Can You Charge Late Fees on an Invoice?
A client is weeks past the due date, your email reminders are being ignored, and you are wondering whether you can add a charge to make them take the deadline seriously. The short answer is usually yes. There are two ways to do it: a late fee you agreed in your terms, or, in some countries, a statutory right to interest that applies even when your contract says nothing. The difference matters, and so does getting the wording and the maths right. Here is what you can charge, what the law allows where you work, and how to calculate it, with the caveat that this is general guidance, not legal advice.
The short answer
Yes, in most places you can charge a late fee or interest on an overdue invoice, but how you earn that right depends on where you are and what your contract says. There are two routes:
1. An agreed late fee. If your quotation or invoice terms stated a late fee before the work started, you can apply it. This is the cleanest route and it works almost everywhere, because the client accepted it up front. 2. Statutory interest. Some countries give businesses a legal right to claim interest on overdue commercial invoices even if the contract is silent, often with a fixed compensation sum on top. The UK and the EU are the clearest examples.
The golden rule either way: state your late fee or interest in your terms, in writing, before you start. A charge the client saw and accepted is fair, expected and easy to enforce. A charge sprung on the final reminder invites an argument.
Agreed late fee vs statutory interest
These two are easy to confuse, so it is worth being clear. An agreed late fee is a term in your contract: a flat charge (say 25 on any invoice over 14 days late) or a percentage per month (commonly 1 to 1.5 percent of the balance). Because the client agreed to it, you can apply it as written, subject to any local cap on how high a fee can go.
Statutory interest is different: it is a right the law gives you, whether or not your contract mentions it. Where it exists, it sets a specific rate and sometimes a fixed recovery fee. You do not need the client's agreement to claim it, though you usually have to be dealing business to business rather than with a consumer.
You generally cannot stack a generous agreed fee on top of full statutory interest for the same delay. Pick the route that applies to you, keep it reasonable, and document it.
What the law allows where you work
Rules vary a lot by country, so treat this as a starting point and check your own. The figures below were accurate as of October 2026.
| Where | What you can usually claim |
|---|---|
| UK | On business-to-business invoices, statutory interest of 8 percent plus the Bank of England base rate, plus a fixed sum of 40 to 100 pounds by invoice size, even with no agreed terms, under the Late Payment of Commercial Debts legislation. This applies unless your contract already sets its own substantial remedy. Source: gov.uk. |
| EU | Under the Late Payment Directive, each member state's law lets businesses claim interest of at least 8 percentage points above the European Central Bank reference rate, plus a minimum 40 euro recovery fee, on late commercial payments. The exact rate and the default 30 day payment period are set in national law. Source: European Commission. |
| US | No single federal rule. Late fees are governed by state law and your contract. A fee generally needs to be agreed in writing and be reasonable, and usury limits vary by state, though many raise or exempt the cap for business contracts. Many businesses use about 1 to 1.5 percent per month, but note 1.5 percent a month is 18 percent a year, which can exceed some state caps. |
| Elsewhere | Most countries let you charge an agreed late fee. Fewer grant automatic statutory interest, so your contract terms usually do the heavy lifting. |
This table is general guidance, not legal advice, and the figures can change, so confirm the current rules for your country. The UK government explains your rights on late commercial payments, interest and debt recovery, and the European Commission covers the EU late payment rules. If you are in the US, check your own state's cap before setting a rate.
How to calculate a late payment fee
There are three common ways to work out the charge. Say the overdue invoice is 5,000.
A flat fee. The simplest: a fixed amount, for example 50, added once the invoice passes an agreed number of days late. Easy to explain, easy to apply.
A percentage per month. If your terms say 1.5 percent per month, the monthly charge is 5,000 times 0.015 = 75 for each month (or part month) it runs late. Two months late and the client owes 150 in fees on top of the 5,000.
Daily statutory interest. Where a statutory annual rate applies, convert it to a daily figure. Using an illustrative 13 percent a year (8 percent plus a 5 percent base rate, not today's figure), the daily interest is 5,000 times 0.13 divided by 365 = about 1.78 a day. Thirty days late is about 53 in interest, and in the UK you could add the fixed recovery sum on top. Charge interest only for the days the invoice is actually overdue, counted from the day after the due date. One UK detail: the base rate you use is the one in force on 30 June or 31 December before the invoice went overdue, not the live rate, so it stays fixed for the whole debt.
How to put a late fee in your terms
A late fee only works cleanly when it was agreed before the work started, so it belongs on your quote and your invoice, not in an angry email later. One or two plain sentences is enough. A percentage version:
"Payment is due within 14 days of the invoice date. Invoices unpaid after the due date may be charged interest at 1.5 percent per month, plus reasonable recovery costs. Where the law gives a higher statutory rate, that applies instead."
Or a flat-fee version, which is simpler for small invoices:
"Payment is due within 14 days of the invoice date. A late fee of 25 applies to any invoice more than 14 days overdue."
Put the line in your quotation terms, repeat it on the invoice, and set a clear, specific due date rather than a vague Net 30. Then, if an invoice does run late, the fee is already on the record and you are simply applying what both sides agreed. Because the exact wording and any caps depend on where you are, it is worth having a local professional check your terms once. Our guide to payment terms covers how to set due dates that hold up.
Should you actually charge it?
Being allowed to charge a fee does not always mean you should fire it off on day one. A late fee is a tool for leverage and for protecting your cash flow, not a way to punish a good client who made an honest slip. For a reliable client a day or two late, a friendly nudge usually works better and keeps the relationship intact.
Save the fee for genuine stallers: the clients who go quiet, break promises to pay, or routinely drag things out. In those cases the fee gives them a concrete reason to pay you before their other suppliers. If you are at that stage, our posts on asking a client for payment and what to do when a client does not pay walk through the whole escalation, late fee included.
Common mistakes to avoid
- Springing the fee without agreed terms. A fee the client never saw is hard to enforce and easy to dispute. Get it into your terms first.
- Setting a rate above the local cap. Some places limit how high a late fee can go, and an excessive one can be unenforceable, so keep it reasonable.
- Charging a consumer like a business. Statutory interest rules usually apply business to business, and consumer rules are often stricter, so do not assume the same rate applies.
- Forgetting the tax treatment. In some countries a late fee or interest can affect the tax or VAT shown on a follow-up invoice, so check how to record it rather than just adding a round number.
- Never actually applying it. A fee you threaten but never charge trains clients to ignore your deadlines. If it is in your terms, use it when it is warranted.
Set your terms once, on every invoice
The easiest way to make late fees work is to bake the terms into the documents you already send. With Remit you set your payment terms and due date on your quote and carry them straight onto the invoice, so the late fee clause is there from the start, in any currency, with your logo and bank details. Then, if a client runs late, the charge is already agreed and you can send a clean follow-up instead of an awkward negotiation.
