Can I legally charge interest on a late invoice?

Yes, if your contract or invoice terms specify an interest clause with the rate and method. Without written terms you may still be entitled to statutory rates in the UK and EU. In the US your right to charge contractual interest depends on your state's law and whether your invoice terms constitute a binding agreement. Always specify your late payment terms in writing before starting a project.

What interest rate should I charge?

Common commercial rates are 1.5% to 2% per month (18-24% annually). The UK statutory rate applies when you have no contract clause; it runs at 8 percentage points above the Bank of England base rate. The EU rate follows the same logic using the ECB base rate. Check your contract first; if there are no terms, your statutory rate is the fallback.

What is the difference between a late fee and late payment interest?

A late fee is a fixed charge applied once the invoice becomes overdue, for example, a flat $50 penalty after 30 days. Late payment interest is a percentage that accrues daily or monthly on the outstanding balance. Fees are simpler to enforce; interest grows the longer the client waits to pay, which creates a stronger financial incentive to settle quickly.

How long before a late invoice becomes uncollectable?

Late payment interest continues to accrue but does not extend the statute of limitations on the underlying contract claim. Most US states have a 4-6 year SOL for written contracts. After that window, you may still demand payment but cannot sue to enforce it. The Statute of Limitations Lookup tool on OnSumo can help you check your specific deadline.

Should I mention the interest charge in my original invoice before it is even late?

Yes. Stating the interest rate and method in your original invoice terms, before any payment is late, establishes the legal basis for charging it. A clause such as \"Invoices unpaid after 30 days accrue interest at 1.5% per month\" gives you a clear contractual right to the charge if the client disputes it later. Many freelancers include this in a brief terms section at the bottom of every invoice. If your invoice template does not already include this, adding it costs nothing and provides real protection.

Does the demand notice generated by this tool have legal weight?

The generated demand notice is a professional communication, not a legal document. It states the calculation clearly and creates a written record that you requested payment on a specific date. If the matter proceeds to small claims court or formal collections, having a dated demand notice on file strengthens your position by demonstrating you gave the client fair notice and a reasonable opportunity to pay. For larger disputed amounts, having an attorney review or issue the demand letter adds legal weight.

Late Payment Interest Calculator

Calculate interest on overdue invoices with simple or compound math and copy a demand notice for your client.

Country / region

Changing region updates defaults and currency for your location.

Invoice amountInvoice # (optional)CurrencyInvoice datePayment due dateAs of date (optional)Interest rateRate typeInterest methodJurisdiction

Total owed

$5,073.97

Interest accrued

$73.97

Days overdue

Interest breakdown

Invoice amount: $5,000.00
Interest (simple): $73.97
Total due: $5,073.97

At 18.00% per year: simple $73.97, compound $73.91.

Interest over time

Late payment notice

Invoice #N for $5,000.00 was due on June 6, 2026 and remains unpaid. Interest of $73.97 has accrued at 18.00% per annum. Total now due: $5,073.97.

Statutory rate note (US)

There is no single federal late-payment rate for commercial invoices. Your contract terms and state law control what you may charge.

State commercial codes and written agreement (retrieved 2026-05-29)

Reference link

This calculator is not legal advice. Confirm your contract terms and local law before charging interest or sending a demand letter.

How this tool works

The tool first counts the number of calendar days between the payment due date and the date you select (defaulting to today). It then applies one of two formulas depending on your selection. Simple interest: I = P × r × (d ÷ 365), where P is the invoice principal, r is the annual rate as a decimal, and d is days overdue. Compound interest accumulates daily: A = P × (1 + r ÷ 365)^d, and interest = A − P. The demand notice uses your entered invoice number, due date, amount, and accrued interest to produce a ready-to-send paragraph. Key assumption: both formulas use a 365-day year; some jurisdictions use 360. Edge case: in leap years, 366-day calculation produces slightly lower daily interest than 365-day; the tool does not auto-detect leap years, so for multi-year overdue balances the 365-day assumption introduces a small undercount. If your contract specifies a different day-count convention, adjust the annual rate accordingly before entering it.

Worked example

Invoice amount: $5,000 Due date: April 1, 2026 Today: June 4, 2026 Days overdue: 64 Annual rate: 18% (entered as 1.5% per month) ` Annual rate = 1.5% x 12 = 18% Interest = 5,000 x 0.18 x (64 / 365) = 5,000 x 0.18 x 0.17534 = $157.81 Total owed = $5,157.81 ` Generated demand notice: > Invoice #[N] for $5,000.00 was due on April 1, 2026 and remains unpaid. Interest of $157.81 has accrued at 18.00% per annum (simple interest). Total now due: $5,157.81. Please remit payment within 7 days to avoid further accrual.

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Frequently asked questions

Can I legally charge interest on a late invoice?
Yes, if your contract or invoice terms specify an interest clause with the rate and method. Without written terms you may still be entitled to statutory rates in the UK and EU. In the US your right to charge contractual interest depends on your state's law and whether your invoice terms constitute a binding agreement. Always specify your late payment terms in writing before starting a project.
What interest rate should I charge?
Common commercial rates are 1.5% to 2% per month (18-24% annually). The UK statutory rate applies when you have no contract clause; it runs at 8 percentage points above the Bank of England base rate. The EU rate follows the same logic using the ECB base rate. Check your contract first; if there are no terms, your statutory rate is the fallback.
What is the difference between a late fee and late payment interest?
A late fee is a fixed charge applied once the invoice becomes overdue, for example, a flat $50 penalty after 30 days. Late payment interest is a percentage that accrues daily or monthly on the outstanding balance. Fees are simpler to enforce; interest grows the longer the client waits to pay, which creates a stronger financial incentive to settle quickly.
How long before a late invoice becomes uncollectable?
Late payment interest continues to accrue but does not extend the statute of limitations on the underlying contract claim. Most US states have a 4-6 year SOL for written contracts. After that window, you may still demand payment but cannot sue to enforce it. The Statute of Limitations Lookup tool on OnSumo can help you check your specific deadline.
Should I mention the interest charge in my original invoice before it is even late?
Yes. Stating the interest rate and method in your original invoice terms, before any payment is late, establishes the legal basis for charging it. A clause such as \"Invoices unpaid after 30 days accrue interest at 1.5% per month\" gives you a clear contractual right to the charge if the client disputes it later. Many freelancers include this in a brief terms section at the bottom of every invoice. If your invoice template does not already include this, adding it costs nothing and provides real protection.
Does the demand notice generated by this tool have legal weight?
The generated demand notice is a professional communication, not a legal document. It states the calculation clearly and creates a written record that you requested payment on a specific date. If the matter proceeds to small claims court or formal collections, having a dated demand notice on file strengthens your position by demonstrating you gave the client fair notice and a reasonable opportunity to pay. For larger disputed amounts, having an attorney review or issue the demand letter adds legal weight.