Construction Act
Can I charge interest when a customer pays late?
It depends on who your customer is, and the split catches more builders out than any deadline. Between businesses there is a statute that fills the gap. On a domestic job there is only what you wrote into your own terms, and a rate written too greedily can vanish exactly when you need it.
QScope Team·13 May 2026·5 min read
The retention finally fell due, or the last valuation did, and the money is three weeks late. Somebody tells you to add interest. Can you?
If your client is a business
A developer, a landlord, a company, another contractor: the debt is a commercial one and the Late Payment of Commercial Debts (Interest) Act 1998 is in play. It works by filling a gap rather than overriding your contract: where the contract already gives a real remedy for late payment, a substantial interest clause rather than a token one, that clause governs. Where the contract is silent, the Act steps in with:
- statutory interest, at the rate set by order under the Act, which has stood at 8 per cent over the Bank of England base rate,
- fixed compensation per late debt under section 5A: £40, £70 or £100 depending on the size of the debt.
So the first thing to check is your own contract, not the statute. That is the same habit as everywhere else in this series: the answer starts in the contract particulars.
If your client is a private homeowner
That Act does not apply. It only works between businesses. On the rear extension for the family living in the house, what you have is the interest rate written into your own contract, and if there is none, there is no automatic entitlement at all. If it goes as far as a county court claim, the court has a discretion to award interest under section 69 of the County Courts Act 1984, but that is a court awarding it, not a right you can invoke in a chasing email.
The trap in writing your own rate
A contract with a consumer is subject to the fairness test in the Consumer Rights Act 2015. A sensible rate will stand. A punitive one can be held unfair and struck out entirely, and then you are left with nothing, which is worse than if you had written a modest figure in the first place. Greedy drafting protects nobody, least of all you.
What to do this week
1. Put a modest interest rate into your standard terms today, before the next job starts. It is one sentence.
2. For the debt you are chasing now, establish who the client is and what the contract says. Business plus silent contract: the statute applies, cite it. Consumer plus silent contract: chase the principal and skip the interest theatre.
3. Count from the final date for payment, not from the invoice. See what a due date actually is.
Where the information stops
Whether an existing clause is a “substantial remedy”, and whether a particular rate would survive the fairness test, are legal judgements. If the sums are worth arguing about, they are worth a solicitor reading two clauses before you rely on either.