Late Fee Calculator

Enter the invoice amount, how the charge is expressed and how late the payment is. The result includes a period-by-period breakdown, because a late fee you cannot show the working for is a late fee that gets argued down.

Rules differ by country. This tool performs the calculation you ask for. What you are entitled to charge, and how it must be presented, is set by your contract and your local law — check both before relying on a figure here.

What this tool does

A late fee is a contractual and statutory instrument before it is a sum of money. What you may charge is governed by your contract, and in many places by statute — some regimes grant a statutory right to interest plus a fixed recovery cost, others cap what is enforceable, and a charge that reads as a penalty rather than compensation may not be enforceable at all.

This calculator computes what a given rate produces. It does not tell you what you are entitled to charge, and it deliberately ships with no statutory rate baked in: those change, they differ by country, and a stale rate presented as current is worse than no rate at all. Decide the rate from your contract and local rules, then use this to apply it consistently.

How it works

  1. Choose how the charge is expressed

    A flat fee is a single fixed amount. A percentage is a one-off charge on the invoice value. Daily, weekly and monthly rates accrue over time — a different thing entirely, and the one that grows.

  2. Set the grace period, if you have one

    Many terms allow a few days before anything accrues. Days inside the grace period are not charged, and the calculator shows how many days are actually chargeable after it is applied.

  3. Pick simple or compound

    Simple interest accrues on the original invoice amount every period. Compound accrues on the running balance, so period two charges interest on period one’s interest. Over a year the difference is substantial, and most contracts that say "interest" without qualification mean simple.

  4. Charge whole periods only

    At ten days with a weekly rate, the calculator charges one week, not 1.43 weeks. Charging fractional periods overstates what most contracts permit and is difficult to defend if challenged.

Worked example

A £5,000 invoice is 90 days overdue. The contract allows 2% per month, with a 7-day grace period.

Inputs

Invoice amount
£5,000.00
Rate
2% per month
Days late
90
Grace period
7 days

Result

Chargeable days
83
Whole months charged
2
Interest (simple)
£200.00
Interest (compound)
£202.00
Grand total (simple)
£5,200.00

Why it matters: Ninety days overdue produces two chargeable months, not three: the grace period removes seven days and the remaining 83 days contain only two whole 30-day periods. A calculator that charged 3 months here would be overstating the debt by £100.

Best practices

  • Put the exact rate, the period, and whether it is simple or compound in your written terms before you invoice. A fee that first appears on a reminder is hard to enforce.
  • Quote the annualised equivalent to yourself before setting a rate. 2% per month is 24% a year simple — high enough that some jurisdictions will not enforce it.
  • Apply the fee consistently or not at all. Selective enforcement undermines the clause for every customer.
  • Send the breakdown, not just the total. "£200 interest" invites a query; "2 months at 2% on £5,000, after a 7-day grace period" usually does not.
  • Treat the fee as leverage rather than income. The point is to be paid the principal sooner, and a waived fee is a reasonable trade for immediate settlement.

Common mistakes

Charging a fee that was never in the contract

A late fee is a term of the agreement. Adding one after the invoice is overdue generally has no contractual basis, and in many jurisdictions is unenforceable regardless of what the reminder says.

Compounding by accident

Applying the monthly rate to the running balance when the contract says a flat monthly rate on the invoice overcharges every month after the first. On a long-overdue debt the drift is significant, and it is the supplier who has to explain it.

Charging fractional periods

Ten days is one week under a weekly rate, not 1.43 weeks. Rounding up part-periods looks like small change and reads, to a customer checking the maths, like an inflated claim.

Ignoring the annualised rate

5% per month sounds moderate and is 60% a year. Rates at that level attract usury limits in some jurisdictions and can void the clause entirely — leaving you with no late fee at all rather than a smaller one.

Frequently asked questions

How much can I legally charge for late payment?

That depends on your contract and your jurisdiction, and there is no universal answer. Several regimes set a statutory entitlement to interest and a fixed recovery cost where no contractual rate applies, and many limit what is enforceable. Check the rules that apply to you — this calculator applies whatever rate you enter, it does not validate it.

What is the difference between a late fee and interest?

A late fee is usually a one-off charge for the fact of lateness — a flat amount or a single percentage. Interest accrues with time. Many contracts use both: a fixed administrative fee plus interest running until payment. The calculator handles either, or both.

Should late payment interest be simple or compound?

Simple, unless the contract explicitly says otherwise. Simple interest charges each period on the original amount; compound charges on the balance including interest already added. Compounding without a clear contractual basis is a common source of disputes and is restricted in some jurisdictions.

Is VAT or sales tax due on a late payment fee?

Treatment varies by jurisdiction and by whether the charge is compensation for late payment or consideration for a supply. Genuine interest for late payment is commonly outside the scope of VAT, but this is exactly the kind of rule that differs by country — take advice for your own situation.

Does charging a late fee damage the customer relationship?

Applying a clause that was agreed in advance, consistently and with the working shown, rarely does. Introducing a fee for the first time on an overdue invoice usually does. The distinction is whether it was part of the deal or feels like a penalty invented after the fact.

What is a reasonable grace period?

Between three and seven days is common and costs very little: most payments that arrive late arrive within a few days, usually because of a payment run rather than deliberate delay. A short grace period removes almost all of the friction while leaving the clause intact for genuinely late payers.

Turn the answer into an invoice

The result above transfers straight into the invoice generator — dates, amounts and terms already filled in. Free, no account needed.

Open the invoice generator

Sources & further reading

Related

Invoice types

Published · General information, not legal, tax or financial advice.