Late Payment Fees: How to Charge Them Legally (US and UK)

Late fees are one of the few real levers freelancers have on overdue invoices — but they only work if they are legally enforceable and properly disclosed. A fee buried in your terms-of-service that the client never agreed to is just a fee they will refuse to pay.

Below is what is actually legal, what is enforceable, and how to make late fees work for you.

Can I legally charge a late fee?

In almost every jurisdiction: yes, on B2B invoices, if certain conditions are met.

United States

Late fees on commercial invoices are legal in all 50 states, but most states cap them. The general safe ceiling is 1 to 1.5% per month (12 to 18% APR). Some states (e.g., Texas, California) allow higher with explicit contract. To be enforceable:

• The fee must be disclosed in the contract before the work is done.
• The fee must be reasonable (a flat $500 fee on a $200 invoice will not hold up).
• The invoice must explicitly state the fee terms.

United Kingdom

The Late Payment of Commercial Debts (Interest) Act 1998 grants UK businesses the statutory right to charge interest on overdue B2B invoices — even without a contract clause. Current rate: Bank of England base rate + 8% per annum. You can also charge a fixed compensation fee depending on the invoice size (£40, £70, or £100).

European Union

The EU Late Payment Directive sets a default of base rate + 8% on B2B invoices and 30-day default payment terms unless otherwise agreed.

Australia and Canada

Both allow contractual late fees but have no statutory default rate. You must include the fee in the agreement.

How much to charge

The sweet spot for most freelancers is 1.5% per month (18% APR). Specifically:

• High enough to actually motivate (vs 0.5%, which clients ignore).
• Low enough to be enforceable (vs 5%/month, which courts will reduce).
• Matches what most US state defaults converge to.

For UK freelancers, the statutory rate is automatic — use it.

How to disclose the fee — three places

For the fee to be enforceable, the client must have been informed before the work was done. Cover three places:

1. In the contract / SOW. One clause is enough: "Invoices are due net 14. A late fee of 1.5% per month (18% per annum) applies to overdue balances."
2. On every invoice. Under the line items: "Terms: Net 14. Late fee 1.5%/mo applies after due date."
3. In the dunning email when applied. When you actually start charging the fee, name it explicitly: "Per our agreement, a late fee of $48 (1.5%/mo) has been applied, bringing the balance to $3,248."

When to start charging

Most state laws and contracts let you charge from day one overdue. In practice, charging at day 1 destroys the relationship for a $5 fee. Better cadence:

• Day 1 to 14: No fee, just polite reminders.
• Day 15 to 30: Warn that fees will apply ("if not received by day 30, a 1.5% late fee will be added").
• Day 30+: Apply the fee and itemize it on the next invoice. Continue compounding monthly.

What if they refuse to pay the fee?

Common scenario: client pays the original invoice but not the late fee. You have two options:

1. Drop the fee, take the payment. Most freelancers do this for relationship reasons. Note that you established the precedent of waiving fees.
2. Apply the unpaid fee as a balance on the next invoice. Sustainable only if you intend to keep working with the client.

If the entire invoice (with fee) goes 60+ days unpaid, the late fee becomes a small piece of a larger collections case. See what to do when a client will not pay.

How to automate it

Tracking which invoices are 30 days late and applying 1.5% to each one manually is tedious. Duefy can auto-apply the fee per your settings, name it on the next reminder, and roll it into the dunning sequence. Set it once; it runs.

If you do not have a late-fee clause in your contracts yet, see the 7 clauses every freelance contract needs.