Invoice Calculator
Calculate the total amount due on a UK invoice, including optional discount and VAT. Optionally calculate late payment interest under the Late Payment of Commercial Debts Act 1998.
Reviewed by Richard Ross · Last updated April 2026
How Invoice Calculator works
Invoice calculation
Invoice Total = (Subtotal − Discount) + VAT. VAT is calculated on the net amount after any discount. For the standard rate: Net × 1.20. For reduced rate: Net × 1.05.
Late payment interest (UK)
Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can charge statutory interest on overdue B2B invoices. The rate is the Bank of England base rate + 8%. As of early 2025, with a base rate of 4.75%, the statutory rate is 12.75% per annum. Interest accrues daily from the day after the payment due date.
When can you charge late payment interest?
For business-to-business (B2B) contracts, statutory interest applies automatically unless the contract specifies a different rate. For business-to-consumer (B2C) debts, different rules apply. You are not obliged to claim interest — it is a right, not a requirement.
Compensation for debt recovery costs
In addition to interest, the Late Payment Act also allows fixed compensation: £40 for debts under £1,000; £70 for debts of £1,000–£9,999.99; £100 for debts of £10,000 or more. This calculator does not include this compensation.
UK invoice legal requirements
A valid UK VAT invoice must include: your business name and address, your VAT registration number, a unique sequential invoice number, the invoice date and the tax point (usually the same), the customer's name and address, a description of the goods or services, the net amount, the VAT rate and VAT amount, and the gross total. For simplified invoices (under £250 gross), fewer details are required. Invoices for non-VAT-registered businesses do not need to show VAT, but should still include contact details, a unique reference, payment terms, and bank details.
Worked example: freelance invoice with late payment
A freelance consultant raises an invoice for £2,000 net services. After a 5% prompt payment discount agreed in contract, the net falls to £1,900. Adding 20% VAT gives a gross total of £2,280. The client pays 45 days late. Statutory interest = £2,280 × (12.75% ÷ 365) × 45 = £35.78. Fixed compensation (debt under £1,000 does not apply here as debt is £2,280, so £70 compensation applies). Total amount due with interest: £2,280 + £35.78 = £2,315.78 plus the optional £70 compensation.
Source: Legislation.gov.uk — Late Payment of Commercial Debts (Interest) Act 1998. HMRC — VAT invoicing rules (gov.uk/vat-record-keeping). GOV.UK — Charging interest on late commercial payments (gov.uk).
Frequently asked questions
How do I calculate VAT on an invoice?
Multiply the net (ex-VAT) amount by 1.20 for standard rate. Example: £1,000 net × 1.20 = £1,200 gross. The VAT amount is £200. Apply the discount before calculating VAT.
Can I charge interest on a late invoice?
Yes, for B2B invoices under the Late Payment of Commercial Debts Act 1998. The statutory rate is Bank of England base rate + 8% per year. You can also agree a different rate in your contract, but it must not be "grossly unfair".
What is the payment term for UK invoices?
The default statutory payment term is 30 days for commercial contracts, unless otherwise agreed. For public sector bodies, the maximum is 30 days. For other businesses, up to 60 days can be agreed; longer terms are subject to a test of fairness.
Does VAT apply to discounts?
Yes — VAT is calculated on the net amount after any discount is applied, not on the original subtotal. This is called a "trade discount". Prompt payment discounts (early payment discounts) are handled differently and may require a VAT credit note.
What must a UK VAT invoice include?
A full VAT invoice must show: your VAT registration number, a unique invoice number, the invoice date, the customer's name and address, a description of goods/services, the net amount, the VAT rate and amount, and the gross total. For invoices under £250, a simplified invoice with fewer details is permitted. Non-VAT-registered businesses cannot include a VAT number or charge VAT.
How do I deal with bad debt for VAT purposes?
If a customer does not pay and the debt is over 6 months old, you can reclaim the VAT you already paid to HMRC under VAT Bad Debt Relief. You must have already paid HMRC the output VAT on that invoice, have written off the debt in your accounts, and the debt must not have been sold or insured. Claim via your VAT return using Box 4.
What must a UK invoice legally include?
A VAT invoice must include: a unique invoice number, your business name and address, your VAT registration number, the invoice date, the tax point (if different from invoice date), the customer's name and address, a description of the goods or services, the unit price and quantity, the net amount, the VAT rate applied, the VAT amount, and the total amount due including VAT. For invoices under £250 (simplified VAT invoices), fewer details are required.
What are standard UK payment terms?
Net 30 (payment within 30 days of invoice date) is the most common standard in UK B2B. Net 14, Net 7, and even immediate payment are common in some industries. The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses the right to charge statutory interest (Bank of England base rate plus 8%) on late B2B invoices. From April 2024, large businesses must publish payment practice reports showing their average payment times.
How do I chase an overdue invoice?
The escalation sequence is: email reminder at due date, phone call 3-5 days after, formal letter before action (LBA) at 14-21 days overdue, small claims court (for debts under £10,000) or County Court claim for larger amounts. For B2B debts you can add the statutory 8% interest plus base rate. Invoice factoring companies can advance 70-90% of outstanding invoice value for a fee, useful if cash flow is tight while chasing payment.
What is invoice factoring and when should I use it?
Invoice factoring (or invoice financing) is where a finance company advances you a percentage (typically 70-90%) of your unpaid invoices immediately, then collects payment from your customers directly. The fee is typically 1-5% of the invoice value. It improves cash flow when you have long payment terms or slow-paying customers but need working capital. It is most useful for B2B businesses with creditworthy customers. The downside is cost and the fact that your customers know a third party is collecting.
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