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adding interest to an outstanding invoice

Hi there

If an invoice was overdue for payment by 3 months, am I able to add interest on a monthly basis to the oustanding amount until it is paid? Someone i've spoken to suggested 8%, which i thought seemed quite steep and i don't know where that figure has come from. Any suggestions or advice?

Thanks

EmEd1984 Thurs 02/10/08 14:14

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moomintroll1
Thurs 02/10/08
21:18

You can't just pick your own interest rate, unless it formed part of the terms and conditions which governed the contract for the goods or service you provided, since in that case the other party would have had an opportunity to review it.

However, you can charge statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998. How much you can charge and for what period is laid down by the Act. It is a daily interest rate, and is set at 8% plus the Bank of England base rate (or reference rate as it is officially called). The website http://www.payontime.co.uk has more information on it, together with a calculator so you don't need to do the sums or work out the timescales yourself.

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