Late Fee Calculator
Calculate late fees on overdue invoices based on your interest rate and days overdue. Get a professional late fee notice template too.
Best for: Freelancers and businesses with overdue invoices who need to calculate interest or issue a formal late fee notice.
Calculation Results
Based on 12% annual interest (0.0329% daily) over 30 days.
How to Charge Late Fees on Invoices
A late fee is an additional charge applied when a client fails to pay an invoice by the agreed due date. Charging late fees encourages clients to pay on time and compensates you for the cost of delayed payment. The key is to establish your late fee policy upfront — include it in your contract and on every invoice before any payment becomes overdue.
Legal Considerations by Region
- United States: Late fee rates are governed by state usury laws and typically range from 1-1.5% per month. The SBA recommends documenting payment terms clearly in contracts.
- United Kingdom: The Late Payment of Commercial Debts Act allows 8% + Bank of England base rate on B2B transactions.
- European Union: Directive 2011/7/EU provides a framework for late payment interest on commercial transactions, with a minimum of 8% above ECB reference rate.
- Australia: No specific late payment legislation, but the PPSA and contract law govern interest charges. Rates must be "reasonable" to be enforceable.
Late Fee Calculation Formula
The standard late fee formula is: Late Fee = Invoice Amount × (Annual Rate ÷ 365) × Days Overdue. For example, a $5,000 invoice at 12% annual interest that is 45 days overdue incurs a late fee of $5,000 × 0.0329% × 45 = $73.97.
Frequently Asked Questions
What is a typical late fee percentage?
Most businesses charge between 1% and 1.5% per month (12-18% annual). Flat fees of $25-$50 are also common for smaller invoices. Always check your jurisdiction's maximum rate before setting your policy.
Do I need to state late fees on the original invoice?
Yes. For late fees to be enforceable, they must be communicated before the payment is due. Include your late fee policy on every invoice and in your contract or terms of service. Learn more about invoice payment terms.
Related Tools & Resources
- Payment Reminder Email Drafter — Generate professional overdue payment emails
- Invoice Number Generator — Create sequential invoice numbers
- Complete Late Payment Guide — How to handle overdue invoices step by step
- Net 30 Payment Terms Explained — When and how to use Net 30
When this isn't the right fit
You have an existing client relationship worth preserving. A phone call usually resolves payment faster than a formal fee notice.
Your contract doesn't specify a late-fee clause. You can still send a demand letter, but enforceability depends on jurisdiction. Check with counsel first.
You're collecting from a bankrupt or insolvent client. File a proof of claim instead — late fees typically rank below principal in the priority stack.
Frequently asked questions
Are late fees enforceable on overdue invoices?
Only if your contract or invoice terms explicitly state the rate. The UK's Late Payment of Commercial Debts Act and EU Directive 2011/7/EU give B2B creditors statutory rights even without contract terms (8% above base rate plus collection fees). The US relies on contract law — silent contracts mean no late fees.
What's a reasonable late fee rate?
1-2% per month (12-24% APR) is the common ceiling that holds up in court. Higher rates can be voided as usurious. UK statutory rate is 8% + Bank of England base, EU is 8% + reference rate. State usury caps in the US vary from 6% (Maine) to 45% (Oklahoma).
Should I charge late fees on a small overdue invoice?
Often not worth it for amounts under $500 if the relationship matters. The fee math will recover pennies; the relationship damage can cost thousands. Save formal late fees for invoices over $1,000, repeat offenders, or one-off clients you don't expect to work with again.