Late Payment Fee Calculator — Calculate Overdue Invoice Interest in 2026
Late payments are one of the biggest challenges for freelancers and small businesses. Knowing how to calculate and enforce late payment fees protects your cash flow and discourages clients from paying late. Our calculator handles simple interest, compound interest, and flat fee models.
How to Calculate Late Payment Interest
- →Simple Interest: Fee = Principal × (Rate% / 100) × (Days / 365)
- →Monthly Rate: Fee = Principal × (Monthly Rate% / 100) × Months
- →Flat Fee: Add a fixed amount per invoice regardless of time
- →Example: £1000 invoice, 8% annual rate, 30 days late → Fee = £1000 × 0.08 × (30/365) = £6.58
Late Payment Laws by Country (2026)
| Country | Legal Rate | Default Terms |
|---|---|---|
| United Kingdom | 8% + Bank of England base rate | Net 30 days |
| European Union | 8% + ECB reference rate | Net 30 days (B2B) |
| United States | Varies by state (5-18%) | As per contract |
| Australia | 10% per annum | Net 30 days |
| Canada | Prime rate + 3% | As per contract |
How to Enforce Late Payment Fees
- →Always include payment terms and late fee policy in your contract
- →State the late fee clearly on every invoice before work begins
- →Send a polite reminder 3 days before the due date
- →Send a formal late payment notice on the day payment is overdue
- →Issue a late payment invoice adding the calculated fee
- →Consider pausing work for repeat late payers
- →Use a debt collection service for invoices over 90 days late
Late Payment Fee Models
| Model | How It Works | Best For |
|---|---|---|
| Simple Annual Interest | Daily interest on outstanding amount | Long overdue invoices |
| Monthly Flat Rate | Fixed % per month overdue | Recurring clients |
| Flat Fee per Invoice | Fixed amount added after due date | Small invoices |
| Escalating Fees | Rate increases the longer unpaid | Deterrence |