An unpaid invoice doesn’t just cost you the amount owed, it costs you the use of that money for however long it takes to collect it, and most B2B sellers are entitled to charge for that cost even when their contract never mentions it. Whether you can add interest or a late fee to an overdue invoice, and how much, depends heavily on which country’s law applies to the transaction, and the rules genuinely diverge enough between markets that a rate perfectly legal in one country can be unenforceable in another. This guide covers the rules in the UK, Germany, and Australia, and how to apply them correctly on Shopify without overreaching into penalty territory.
Why Late Payment Costs More Than the Missing Cash
Before getting into specific rates, it’s worth understanding why the law treats late commercial payment as something worth compensating for beyond simply chasing the original amount.
The Cash Flow Argument Behind Statutory Interest
An unpaid invoice ties up working capital a business would otherwise be using, whether to pay its own suppliers, cover payroll, or reinvest in growth. Late payment interest exists to compensate for that lost use of funds, not to punish the late-paying customer, which is an important distinction that shapes how courts view interest clauses that go too far. A rate designed purely to hurt a slow-paying customer, rather than fairly compensate for the delay, is the kind of clause that tends not to survive a legal challenge.
Why B2B and B2C Are Treated Completely Differently Here
Every jurisdiction covered in this guide treats late payment interest as a B2B concept specifically. Consumer transactions are governed by entirely separate consumer protection rules, and none of the statutory rights described below apply to a late-paying retail customer. This guide is relevant only to your wholesale, trade, and B2B invoicing, not your standard consumer checkout, and applying any of these rates to a consumer order would create a compliance problem rather than solve one.
UK: The Late Payment of Commercial Debts (Interest) Act 1998
The UK has the most automatic and best-defined statutory right of the three markets covered here.
The Statutory Rate and Fixed Compensation
Under this Act, UK businesses can charge statutory interest on overdue B2B invoices at the Bank of England base rate plus 8 percent, a rate that currently sits at 11.75 percent with the base rate at 3.75 percent. On top of interest, you can add fixed compensation per overdue invoice: £40 for debts up to £999.99, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more. This compensation applies per invoice, not per customer account, so a business owed money across several overdue invoices from the same customer can claim the fixed sum separately for each one.
This Right Applies Automatically, No Contract Clause Needed
The right to charge statutory interest and compensation exists automatically under the Act, even if your invoice or contract says nothing about late fees at all. Interest can start accruing from the day after payment was due, whether that due date came from an agreed payment date or the default 30-day period the Act applies when no term was agreed. The base rate itself changes periodically with Bank of England decisions, so the exact statutory rate at any given moment depends on when the invoice fell overdue, not necessarily today’s published figure, which means a business chasing several overdue invoices from different months may legitimately be applying slightly different rates to each one.
Germany: Verzugszinsen Under the BGB
Germany’s system works on broadly similar principles but calculates the rate differently and ties it to a different base figure.
How the Rate Is Calculated
German late payment interest, governed by Section 288 of the BGB, is set at 9 percentage points above the Bundesbank’s base rate for B2B transactions specifically, distinct from the lower rate that applies to consumer debts. As of early 2026, this worked out to roughly 10.27 percent annually. Alongside interest, businesses can also claim a flat compensation of €40 per overdue invoice under Section 288(5), which applies separately to each individual overdue claim if pursued independently.
When Default Actually Begins Under German Law
A German debtor generally falls into default 30 days after the invoice is received or the payment deadline stated on it passes, whichever applies, at which point interest starts accruing daily until the debt is settled. Unlike casual dunning fees, which creditors can set at their own discretion within reason, the interest rate itself is fixed by law and not something you can adjust upward. The Bundesbank publishes the base rate twice a year, on the first of January and the first of July, so the exact figure needs checking against whichever period the invoice fell overdue in.
Australia: Contract-Based, Not Automatic
Australia is meaningfully different from the UK and Germany here, and treating it the same way risks an unenforceable clause.
Why You Need the Customer’s Agreement Upfront
Unlike the UK and Germany, Australia has no automatic statutory right to charge late payment interest. You can only charge it if the customer agreed to the interest clause in your contract or trading terms before the goods or services were supplied. Adding an interest charge unilaterally to an invoice after the fact, with no prior agreement in place, generally isn’t enforceable, regardless of how reasonable the rate itself might be.
What Counts as a Reasonable Rate
Most Australian small businesses set their late payment interest rate between 10 and 12 percent per annum, which courts have generally accepted as reasonable and proportionate. Rates meaningfully above that, particularly anything above 15 percent, risk being challenged either as an unenforceable penalty under contract law or as an unfair term under the Australian Consumer Law, especially if your terms are a standard form contract used across many small business customers rather than individually negotiated. Building the clause into your standard terms of trade before the first sale, rather than adding it later, is what makes the right enforceable in practice.
Applying This on Your Shopify Invoices
Knowing the legal rate is only useful if it actually shows up correctly on the document your customer receives.
Adding Interest and Compensation as Line Items
Once an invoice is overdue and interest has started accruing, the calculation itself is simple daily math: divide the annual rate by 365, multiply by the outstanding amount, then multiply by the number of days overdue. Whatever invoicing setup you use needs to be able to add this calculated interest, plus any fixed compensation your jurisdiction allows, as a clear, itemized addition to the original invoice rather than folding it into a vague adjusted total that leaves the customer guessing how the new figure was reached.
Why This Needs to Be a Deliberate Add-On, Not an Automatic Assumption
Charging late payment interest and compensation isn’t something InvoiceForge currently automates as a built-in calculation on your behalf; it’s worth confirming directly with the InvoiceForge team what level of support exists for adding these charges to an existing invoice before assuming it happens automatically once a due date passes. In the meantime, pairing accurate manual calculation with your automatic invoice reminders for unpaid orders at least ensures the customer knows a payment is overdue well before any interest conversation becomes necessary, which in practice resolves a large share of late payments before a late fee ever needs to be discussed at all.
Getting Paid Faster Without Overreaching
Charging interest or late fees on overdue invoices is a legitimate right in every market covered here, but the mechanics differ enough that copying a UK approach onto an Australian contract, or assuming Germany’s fixed compensation applies in the UK, will get the numbers wrong. Know which statutory right applies to the jurisdiction on your invoice, whether it requires prior agreement or applies automatically, and keep the rate within what courts in that market consider reasonable rather than punitive. Most businesses that use this right well don’t reach for it aggressively on every late payment; they set it up correctly once, mention it plainly in their terms, and let its existence do most of the work of encouraging timely payment. For the earlier stage of this same problem, getting customers to pay before interest ever becomes relevant, our guide on invoice disputes and corrections in B2B covers how to handle disagreements over an invoice before they turn into a late payment situation at all.