Interest on Unpaid Debts: How to Calculate the 8% Court Rate and Use It in a Claim

Interest on Unpaid Debts

Someone owes you money and has not paid. Besides the debt, you may be entitled to interest, and adding it to your demand letter and your court claim is simple once you can calculate it. The Money Claim Interest Calculator does the arithmetic.

The court rate

When you bring a claim for a debt in the county court of England and Wales, the court can award simple interest, usually at 8 percent a year, from the date the debt was due until judgment or payment. It is "simple" interest: it is calculated on the original sum, not on interest already earned. The rate is set by statute and practice, although the court has discretion.

The daily rate

Divide the yearly interest by 365. For a debt of £4,500 at 8 percent, interest per year is £360, and the daily rate is £0.99. When you fill in a claim form, you state the interest to the date of the claim and the daily rate after that, so that the court can add interest until judgment.

Business debts

For debts between businesses or from a business to a public authority, the Late Payment of Commercial Debts (Interest) Act 1998 gives a statutory rate of 8 percent above the Bank of England base rate, and a fixed sum for compensation of £40, £70 or £100, depending on the size of the invoice. If your invoice terms set their own interest rate, they usually must be a substantial remedy. You can change the rate in the calculator to test these.

Using the calculator

Enter the amount owed, the date it was due and the date to which you want the interest calculated (leave it blank for today). Change the rate if needed. The tool shows the number of days, the daily interest, the total interest, the total owed and the interest per month.

An example

A debt of £4,500 was due on 1 November 2025. To 1 November 2026 is 365 days, so the interest is £360, and the total is £4,860. Each additional day adds £0.99. If you claim on 1 December 2026, the interest is £389.59.

Before you make a claim

1. Check the facts: the contract, the invoice and the due date.
2. Send a letter before action: state the sum, the interest, how it is calculated and a deadline, usually 14 to 30 days.
3. Consider the cost: the court fee depends on the amount claimed; you can add it to the claim if you win.
4. Choose the route: claims up to £10,000 are normally on the small claims track, which has limited costs.
5. Think about the debtor: a judgment is only useful if the debtor can pay.

Mistakes to avoid

Do not charge compound interest unless the contract provides it. Do not start interest before the due date. Do not forget to add the daily rate to the claim form. Keep your evidence, including emails and delivery records.

Limits

This calculator is for planning and is not legal advice. The court has discretion over interest, and specific rules apply to judgments, consumer credit and contractual rates.

Quick answers

Can I charge interest without going to court? Only if the contract or the late payment law gives it. Include it in your letter before action.

Does interest stop at judgment? Judgment debts above £5,000 carry interest at 8 percent under a separate rule, but small claims judgments do not.

What if the debtor pays part? Reduce the principal from the date of payment and recalculate the interest.