Late payment interest calculator

How the interest estimate works

This tool uses simple interest: overdue principal multiplied by an annual percentage rate and by the overdue days, divided by 365. It does not compound interest or add fees. Enter the principal amount that is actually overdue, the annual rate from the applicable contract or law, and the number of late days.

The calculator does not determine whether interest is legally owed, which rate applies, whether a grace period exists, or how a jurisdiction counts days. Contract terms, statutory rules, customer type, notice requirements, and applicable law may affect the amount you may charge. Verify the legal basis before requesting payment.

What the result means

The interest estimate is separate from the original invoice principal. The total shown is the principal plus the calculated simple interest for the entered period. It is an arithmetic projection, not a demand, legal notice, or confirmation that the amount is recoverable.

For a simple example, a principal of 1,000 at an entered annual rate of 8% for 30 days produces about 6.58 in simple interest using a 365-day year. A contract or applicable rule may use another day-count convention or rate, so confirm the assumptions before relying on the figure.

Common mistakes to avoid

Applying a default statutory rate without checking the country, transaction, and current date.

Charging interest on fees, tax, or a disputed amount without confirming the contract and applicable law.

Using calendar days when the agreement defines another method, or applying compounding when the terms specify simple interest.

Use a careful payment process

Keep the contract, invoice, delivery record, due date, and payment history together. If an invoice is overdue, first confirm that the amount and due date are correct and check whether the customer raised a dispute or agreed to a revised schedule.

Communicate clearly and professionally. Before adding interest or recovery charges, check the contract and current official guidance for the governing jurisdiction. If the amount is disputed or significant, seek legal or accounting advice rather than treating this estimate as proof of entitlement.

Check the agreement before requesting interest

The calculator needs a principal, rate, and number of days because those are the inputs to a simple-interest estimate. It does not interpret the contract or identify which statutory regime applies. A rate entered into a calculator is not evidence that the rate is owed.

Confirm that the invoice was properly issued, delivered, and due under the agreed terms. Check whether a customer has disputed the work, whether a written variation changed the due date, and whether a grace period or notice requirement applies. The starting date can affect the result materially.

Review whether the contract defines a day-count convention, compounding, or interest on fees. This calculator assumes a 365-day year and simple interest on the principal only. If the agreement uses a different method, the displayed estimate will not match it.

Keep communications factual and preserve copies of the contract, invoice, delivery evidence, and payment history. If you send a reminder, explain the amount and basis clearly and provide a way to raise a genuine billing issue. Avoid adding charges that you have not verified.

Rules differ by country and by transaction. Small businesses may have specific statutory rights in some places, while consumer debts and disputed amounts may be treated differently. Consult current official guidance or a qualified adviser before taking enforcement steps.

Frequently asked questions

Official sources and further reading

Use current official guidance to confirm rules for your circumstances:

• GOV.UK: Charging interest on late commercial payments
• U.S. Small Business Administration: Manage your finances