Late payment is one of the most common (and cashflow-killing) problems on UK construction projects. Whether you’re a main contractor waiting on an employer’s certificate, or a specialist subbie chasing an overdue application, the question comes up fast: what interest can you charge, and at what rate?
Under the Housing Grants, Construction and Regeneration Act 1996 (as amended) (commonly referred to as the Construction Act), payment provisions must be clear and enforceable. But the interest rate on late payments is largely dealt with through the related statutory regime on late payment.
This guide explains the rate, when it applies, what “substantial remedy” means, and how to handle construction late payments practically—using SiteSamurai to evidence applications, notices, and interest claims.
## The statutory interest rate: 8% above Bank of England Base Rate
If your construction contract **doesn’t provide a “substantial remedy” for late payment**, interest can be claimed at the **statutory rate**.
In practice, that statutory interest is:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
8% above the Bank of England Base rate, accruing on the qualifying debt, and</li><li class="ml-4 list-disc list-inside">a
fixed compensation sum (a lump sum) based on the size of the debt.</li></ul>
This is the figure most people mean when they ask about “interest under the Construction Act”, and it’s the key number to remember for construction late payments.
How it works in the real world
If Base rate is (for example) 5.25%, statutory interest is 13.25% per annum. It typically accrues daily from the day after the payment due date until payment is made.
On a site with thin margins, that rate is deliberately punchy. It’s meant to discourage slow payment culture.
## When can you charge statutory interest?
Statutory interest usually comes into play when:
<ol class="my-4 space-y-2"><li class="ml-4 list-decimal list-inside">
A payment is late under the contract (i.e., the due date has passed and payment hasn’t been made), and</li><li class="ml-4 list-decimal list-inside">The contract
does not provide an adequate contractual interest remedy (the “substantial remedy” point).</li></ol>
Most standard forms (JCT, NEC) include interest provisions. If those provisions are considered a substantial remedy, you’ll generally follow the contract rate rather than the statutory rate.
That said, plenty of subcontract orders and amended terms either:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">say nothing about interest, or</li><li class="ml-4 list-disc list-inside">include a token interest clause that may not be effective in practice.</li></ul>
If you’re regularly dealing with bespoke subcontract terms, it’s worth checking the exact clause wording before you assume you’re stuck with whatever it says.
## What is a “substantial remedy” for late payment?
The phrase “substantial remedy” is key. In plain terms, it means the contract must provide a **meaningful** remedy for late payment.
A typical “substantial remedy” is a clause that:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">sets out a clear interest rate (often linked to Base rate), and</li><li class="ml-4 list-disc list-inside">explains when interest starts and how it’s calculated.</li></ul>
If the contractual interest clause is clear and workable, you generally claim contractual interest.
If the contract is silent, unclear, or arguably inadequate, you may be able to rely on the statutory interest position (8% above Base).
> Practical point: arguing whether a clause is a “substantial remedy” can become a dispute in itself. If you can, treat interest as a secondary lever—your primary goal is getting the principal sum paid.
## The fixed lump sum compensation (in addition to interest)
Alongside interest, the statutory regime also allows a **fixed compensation amount** depending on the size of the debt. This is designed to cover the admin cost of chasing.
The bands commonly applied are:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
£40 for debts up to £999.99</li><li class="ml-4 list-disc list-inside">
£70 for debts from £1,000 to £9,999.99</li><li class="ml-4 list-disc list-inside">
£100 for debts of £10,000 and above</li></ul>
On construction projects, claims are often well above £10k, so the £100 is typical—but don’t dismiss it. It’s another contractual pressure point and signals you’re serious.
## Example: late payment on a fit-out project (how interest stacks up)
Imagine a drylining subcontractor on a commercial fit-out in Manchester:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Application value certified/assessed:
£60,000</li><li class="ml-4 list-disc list-inside">Due date:
1 October</li><li class="ml-4 list-disc list-inside">Payment date (final date for payment):
15 October</li><li class="ml-4 list-disc list-inside">Payment actually received:
14 November</li><li class="ml-4 list-disc list-inside">Base rate (example):
5.25%</li></ul>
Interest period: 16 October to 14 November (30 days).
Statutory interest rate: 13.25% per annum.
Approximate interest: £60,000 × 13.25% ÷ 365 × 30 ≈ £653.
Add the fixed compensation: £100.
Total additional claim (approx.): £753.
That’s not life-changing on its own, but across multiple late payments in a year it becomes meaningful—and it’s often enough to get the accounts team to prioritise your payment.
## Construction Act payment hygiene: notices matter
The Construction Act regime is heavily driven by **payment notices** and **pay less notices**. Interest is easier to claim when you’ve got clean documentation showing:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">what you applied for and when</li><li class="ml-4 list-disc list-inside">what was certified/valued</li><li class="ml-4 list-disc list-inside">what the payer said they would pay (and why)</li><li class="ml-4 list-disc list-inside">the due date and final date for payment</li><li class="ml-4 list-disc list-inside">the date funds actually hit the bank</li></ul>
If you end up in adjudication, the party with tidy records is usually the party with leverage.
## Using SiteSamurai to manage construction late payments (and support interest claims)
Interest claims don’t succeed because someone is “right”—they succeed because someone is **organised**.
Here’s a practical workflow using SiteSamurai to reduce late payment risk and make interest claims straightforward.
1) Track applications and due dates in one place
Use SiteSamurai to log each application:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">application number (e.g., AFP 07)</li><li class="ml-4 list-disc list-inside">valuation period</li><li class="ml-4 list-disc list-inside">submission date/time</li><li class="ml-4 list-disc list-inside">due date and final date for payment</li><li class="ml-4 list-disc list-inside">supporting evidence (photos, delivery tickets, labour returns, signed dayworks)</li></ul>
When a payment goes late, you’re not scrambling through emails and WhatsApp threads.
2) Attach proof that the work was done
Late payments often start as “we’re reviewing the valuation” or “we don’t agree with progress”.
On live sites, SiteSamurai helps you build a clean evidence pack:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">dated site photos showing installed quantities</li><li class="ml-4 list-disc list-inside">QA records and sign-offs</li><li class="ml-4 list-disc list-inside">material delivery confirmations</li><li class="ml-4 list-disc list-inside">variation instructions and approvals</li></ul>
That evidence reduces the wriggle room that leads to payment drift.
3) Record notices and correspondence
If you receive a payment notice or pay less notice, store it against the application in SiteSamurai. If you don’t receive one, record that too.
When you later calculate interest, you can show:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">the amount properly due</li><li class="ml-4 list-disc list-inside">whether the payer complied with notice requirements</li><li class="ml-4 list-disc list-inside">the exact date payment became late</li></ul>
4) Generate a consistent “late payment” chase pack
For repeat offenders, consistency wins. Build a standard chase sequence:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Day 1 after final date: polite reminder + statement</li><li class="ml-4 list-disc list-inside">Day 7: formal letter/email reserving rights to interest and costs</li><li class="ml-4 list-disc list-inside">Day 14: escalation (commercial manager/director) + warning of adjudication</li></ul>
SiteSamurai keeps all comms tied to the job and application, which is exactly what you want if the dispute escalates.
5) Make interest calculation easy
Once your dates and amounts are logged, you can calculate interest quickly and accurately. Even if you do the maths externally, SiteSamurai provides the reliable timeline you need:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">principal sum</li><li class="ml-4 list-disc list-inside">late period (start/end)</li><li class="ml-4 list-disc list-inside">applicable rate (contractual or statutory)</li></ul>
That reduces errors—and prevents the other side from arguing about basic facts.
## What to check in your contract before claiming interest
Before firing off an interest invoice, check:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">
Is there a contractual interest clause? If yes, what rate and from when?</li><li class="ml-4 list-disc list-inside">
Does the contract define the final date for payment clearly?</li><li class="ml-4 list-disc list-inside">
Have you complied with any application requirements? (format, timing, supporting info)</li><li class="ml-4 list-disc list-inside">
Are you claiming on a “qualifying debt”? (i.e., a payment properly due)</li></ul>
If you’re unsure, take advice early. On many projects, the bigger win is enforcing payment via the notice regime and (if needed) adjudication—interest is the add-on.
## Key takeaways
- The commonly cited statutory interest position for construction late payments is **8% above the Bank of England Base rate**, plus a **fixed compensation sum**.
- If your contract provides a **substantial remedy** (a workable interest clause), you’ll usually claim **contractual interest** instead.
- The easiest way to protect your position is disciplined record-keeping: applications, notices, evidence, and dates.
- **SiteSamurai** helps you keep everything tied to each application so you can chase payment confidently—and support interest claims with facts.
If late payment is becoming “normal” on your projects, tighten up the admin, standardise your chase process, and make your evidence indisputable. That’s how you turn construction late payments from a constant firefight into a controlled commercial process.