Late Payment Clause Freelance Contract UK | Statutory Interest and Compensation
Getting paid late is one of the most damaging problems UK freelancers face, yet many contracts offer no real protection when a client ignores an invoice. A late payment clause sets out exactly what happens when payment deadlines are missed, including your right to charge statutory interest at 8% above the Bank of England base rate under the Late Payment of Commercial Debts (Interest) Act 1998. You can also claim fixed compensation of £40, £70, or £100 per invoice depending on the debt amount, plus reasonable recovery costs. Without these terms written into your contract, enforcing your rights becomes significantly harder. This template gives you a legally grounded starting point that reflects current UK commercial debt law. Generate yours now and stop unpaid invoices from becoming a recurring problem.
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Key clauses in a Freelance Contract
Statutory Interest on Late Payment
This clause entitles the freelancer to charge interest at 8% above the Bank of England base rate on any overdue invoice, as provided by the Late Payment of Commercial Debts (Interest) Act 1998. It applies automatically to business-to-business contracts, but stating it explicitly in the contract removes any ambiguity about when interest begins to accrue.
Fixed Debt Recovery Compensation
Under the 1998 Act, creditors are entitled to claim a fixed sum when a commercial debt goes unpaid: £40 for debts under £1,000, £70 for debts between £1,000 and £9,999, and £100 for debts of £10,000 or more. Including this clause in your freelance contract makes clear that you will claim this compensation automatically, which discourages late payment from the outset.
Payment Terms and Due Date
This clause defines the agreed payment period, typically 30 days from invoice date for commercial transactions, though parties can contract for shorter terms. Specifying the due date precisely is essential because the Late Payment of Commercial Debts Act 1998 calculates interest from the date payment falls due, so an ambiguous payment term weakens your ability to enforce your rights.
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Generate free →Frequently asked questions
Can I charge statutory interest on a late invoice even if my contract does not mention it?
Yes. The Late Payment of Commercial Debts (Interest) Act 1998 implies a right to statutory interest into business-to-business contracts automatically, so you do not need an explicit clause to claim it. However, having the clause written into your contract makes the position clear to clients from the start and reduces the likelihood of disputes about when interest begins to run.
What counts as a 'substantial remedy' that allows a client to opt out of the 1998 Act?
Under the Late Payment of Commercial Debts (Interest) Act 1998, a client can only contract out of statutory interest if they replace it with a 'substantial remedy' that adequately compensates the creditor for late payment. Courts interpret this strictly, meaning a nominal or token interest rate is unlikely to qualify. Any attempt to exclude statutory interest entirely without a genuine alternative remedy is void.
Does the Late Payment of Commercial Debts Act 1998 apply to contracts with sole trader clients?
Yes, provided both parties are acting in a business capacity rather than as private consumers. The Act covers contracts where both the supplier and the purchaser are businesses, which includes sole traders. It does not apply where the client is a private individual, in which case you would need to rely on the contractual payment terms you have agreed.
The information on this page is for general informational purposes only and does not constitute legal advice. Contracto generates AI-assisted contract templates — they are not a substitute for advice from a qualified solicitor. For high-value or complex engagements, always seek independent legal review.