What is Late Payment of Commercial Debts Act 1998?

The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses the statutory right to charge interest on overdue B2B invoices at 8% above the Bank of England base rate (approximately 13% in mid-2024). In addition, the creditor is entitled to a fixed debt compensation charge of £40 per debt below £1,000, £70 per debt between £1,000 and £9,999, or £100 per debt of £10,000 or above. The Act applies automatically unless the contract substitutes a substantial remedy. Businesses cannot fully contract out of the Act in standard terms — any attempt to reduce the statutory rate must offer a substantial remedy instead.