Late Payment Fees and Interest by Country: What You Can Legally Charge

"Can I charge a late fee?" is one of the most common questions freelancers ask after a client misses a due date. The answer depends on two things:

1. What you agreed. A late fee or interest rate written into your contract or accepted terms.
2. Where you are. Some countries give businesses an automatic right to interest and compensation on late B2B invoices. Others leave it almost entirely to the contract.

This guide summarises the rules in the main English-speaking markets and the EU, with links to the official sources so you can check the details yourself. Rates change, so always confirm the current figure before you put it on an invoice.

Important: this is general information, not legal advice. Most of these rules apply to business-to-business invoices. Charging consumers is usually governed by separate, stricter rules.

Late fee vs. interest: what's the difference?

• A late fee is a fixed amount or a one-off percentage added when an invoice is late (for example, "$25" or "5% of the invoice").
• Interest builds up over time on the unpaid balance (for example, "1.5% per month" or "8% plus base rate per year").
• Statutory compensation is a fixed sum some laws let you claim for the cost of chasing, on top of interest. The UK and EU have it.

Whatever you charge, the safest approach everywhere is the same: put it in writing before the work starts, show it on the invoice, and remind the client before applying it.

United Kingdom

The UK has one of the clearest regimes, under the Late Payment of Commercial Debts (Interest) Act 1998.

• When a payment is late: on the agreed date. If no date was agreed, 30 days after the customer receives the invoice or you deliver the work, whichever is later. Agreed B2B terms should usually be no longer than 60 days, unless a longer period is fair to both sides (GOV.UK).
• Statutory interest: 8% plus the Bank of England base rate, as simple interest (GOV.UK). Check the current base rate on the Bank of England website. The Small Business Commissioner explains that the rate is fixed in six-month periods, using the base rate on 31 December or 30 June (OSBC).
• Fixed compensation per invoice (GOV.UK):

How to calculate it: GOV.UK's worked method is invoice amount × annual rate ÷ 365 × days late. The OSBC adds that you calculate on the VAT-inclusive total, and you send a new invoice for the interest and compensation that references the original. You can't charge interest on an invoice paid late because of a genuine dispute. The OSBC interest calculator will do the maths for you.

Your contract can replace statutory interest, but only with a "substantial remedy". A contract term that excludes interest or sets it unrealistically low can be void (section 8 of the Act).

European Union

The Late Payment Directive 2011/7/EU sets minimum rules that every EU country has built into its national law:

• Default deadline: if no payment period was agreed, interest is due automatically 30 calendar days after the client receives your invoice (or after delivery, if that's later). Businesses must normally pay within 60 days, unless they expressly agree otherwise and it isn't grossly unfair to the supplier (European Commission).
• Statutory interest: the reference rate (for euro countries, the ECB's main refinancing rate) plus at least 8 percentage points.
• Compensation: at least €40 per late invoice, with no reminder needed, plus reasonable recovery costs above that (Article 6).

Your Europe publishes each country's statutory rate every six months. For 1 July – 31 December 2026 it lists, for example (Your Europe):

Your Europe also notes that you charge interest on the gross (VAT-inclusive) amount, that these rules don't cover consumers, and that cross-border contracts follow whichever country's law the contract chose.

United States

There is no federal law giving businesses an automatic right to late-payment interest on B2B invoices. In practice:

• Your contract is what counts. Late fees and interest generally need to be agreed in advance. "1.5% per month on overdue balances" is a common clause.
• State law sets the limits. States have their own usury and interest rules, and they differ a lot. Check your state's rules, or ask a local lawyer, before choosing a rate.
• Freelancer payment laws in some places set when you must be paid, though not a late-fee amount. New York State's Freelance Isn't Free Act, California's Freelance Worker Protection Act and Illinois's Freelance Worker Protection Act all require payment by the agreed date or, if none, within 30 days of completing the work, for covered contracts. New York City has its own law too (NYC DCWP).

Canada

Interest is mainly a matter of contract and provincial law, with one federal rule every freelancer should know. Under section 4 of the Interest Act, if a written contract states interest per day, week or month (such as "2% per month") and doesn't also state the equivalent yearly rate, you can't recover more than 5% a year.

The practical fix is to write both: "Overdue balances accrue interest at 2% per month (26.82% per year)." Work out the annual figure correctly for how you compound (2% a month compounded monthly is about 26.82% a year; simple interest is 24%).

Australia

Australia doesn't have a UK- or EU-style automatic interest right on general B2B invoices that official guidance points to. Instead, business.gov.au tells you to start by checking your contract: the payment date, the payment method, and what you both agreed would happen if payment was late. In other words, put your late-fee or interest clause in your terms.

If a client still won't pay, the Australian Small Business and Family Enterprise Ombudsman can help you find low-cost dispute resolution. (Construction work has separate security-of-payment laws in each state, which are outside the scope of this guide.)

India

Registered micro and small enterprises have strong statutory protection under the MSMED Act 2006:

• Payment deadline: the agreed date, which can't be more than 45 days after acceptance. If no date was agreed, payment is due 15 days after acceptance (section 15).
• Interest: if the buyer pays late, they owe compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India (section 16). A contract can't waive this.

The government's MSME Samadhaan portal handles delayed-payment complaints.

South Africa

If no interest rate was agreed, the prescribed rate of interest under the Prescribed Rate of Interest Act 55 of 1975 generally applies to a debt. It's linked to the Reserve Bank's repo rate (repo plus 3.5 percentage points). South African law firm Deneys reports the rate as 10.50% per year from 1 July 2026, and notes that the new rate takes effect even if no Government Gazette notice is published (Deneys). You can agree a different rate in your contract, subject to other laws such as the National Credit Act.

How to apply a late fee without losing the client

1. Agree it up front. Put a clause in your contract or quote, and repeat it on every invoice: "Payment due within 14 days. Overdue balances incur [fee/interest] as per our agreement dated [date]."
2. Warn before you apply it. A reminder on the due date that mentions the fee often gets the invoice paid without ever charging it.
3. Invoice it separately and clearly. Show the original invoice, the days late, the rate and the calculation.
4. Waive it strategically. Waiving a fee for a long-standing client who pays promptly once reminded is a goodwill gesture that costs you little.
5. Don't charge on disputed amounts. Sort out the dispute first.

Getting the wording right in each reminder is where most people hesitate. The free ChaseKindly payment reminder email generator writes reminders that mention your agreed fee politely, without sounding like a threat. And ChaseKindly can plan the whole sequence for you, from the friendly heads-up to the firm 30-day email. Automatic sending coming soon. It's free for up to 3 active (unpaid) invoices; Pro is $12/month.

Quick FAQ

Can I add a late fee if it wasn't in my contract? In the UK and EU, statutory interest and compensation can apply to B2B invoices even if your contract doesn't mention them. In most other places, including the US, Canada and Australia, you generally need to have agreed it in advance. Adding a surprise fee can also damage the relationship.

Is a late fee the same as a penalty? Not legally, in many places. Courts in some countries won't enforce charges they see as punitive rather than a genuine pre-estimate of loss or a reasonable remedy. Keep fees proportionate.

What rate should I choose? In the UK and EU, the statutory rate is a ready-made, defensible default. Elsewhere, choose a moderate rate, state the annual equivalent, and check local limits.

Sources were checked on 18 October 2026. Rates such as the Bank of England base rate, EU statutory rates and South Africa's prescribed rate change periodically, so confirm the current figure using the links above.

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