Late Payment Clauses in Freelance Contracts: Your Complete UK Guide

It's been 45 days since you submitted that invoice. The client keeps saying "it's in processing" but your rent is due next week. Sound familiar? Late payments are the bane of freelance life but with the right contract clauses, you can protect yourself and even get compensated when clients drag their feet.

The good news? UK law is actually on your side. The bad news? Most freelancers don't know their rights, and even fewer have contracts that properly enforce them. Let's fix that.

What UK Law Says About Late Payment

The Late Payment of Commercial Debts (Interest) Act 1998 gives UK freelancers powerful rights when clients pay late. Here's what you're entitled to:

Statutory Interest

You can charge interest at 8% above the Bank of England base rate. As of January 2026, with the base rate at 4.75%, that means you can charge 12.75% annual interest on overdue invoices. This applies automatically to business-to-business transactions you don't need it written in your contract (though it helps).

Fixed Compensation

On top of interest, you're entitled to fixed compensation for the inconvenience of chasing payment:

• £40 for debts up to £999.99
• £70 for debts between £1,000 and £9,999.99
• £100 for debts of £10,000 or more

When Do These Rights Apply?

Your statutory rights kick in when payment becomes overdue. If your contract specifies "Net 30," then day 31 is when interest starts accruing. If there's no payment term specified, the law assumes 30 days from either the invoice date or delivery of goods/services (whichever is later).

What a Good Late Payment Clause Includes

While you have statutory rights regardless, a well-written late payment clause in your contract makes everything clearer and easier to enforce. Here's what to include:

1. Clear Payment Deadline

Be specific: "Payment is due within 14 days of invoice date" or "Net 30 from project completion." Avoid vague terms like "payment due promptly" or "upon receipt."

2. Interest Rate Specification

State your interest rate clearly: "Interest will be charged at 8% above the Bank of England base rate on overdue amounts, calculated daily." You can charge more than the statutory rate if the client agrees, but you can't charge less.

3. Work Suspension Rights

Include language like: "The Contractor reserves the right to suspend work if any invoice remains unpaid for more than 14 days beyond its due date. Work will resume within 48 hours of payment being received."

4. Recovery Costs

Add: "The Client agrees to pay all reasonable costs incurred in recovering overdue payments, including but not limited to debt collection fees and legal costs."

Warning Signs in Payment Terms

Watch out for these red flags when reviewing the payment section of a contract:

"Payment Upon Approval" Without Timeline

This gives the client infinite time to "review" your work while you wait for payment. Always add: "Approval shall be deemed granted if no feedback is provided within 7 business days of delivery."

90+ Day Payment Terms

Some large companies try to impose Net 90 or even Net 120 terms. This is unreasonable for most freelancers. Push back for Net 30, or at minimum, request milestone payments so you're not financing their project for three months.

No Interest Clause or Waiver of Statutory Rights

Some contracts try to waive your right to late payment interest. While such clauses may not be enforceable, their presence suggests the client expects to pay late. Consider this a warning sign about how they treat suppliers.

For more payment-related warning signs, see our guide on freelance contract red flags.

Example Late Payment Clause

Here's a template clause you can adapt for your contracts:

Feel free to adjust the payment window (14 or 30 days) based on your industry norms and cash flow needs.

How to Calculate Late Payment Interest

Let's walk through a real example. Say you invoiced £2,000 on Net 30 terms, and the client paid 45 days late.

Step 1: Determine the Interest Rate

Bank of England base rate (4.75%) + 8% = 12.75% annual interest

Step 2: Calculate Daily Interest

£2,000 × 12.75% ÷ 365 = £0.70 per day

Step 3: Multiply by Days Overdue

£0.70 × 45 days = £31.50 in interest

Step 4: Add Fixed Compensation

For a £2,000 debt: £70 fixed compensation

Total Owed

£2,000 + £31.50 + £70 = £2,101.50

That extra £101.50 might not seem like much, but it adds up over time and more importantly, claiming it consistently sends a message that you take payment terms seriously.

Frequently Asked Questions

Can I claim late payment interest even if it's not in my contract?

Yes. The Late Payment of Commercial Debts (Interest) Act 1998 gives you statutory rights regardless of what's in your contract. However, having it written in makes it easier to enforce and shows clients you mean business.

Will claiming interest damage my client relationship?

Possibly, but consider: a client who regularly pays late and resents you for enforcing your rights isn't a good client. Many freelancers find that simply having the clause in their contract prevents late payments in the first place.

What if my client is a consumer, not a business?

The Late Payment Act only applies to business-to-business transactions. If you're working with consumers (individuals), you'll need to rely on your contract terms rather than statutory rights.

Should I charge interest on the first late payment?

That's a judgment call. Some freelancers give a grace period for first-time offenders. Others charge from day one to set clear expectations. Whatever you decide, be consistent.