Late Payment Fees
Late payment fees are charges imposed on individuals or businesses when they fail to make timely payments for products or services.
These fees act as penalties for not meeting payment deadlines and can range from a flat rate fee to a percentage of the outstanding balance.
They are commonly seen in credit card bills, utility bills, and loan repayments. Late payment fees serve as a way for companies to recoup any losses incurred due to delayed payments, such as administrative costs and potential losses in interest.
While these fees may seem like an inconvenience, they also act as an incentive for individuals to make payments on time and avoid accumulating debt. Additionally, late payment fees help companies maintain their cash flow and ensure that they are paid for the products or services they provide.
It is crucial for individuals to be aware of any late payment fees associated with their accounts and make prompt payments to avoid unnecessary charges.
The Late Payment of Commercial Debts (Interest) Act 1998 adds an implied term in business-to-business contracts for the supply of goods and services, giving at least 8% a year interest on the price, plus a fixed sum and reasonable costs of recovering the debt.
Example
If your business were owed £1,000 and the Bank of England base rate was 0.5%:
- the annual statutory interest on this would be £85 (1,000 x 0.085 = £85)
- divide £85 by 365 to get the daily interest: 23p a day (85 / 365 = 0.23)
- after 50 days this would be £11.50 (50 x 0.23 = 11.50)
The amount you are permitted to charge is determined by the amount of debt. You may only charge the business once for each payment.
Amount of Debt | What you can Charge Up to |
---|---|
£999.99 | £40 |
£1,000 to £9,999.99 | £70 |
£10,000 or more | £100 |
These amounts are set by late payment legislation.
Late Payment Calculator
Please complete the form below to calculate the late payment interest due: