Late payment fee clause: how to word it and when to charge

A late payment fee clause needs five parts: the due date, the exact fee or interest rate, the day it starts, how it is calculated, and a statement that you can pause work while the invoice is overdue. Put the same terms on every invoice. Charge it consistently, and waive it in writing when you choose to, so the rule stays believable.

If you are deciding whether to charge a fee at all, our post on whether to charge late fees covers the pros and cons. This guide is about the wording and the mechanics.

What the law may already give you

Before you invent a fee, check what the law already gives you in the places your clients are. In some countries you have rights to interest on late business invoices whether or not your contract says so. This is general information, not legal advice, so check your own situation with an accountant or lawyer.

United Kingdom. Under section 5A of the Late Payment of Commercial Debts (Interest) Act 1998, a supplier can also claim a fixed sum for debt recovery costs on top of statutory interest: £40 for a debt under £1,000, £70 for a debt from £1,000 up to £10,000, and £100 for £10,000 or more. If the supplier's reasonable costs go beyond that sum, the difference can be claimed. GOV.UK explains that an agreed payment date should usually fall within 60 days for business transactions, and that without an agreed date a payment is late 30 days after the invoice is received or the service is delivered, whichever is later.

The UK is also changing the rules. The government's Commercial Payments Bill overview describes maximum payment terms of 60 days and mandatory interest on late payments at 8% above the Bank of England base rate. The bill was introduced to Parliament in May 2026 and is not in force yet, and the government says there will be a lead-in period before the powers start. Watch it, and do not write the new rules into a contract as if they already applied.

European Union. The Late Payment Directive 2011/7/EU sets statutory interest at the European Central Bank reference rate plus at least 8 percentage points, and a minimum of €40 per invoice for recovery costs. The European Commission's FAQ on the directive adds three points worth knowing. Interest runs from the day after the due date without a reminder. A contract term that excludes late-payment interest is treated as grossly unfair to the creditor. And the creditor is not obliged to claim either amount. Member states apply the directive through their own laws, so rates and details differ by country.

United States and elsewhere. There is no single federal cap on late fees in business contracts, and state law on interest and fees varies. Practitioners often use 1.5% per month as a benchmark, but that is a habit, not a rule you can rely on everywhere. Ask a local lawyer before you go above a modest figure, and do not use a rate you have only seen on a template.

The practical takeaway: in the UK and EU your clients may already owe you interest and a fixed sum. Your clause can add to that or set a clear process, but a clause that tries to remove those rights may not hold.

The five parts of a late fee clause

1. The due date. Say it in days from invoice date or as a fixed date. "Payable within 14 days of the invoice date" beats "on receipt".
2. The charge. Pick one: a percentage per month on the overdue amount, or a flat fee, or interest at a stated annual rate. Do not stack all three.
3. The start. Say when it begins: the day after the due date, or after a short grace period.
4. The calculation. Give an example so there is no argument. Simple interest on the unpaid balance is easiest to explain.
5. The remedy. State that you may pause work or delay delivery of files until the invoice is paid.

Add a sentence that says the fee is a reasonable charge for the cost of chasing late payment and not a penalty. In many legal systems a charge that looks like a penalty can be challenged, while a charge that reflects a real cost is easier to defend. A fixed, modest charge with a stated reason is safer than a large one with no explanation. Ask a lawyer where you operate.

Sample clause

Adapt this wording to your business, your currency and your country. It is a template to edit, not a ready-made legal document.

"Payment is due within 14 days of the invoice date. If an invoice is not paid by the due date, interest of 1.5% per month (or the maximum rate allowed by law, if lower) applies to the overdue amount from the day after the due date until it is paid in full. The client also agrees to pay a fixed administration fee of [amount] for each overdue invoice, to cover the cost of recovery. [Business name] may pause work and hold delivery of files until all overdue amounts are paid. Nothing in this clause removes any right to statutory interest or recovery costs that applies by law."

That last sentence matters in the UK and EU. It shows your clause sits alongside the law instead of fighting it.

What goes on the invoice

The invoice should repeat the terms, in a short line near the total: "Due 14 days from invoice date. Late payments incur interest at 1.5% per month and a fixed fee of [amount], as set out in our agreement." The invoice is the document your client's accounts team actually reads, and the contract may be months old.

Also put the due date as a calendar date, the amount, the invoice number and a payment link. A client who finds the invoice easy to pay pays sooner. For a project with several milestones, a payment schedule with dated instalments reduces the chance that one big late invoice holds up the whole job.

When to charge the fee, and when to waive it

A fee you never charge is not a policy. A fee you always charge, even when the client was one day late because of a bank holiday, costs you goodwill. A short ladder keeps you consistent.

• Days 1 to 6 after the due date: no fee. Send a friendly reminder with the payment link. Most late payments here are oversight.
• Day 7: second reminder. Mention the fee clause and the date it applies from.
• Day 14: apply the fee, send the updated invoice and say you are pausing new work until it is paid.
• Day 30: a firm final notice, then follow your collection process. Check the formal route in your country before you do it, since some countries require specific letters before a claim.

Waive the fee when the delay is clearly your fault (a wrong bank detail, an invoice sent to the wrong person) or when a long-term client with a good record is a few days late for the first time. Do it in writing: "I have waived the late fee on this occasion." A written waiver stops a one-off kindness from turning into a precedent.

Charge it without apology when a client pays late repeatedly, ignores reminders or disputes an invoice only after it is overdue. For a wider recovery plan, see how to handle late-paying clients.

Mistakes that make a late fee unenforceable or ignored

• A fee that appears only on the invoice. If the contract never mentioned it, the client can argue they never agreed.
• A rate nobody can explain. If you cannot say how you got 3% per week, the client's lawyer will ask too.
• Charging inconsistently. Charging one client and waiving it for another without a reason invites arguments.
• Mixing deposit and late fee rules. Keep the deposit terms separate so a client does not think a late fee eats the deposit.
• Removing statutory rights. In the EU a term that excludes interest is treated as grossly unfair. Keep a savings sentence in your clause.

How Delivvo helps you get paid on time

Delivvo is built so the clause, the invoice and the reminders all say the same thing, and so the client can pay in one click.

Start with the contract. The contract clause builder lets you fill a contract from clause blocks, including deposit, late fee and cancellation fee, and you can edit every clause. The output is a template that your business issues. It is not legal advice, so have a lawyer read it once and save your wording as the default for every new contract. The client signs electronically on the same page where they accept your quote.

The invoice carries your due date and terms. For a larger project you can set a payment schedule with up to 12 instalments, each with its own date and pay link, so a late milestone is easy to see.

Reminders then run for you. Delivvo sends reminders before the due date and late reminders at 7, 14 and 30 days after it, each with the pay link, and they stop the moment the invoice is paid. You do not have to remember to chase, and you never chase a client who has already paid.

The client pays through your own gateway, whichever one you connect, and Delivvo takes 0% of the payment. The money goes straight from the client to you, and the invoice shows as paid once the gateway confirms it. Every invoice and contract also carries a verification code, so a client or their accountant can check that the document is the one you issued.

Read more on the invoicing page and the contracts and e-signatures page.

Next, look at contracts and e-signatures or how the CRM fits around it.

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