How the Late Payment Calculator works

1. How we calculate the annual cost

Annual capital cost = overdue receivables × (DSO ÷ 365) × cost of capital. Cost of capital = BoE base rate + 4 percentage points, reflecting typical SME working-capital margin. If you don't supply your DSO we use the sector median below.

2. Statutory interest explained

The Late Payment of Commercial Debts (Interest) Act 1998 entitles you to statutory interest on any commercial debt past its due date. The headline rate is the Bank of England base rate plus 8 percentage points - recalculated every six months. The calculator fetches the current base rate from the Bank of England directly so the headline number is always accurate to the current MPC decision.

3. Compensation tiers

The Late Payment of Commercial Debts Regulations 2002 (SI 2002/1674), regulation 5A, set fixed compensation in addition to interest:

• £40 if the overdue debt is less than £1,000
• £70 if the overdue debt is £1,000 to £9,999.99
• £100 if the overdue debt is £10,000 or more

Compensation is per invoice and recoverable without going to court.

4. Sector DSO benchmarks

Indicative medians for UK SMEs in 2024. Where your business sits within the sector matters more than the headline median - construction commonly runs 90+ days, retail commonly under 30.

5. Sources & citations

• Late Payment of Commercial Debts (Interest) Act 1998 (as amended) - statutory interest at BoE base + 8%.
• Late Payment of Commercial Debts Regulations 2002 (SI 2002/1674) reg 5A - £40 / £70 / £100 compensation tiers.
• Bank of England base rate - sourced from the BoE Statistical Database (refreshed weekly).
• Default overdue ratio (30% of annual revenue) - Bacs UK SME averages, indicative blend.
• DSO sector medians - industry blend of 2024 UK SME ranges, indicative.