What Can You Charge on an Unpaid Invoice? A Straightforward Guide for Trades & Small Businesses
Late payments are frustrating especially for tradespeople and small business owners who rely on regular cash flow to survive. But here’s what many don’t realise:
If you’re chasing payment from a business, you can legally charge more than just the invoice total.
Here’s a clear, guide to what you can (and can’t) add when chasing an unpaid invoice and how to protect yourself for the future.
If You're Dealing With a Business (B2B)
If your customer is a limited company or a sole trader acting in a business capacity, you’re covered by the Late Payment of Commercial Debts (Interest) Act 1998.
That means you can legally add:
Statutory interest at 8% above the Bank of England base rate
A fixed late payment fee (see below)
Reasonable recovery costs, if they exceed the fixed fee
📊 Fixed Late Payment Charges (Based on Invoice Amount):
Fixed Fee You Can Charge
Invoice Amount Fixed Fee You Can Charge
Up to £999.99 £40
£1,000.00 to £9,999.99 £70
Over £10,000.00 £100
💡 Remember - You must be invoicing a business, not an individual to be able to apply these.
What If You're Owed Money by an Individual?
This is where things change.
If your client is a private individual (not acting for their business), the Late Payment Act does not apply.
That means:
You can’t automatically charge interest, late fees, or recovery costs.
You must have a written agreement in place beforehand to claim anything beyond the invoice total.
✅ To protect yourself, include a clause in your quote, contract, or T&Cs covering:
Late payment interest
Debt recovery charges
Legal and collection costs (if needed)
Without it, you’ll likely be stuck claiming just the original invoice amount.
Don’t Add Late Payment Clauses to the Invoice Alone
Many tradespeople and small businesses add late fees or interest clauses to their invoices but here’s the catch:
➡️ It won’t hold up.
Why? Because by the time you issue an invoice, the work is already done. The client hasn’t agreed to those terms in advance so they can easily dispute them.
🛠️ Solution: Always include payment terms in your quote, contract, or terms and conditions before the job starts and get written confirmation.
Example Clauses You Can Use
Interest Clause (for businesses or individuals):
“We reserve the right to charge interest on overdue invoices at a rate of 8% above the Bank of England base rate.”
Recovery Costs Clause:
“In the event of late payment, the client agrees to pay all reasonable costs, charges, and expenses (including third-party debt recovery or legal fees) incurred in recovering the outstanding amount.”
At Hays Collections Ltd, we help small businesses and trades across the UK recover unpaid invoices fast, fairly, and without drama.
Want to Talk?
Call: 01737 632249
Email: info@hayscollections.com
Hays Collections Ltd – Debt Recovery for Trades & Small Business