Statutory interest is 8% plus the Bank of England base rate for business to business transactions.
You can’t claim statutory interest if your customer is a consumer and not acting in the course of a business – in this case you can only claim interest if the contract sets a contractual rate.
For example, if the Bank of England base rate is 0.5%, statutory interest for a recent debt would be 8.5%; check the Bank of England base rate history.
The calculation for statutory/contractual interest is: (Debt x interest rate x the number of days late) /365.
Worked example (using statutory interest and assuming a base rate of 0.5%):
- your business is owed £1,000
- the annual statutory interest on this would be £85 (1,000 x 0.085 = 85)
- divide £85 by 365 to get the daily interest: 23p a day (85 / 365 = 0.23)
- after 50 days this would be £11.50 (50 x 0.23 = 11.50)
If you are seeking to recover a debt on a business to business or consumer transaction, you can consider using a late payment letter and if the debt still remains unpaid, consider following this up with a second late payment letter. If you want to issue proceedings to recover a debt (which should be a last resort) consider using a letter before action. Rocket Lawyer’s late payment letters will even calculate the interest due, if you chose to claim it. Before you issue proceedings, consider alternatives to legal action.