Late Payment Interest Calculator for Construction
Calculate the statutory interest and fixed compensation owed on any overdue UK construction invoice or retention payment under the Late Payment of Commercial Debts (Interest) Act 1998. Enter the invoice amount, the date payment was due, and the date of payment (or today if still unpaid) to see the interest accrued at 8% above the Bank of England base rate, the fixed compensation amount (£40, £70, or £100), and the total sum owed. Results update instantly and you can export a detailed breakdown as a PDF to support a formal demand letter or adjudication notice.
How to use this calculator
Enter the gross amount of the overdue payment (the sum shown on your invoice or payment certificate), the date the payment was contractually due (the final date for payment under the Construction Act), and either the actual date you received payment or leave it blank to calculate interest to today's date. The calculator applies the correct statutory interest rate for each six-month period the debt has been outstanding, adds the fixed compensation amount based on the debt size, and shows the total sum owed. You can generate a PDF summary suitable for use in a demand letter, formal notice, or adjudication referral.
Late payment law in UK construction
UK construction subcontractors have strong statutory rights when payments are made late. Two key pieces of legislation protect your right to be paid on time and to recover additional sums when you are not.
The Housing Grants, Construction and Regeneration Act 1996 (the Construction Act) governs the payment mechanism in construction contracts. It requires that all construction contracts include adequate payment provisions: a mechanism for determining what sums are due and when, a final date for payment (at least 17 days after the payment due date under the Scheme for Construction Contracts where the contract is silent), and a right for the paying party to serve a Pay Less Notice before the final date for payment if they wish to pay less than the certified sum. Where no Pay Less Notice is served, the notified or applied amount is typically treated as payable. Failure to pay is a breach of contract and entitles the payee to refer the dispute to adjudication - a fast-track dispute resolution process that typically concludes within 28 days.
The Late Payment of Commercial Debts (Interest) Act 1998 provides a separate statutory remedy once a payment becomes overdue. Interest accrues automatically at 8% per annum above the Bank of England base rate from the day after the final date for payment. The base rate used is fixed at the start of each six-month statutory interest period (June and December). In addition to interest, the Act entitles the creditor to a fixed compensation sum - £40 for debts under £1,000, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more. If your actual debt recovery costs exceed the fixed compensation, you can also claim the difference as reasonable costs.
These rights apply to payment applications, certified sums, retention releases, and any other qualifying commercial debt arising from construction operations. They cannot be excluded by contract unless the contract provides a substantial contractual remedy for late payment - a high bar that most standard form contracts do not meet.
To exercise your rights effectively, keep clear records of every invoice, payment certificate, and Pay Less Notice served or received. Serve formal written notice on the paying party identifying the overdue sum, the due date, and the interest accruing. If payment is not made promptly, you can refer the dispute to adjudication or, for smaller sums, the County Court or HMRC where VAT or CIS issues are involved.
BuildQS tracks all your payment applications including submission dates, approved amounts, and payment received dates so you always have the data needed to calculate and recover late payment interest. See our Approval Workflows feature for details.
Frequently Asked Questions
- What is the statutory interest rate on late commercial payments?
- Statutory interest accrues at 8% per annum above the Bank of England base rate under the Late Payment of Commercial Debts Act 1998. The base rate used is fixed at the start of each six-month period (using the rate on 30 June and 31 December). The combined rate changes whenever the Bank of England adjusts the base rate at those reference dates.
- What fixed compensation can I claim for a late payment?
- In addition to interest, you are entitled to fixed compensation of £40 for debts below £1,000, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more. This is automatic - you do not need to prove actual costs were incurred. If your actual recovery costs exceed the fixed amount, you can claim the difference.
- When does statutory interest start to run on a construction payment?
- Interest begins to accrue the day after the final date for payment. Under the Construction Act, the final date for payment is the deadline specified in the contract or, if the contract is silent, 17 days after the payment due date under the Scheme for Construction Contracts.
- Can I claim statutory interest on overdue retention?
- Yes. Overdue retention is a qualifying commercial debt and interest accrues from the day after the contractual retention release date. The fixed compensation amounts also apply. Many subcontractors overlook this right, but retention held for 12 months or more can accumulate significant interest.
- Do I need to notify the paying party before claiming statutory interest?
- No formal notice is legally required before interest starts to accrue - it runs automatically. However, in practice you should send a written demand identifying the overdue sum, the due date, and the interest accrued before escalating to adjudication or court. Our calculator provides the figures needed for this notice.
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