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.

The Late Payment Interest Calculator shows the interest penalty a client owes when they pay an invoice after the due date. You enter the invoice amount, the due date, the actual payment date, and the annual interest rate specified in your contract or local law. The tool calculates the number of days overdue and applies simple interest to determine the penalty. For a $5,000 invoice that is 45 days late with an 18% annual interest rate, the client owes $111.99 in late fees. This amount is legally enforceable if your contract or jurisdiction allows late payment interest. The calculator is used by freelancers and small businesses to quantify late fees and by clients to verify that a late fee invoice is calculated correctly.

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 August 29, 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

You input the original invoice amount, the invoice due date, the date payment was received (or today's date if still unpaid), and the annual interest rate. The calculator computes the number of days between the due date and payment date, converts the annual rate to a daily rate (annual rate ÷ 365), and multiplies that daily rate by the invoice amount and the number of days overdue. The result is the interest penalty owed. The tool also shows the total amount due (original invoice plus interest) and breaks down the interest accrual day by day if you want to see how the penalty grows over time. Most freelance contracts specify a late payment interest rate between 1% and 2% per month (12% to 24% annually). If your contract does not specify a rate, many jurisdictions have a statutory default rate, often tied to the prime rate plus a margin.

Detailed explanation

Late payment interest serves two functions: it compensates you for the time value of money (you could have invested that payment or paid down debt with it), and it creates a financial incentive for clients to pay on time. Without a late fee clause, some clients treat freelancer invoices as zero-interest loans and prioritize other payables. A clear late fee policy makes your payment terms enforceable and professional. The interest rate you charge should be high enough to matter but not so punitive that it triggers legal challenges or damages the client relationship. Industry standard is 1.5% per month (18% annually), which is the rate many B2B contracts and SaaS vendors use. Some jurisdictions cap late payment interest (for example, California limits it to 10% per year unless the contract specifies a higher rate and the debt exceeds $1,000). Check your local commercial code or consult a contracts attorney before setting your rate. The calculator uses simple interest, not compound interest. Simple interest means the penalty is calculated only on the original invoice amount, not on previously accrued interest. Compound interest (charging interest on interest) is rarely used in freelance contracts and may not be enforceable depending on jurisdiction. To enforce late payment interest, your contract or invoice must state the terms clearly: payment due date, interest rate, and when interest begins accruing. If your invoice says 'Net 30' and includes a late fee clause ('1.5% monthly interest on overdue balances'), interest starts accruing on day 31. Many freelancers include this clause in their contract template and reiterate it on every invoice. If a client disputes the late fee, you point to the signed contract. The calculator helps you document the exact amount owed so the client cannot claim the fee is arbitrary. Some freelancers waive the first occurrence of a late fee as a courtesy, especially if the client relationship is otherwise strong and the delay was a one-time accounting error. Use the calculator to quantify what you are waiving so you can make an informed decision.

Common use cases

**Freelancer invoicing a late fee after repeated delays:** A client has paid your last three invoices 20 to 40 days late. Your contract specifies 1.5% monthly interest. The latest invoice is $8,000 and is 35 days overdue. Use the calculator to determine the late fee: $8,000 × 18% annual ÷ 365 days × 35 days = $138.08. Send a revised invoice for $8,138.08 with the late fee line item and a reference to the contract clause.

**Small business owner verifying a late fee from a vendor:** A supplier invoices you for a $12,000 payment that was 60 days late and adds a $400 late fee. Check whether that fee is accurate. If the contract specifies 2% monthly interest (24% annually), the calculation is $12,000 × 24% ÷ 365 × 60 = $473.42. The vendor undercharged you, or they used a different rate. Ask for clarification.

**Consultant deciding whether to waive a late fee:** A long-term client paid 15 days late for the first time due to an internal accounting issue. The invoice was $3,500. Calculate the late fee: $3,500 × 18% ÷ 365 × 15 = $25.89. Decide whether $26 is worth the potential friction. Many consultants waive fees under $50 for first-time delays but enforce them rigorously after that.

**Setting up a late payment clause in a new contract:** You are drafting a service agreement and want to include a late fee provision. Research the statutory rate in your state (for example, 10% in California). Decide whether to use the statutory rate or a higher contractual rate (18% is common). Add the clause: 'Invoices not paid within 30 days of the due date will accrue interest at 1.5% per month (18% annually) until paid in full.' Use the calculator to model a few scenarios so you know what typical late fees will look like.

Worked example

Invoice amount $6,200. Due date March 15, 2026. Payment received May 5, 2026. Days overdue: 51. Annual interest rate 18% (1.5% per month). Daily interest rate: 18% ÷ 365 = 0.0493% per day. Interest penalty: $6,200 × 0.000493 × 51 = $155.79. Total amount due: $6,200 + $155.79 = $6,355.79. If the invoice remains unpaid for another 30 days (81 days total), the penalty grows to $247.32. Each additional month of delay adds roughly $93 in interest.

Related tools

Calculate your required hourly or project rate with the [Freelance Rate Simulator](/tools/freelance/freelance-rate-simulator) or [Project Quote Calculator](/tools/freelance/project-quote-calculator) to ensure late payments do not erode your effective income. Track cash flow impact of delayed payments with basic accounting tools.

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.

Citation: Late payment interest enforceability varies by jurisdiction. California Civil Code Section 3289 caps default interest at 10% annually unless contractually specified otherwise. Consult local commercial law or a contracts attorney before enforcing late fees.

Author: OnSumo Editorial