Late payment is one of the biggest cash flow problems in UK construction. Whether you are a main contractor, subcontractor or specialist trade business, one overdue invoice can quickly affect wages, materials, plant hire and programme delivery.
So, can you legally charge a late payment fee?
In short, yes — in many cases you can. But the important detail is that the fee must be set out properly, applied fairly and, where relevant, agreed in advance. In construction, where payment disputes are already common, getting this wrong can create more problems than it solves.
This guide explains how late payment fees work in the UK, what construction firms need to include in their payment terms, and how better systems such as SiteSamurai can help you prevent overdue invoices in the first place.
Can you legally charge a late payment fee in the UK?
Yes, UK businesses can legally charge a late payment fee, provided there is a lawful basis for doing so.
In practice, that usually means one of two routes:
<ol class="my-4 space-y-2"><li class="ml-4 list-decimal list-inside">
A contractual late fee clause included in your quotation, subcontract, terms and conditions or invoice terms, and agreed by the client beforehand.</li><li class="ml-4 list-decimal list-inside">
Statutory late payment rights under UK legislation for business-to-business transactions.</li></ol>
For construction businesses, both routes may be relevant. However, the safest option is always to make your payment terms clear at the start of the job rather than trying to impose a fee after the invoice has already gone overdue.
If your client never agreed to late payment charges, enforcing them can be much harder.
What does the law say about construction late payments?
For business-to-business work, the Late Payment of Commercial Debts (Interest) Act 1998 gives suppliers the right to charge statutory interest and claim debt recovery costs on overdue invoices, unless the contract sets out a substantial alternative remedy.
This is particularly relevant in construction late payments, where delayed certification, disputed valuations and long payment chains can leave smaller firms exposed.
Under the legislation, you may be entitled to charge:
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Statutory interest at 8% above the Bank of England base rate</li><li class="ml-4 list-disc list-inside">
Fixed compensation depending on the size of the debt:</li> - £40 for debts up to £999.99 - £70 for debts from £1,000 to £9,999.99 - £100 for debts of £10,000 or more<li class="ml-4 list-disc list-inside">In some cases,
reasonable debt recovery costs above the fixed amount</li></ul>
That said, construction contracts often contain their own payment provisions, and these can interact with statutory rights in different ways. If you are working under a JCT subcontract, bespoke terms or a framework agreement, it is important to check the wording carefully.
Do late payment fees need to be in your invoice terms?
Yes, if you want to charge your own contractual late fee, it should be clearly written into your payment terms and agreed before the work starts.
A simple line added to an invoice after the event is unlikely to be enough on its own if the customer never accepted it.
Your terms should state:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">When payment is due</li><li class="ml-4 list-disc list-inside">What happens if payment is late</li><li class="ml-4 list-disc list-inside">Whether you charge a fixed fee, percentage or interest</li><li class="ml-4 list-disc list-inside">Any administration or recovery charges</li><li class="ml-4 list-disc list-inside">How disputes should be raised</li></ul>
For example, a groundwork contractor might state in its subcontract terms that payment is due within 14 days of invoice and that overdue accounts will incur interest and recovery charges in line with the Late Payment of Commercial Debts legislation.
That is much stronger than sending an invoice with vague wording such as "late fees may apply".
What counts as a fair late payment fee?
A late payment fee should be reasonable and proportionate.
In commercial construction work, businesses often use one of the following:
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fixed administration fee for overdue accounts</li><li class="ml-4 list-disc list-inside">A
percentage-based fee on outstanding sums</li><li class="ml-4 list-disc list-inside">
Statutory interest and compensation under the legislation</li></ul>
The key issue is fairness. If the charge looks excessive or punitive, it may be challenged. For example, adding a large arbitrary fee to a relatively small invoice could damage your position in a dispute.
In most cases, construction firms are better off using clear, standardised terms linked to statutory rights rather than inventing aggressive penalties.
Construction example: subcontractor chasing an overdue invoice
Imagine a drylining subcontractor completes a package on a commercial fit-out in Manchester. The invoice for £12,500 is due in 30 days, but 45 days later it still has not been paid.
If the subcontract terms allow for late payment charges, or if statutory rights apply, the subcontractor may be able to claim:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Statutory interest on the overdue amount</li><li class="ml-4 list-disc list-inside">A fixed compensation charge of £100</li><li class="ml-4 list-disc list-inside">Additional reasonable recovery costs if debt collection action becomes necessary</li></ul>
Now compare that with a business that never issued formal terms, has no clear due date and relies on WhatsApp messages and spreadsheets to track payments. Recovering late fees becomes far more difficult, and the contractor may first have to prove what was agreed.
This is exactly why strong admin matters on site as much as strong delivery.
When can you not charge a late payment fee?
There are situations where charging a late payment fee may not be straightforward or appropriate.
These include:
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The client never agreed to your payment terms</li><li class="ml-4 list-disc list-inside">
The debt is genuinely disputed</li><li class="ml-4 list-disc list-inside">
The contract includes different payment remedies</li><li class="ml-4 list-disc list-inside">
The charge is unreasonable or punitive</li><li class="ml-4 list-disc list-inside">
The customer is a consumer rather than a business</li></ul>
Construction businesses should be especially careful where there is a live dispute over defects, variations, measurement, contra-charges or incomplete works. In these cases, the issue may not simply be late payment — it may be a contractual dispute requiring a different route such as negotiation, adjudication or legal advice.
Best practice for construction firms
If you want to protect your right to charge for overdue invoices, your process needs to start long before payment becomes late.
Best practice includes:
1. Set payment terms before work starts
Include your payment period and late payment wording in quotations, work orders, subcontracts or terms and conditions.
2. Make invoices clear and complete
A construction invoice should reference the job, application or valuation period, purchase order if required, due date and payment method.
3. Keep records of approval
Save signed contracts, email acceptance, purchase orders and any agreed variations. These records matter if payment is challenged.
4. Follow up promptly
Do not wait until invoices are 60 or 90 days overdue. Early reminders are often enough to prevent longer delays.
5. Standardise your credit control process
Consistent reminders, escalation points and supporting documentation reduce the risk of disputes.
How SiteSamurai helps reduce construction late payments
While legal rights matter, prevention is always better than enforcement.
Many construction late payments happen because admin is fragmented. Site records are in one place, delivery notes in another, variation approvals on email, and invoice status in a spreadsheet that only one person updates. When the client queries the amount, your team wastes days pulling the evidence together.
SiteSamurai helps construction businesses tighten that process.
With SiteSamurai, teams can:
<ul class="my-4 space-y-2"><li class="ml-4 list-disc list-inside">Keep job records, site activity and supporting information organised</li><li class="ml-4 list-disc list-inside">Track work completed against the project timeline</li><li class="ml-4 list-disc list-inside">Record variations and site instructions more clearly</li><li class="ml-4 list-disc list-inside">Improve communication between site teams and office staff</li><li class="ml-4 list-disc list-inside">Create a more reliable audit trail when payment is due</li></ul>
For example, if a brickwork subcontractor needs to prove that additional labour and out-of-sequence work were instructed on site, having those records logged properly can make the difference between a quick payment and a long-running argument.
In other words, SiteSamurai does not just help with operations — it supports stronger commercial control too.
A simple late payment clause example
Here is an example of the type of wording many businesses use in their terms:
> Payment is due within 30 days of the invoice date. We reserve the right to charge interest and fixed compensation on overdue accounts in accordance with the Late Payment of Commercial Debts (Interest) Act 1998.
This is not legal advice, and you should ensure any wording fits your contract structure and client type. But it shows the importance of being specific and referencing a recognised legal basis.
Final thoughts
So, can you legally charge a late payment fee?
Yes — if your terms are clear, agreed in advance and applied properly, or if statutory late payment rights apply to the transaction. For UK construction businesses, the bigger issue is often not whether you can charge the fee, but whether your paperwork and processes are strong enough to support it.
Late fees can encourage prompt payment, but they work best when backed by solid contract administration, accurate records and a consistent invoicing process.
If your business is losing time chasing paperwork, responding to invoice queries or proving what happened on site, better systems can make a real difference. SiteSamurai helps construction teams stay organised, create clearer records and put themselves in a much stronger position when payment falls due.
For any significant dispute or contract-specific question, always take professional legal advice. But as a practical starting point, clear terms and better site records will put you ahead of most businesses still relying on disconnected admin.