services for a fee, you form a contract. Your client's obligation to pay on the agreed date is a contractual duty. If they don't pay, they are in breach of contract.
Beyond the contractual right, the Late Payment of Commercial Debts (Interest) Act 1998 gives business-to-business creditors automatic rights when invoices are overdue — regardless of whether your contract mentions them.
These rights apply to transactions between businesses. If your client is a consumer (an individual, not a business), different rules apply under consumer contracts, but the principle of being paid on time remains.
If your contract does not specify payment terms, the Late Payment Act sets a default: invoices become overdue 30 days after the later of:
Many contracts specify shorter or longer terms — 14 days and 30 days are common for freelancers. 60 or 90-day terms, sometimes imposed by large clients, are legal but can be challenged as "grossly unfair" under the Act if they are substantially worse than standard practice.
Once an invoice is overdue, you are automatically entitled to charge statutory interest at 8% above the Bank of England base rate. This applies from the first day of default and accrues daily.
You do not need to have included this in your contract — the right arises automatically under the 1998 Act.
Example: An invoice for £2,000 is 60 days overdue. At 8% + base rate (say 5.25%) = 13.25% annual interest. Daily rate: (£2,000 × 13.25%) / 365 = approximately £0.73/day. Over 60 days: ~£43.70 in interest.
For larger invoices, this adds up quickly.
In addition to interest, you can also claim a fixed compensation charge automatically:
| Invoice amount | Compensation | |----------------|-------------| | Up to £999.99 | £40 | | £1,000 to £9,999.99 | £70 | | £10,000 or more | £100 |
These charges are per invoice — if a client is late on three separate invoices, you can claim three separate charges.
If your actual debt recovery costs exceed these fixed amounts (for example, if you engaged a debt recovery agency), you can claim reasonable recovery costs instead.
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Day 1 after due date: Send a polite reminder. Often invoices are genuinely overlooked, particularly in large organisations. Keep it brief and professional — a copy of the invoice attached, a short note that it has passed its due date, a request for payment.
7–14 days overdue: Send a formal follow-up. Reference the invoice number, amount, and due date. State that the invoice is now overdue and that statutory interest is accruing.
30 days overdue: Send a Letter Before Action (LBA). This is a formal letter stating that you intend to pursue the debt through the courts if payment is not received within 7–14 days. Template LBAs are available from Citizens Advice and IPSE.
After LBA: If no response or payment, you can proceed to the small claims court (for amounts up to £10,000 in England and Wales) or a debt recovery agency.
Making a claim through Money Claim Online (gov.uk/make-court-claim-for-money) is straightforward:
For claims over £10,000, the process is more complex and a solicitor may be worth consulting.
The most effective debt recovery is prevention:
Deposit upfront. A 25–50% deposit before work begins filters out unreliable clients and covers you if they disappear mid-project.
Clear payment terms in your contract. Specify the due date (e.g. "14 days from invoice date"), the method of payment, and that statutory interest applies to overdue amounts.
Invoice promptly. Don't let invoices sit unsent — the clock starts when you invoice.
Don't continue work on unpaid invoices. Completing a second milestone while the first is unpaid doubles your exposure.
Credit check large clients. For significant projects, a basic credit check (available through Companies House or credit reference agencies) can flag financial instability.
Not all debt is worth pursuing. If a client is insolvent, has dissolved their company, or has clearly disappeared, the cost of recovery may exceed the debt. In those cases, HMRC allows you to write off bad debts and reclaim any VAT you've paid on the unpaid invoice.
Most situations, however, are not insolvency — they're cash flow management, forgetfulness, or a test of whether you'll actually push back. A firm, professional approach to chasing payment usually works.
Disclaimer: This article is for general information only and does not constitute legal advice. For specific advice on debt recovery, contact Citizens Advice, IPSE (ipse.co.uk), or a solicitor. The Small Business Commissioner (smallbusinesscommissioner.gov.uk) can also assist with disputes involving larger businesses.
Upload any UK legal document and get an instant AI breakdown — clause by clause, risk by risk, in plain English.
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