Letter before action template for unpaid invoices

Company or homeowner: which letter you need

The letter you send depends on who owes you. If the customer is an individual, including a sole trader, the Pre-Action Protocol for Debt Claims applies: a set letter, set enclosures and 30 days to reply. If the customer is a limited company or another organisation, that protocol does not apply, and a shorter letter with a reasonable deadline does the job.

The protocol says it covers any business claiming a debt from an individual, and that it does not cover business-to-business debts "unless the debtor is a sole trader" (paragraph 1.1). So a builder trading in his own name, who owes you for second-fix on his job, gets the full protocol letter, the same as a homeowner would.

Where no protocol fits, the court's Practice Direction on Pre-Action Conduct still expects a letter first. It should give concise details of the claim, how the amount is worked out, and what you want. The other side is expected to reply within a reasonable time: 14 days in a straightforward case (paragraph 6). An unpaid invoice is about as straightforward as it gets.

What the debt protocol makes you include

For an individual debtor, paragraph 3.1 of the protocol lists what the letter of claim should contain. The generator writes a sentence for each one that applies, so you only answer questions, not draft clauses:

• the amount of the debt, and whether interest or other charges are still being added;
• for a job agreed in writing, the date of the agreement, who it was between, and a line saying they can ask you for a copy;
• for a job agreed by word of mouth, who agreed it, what was agreed, as close to the words used as you can, and when and where;
• if they are already paying or offering instalments, why that offer is not acceptable;
• how to pay (bank details or an address), and how to get in touch to talk about payment options;
• the address the Reply Form should go back to;
• an up-to-date statement of account, showing any interest and charges added (enclosed, or stated in the letter if you have never sent one);
• the Information Sheet and Reply Form from Annex 1 of the protocol, and a Financial Statement form like the one in Annex 2.

Adding interest and compensation to a business debt

When the customer is a business, the 1998 Act on late payment of commercial debts puts a term into the contract: an unpaid invoice carries simple interest at 8% a year over the Bank of England's Bank Rate. Your own terms can set a different rate, and if they do, you use that instead. The invoice generator page covers when a payment becomes late and how to mention the Act on your invoices. This section is about putting the figures in a demand.

The base rate part is fixed per debt, not updated daily. Article 4 of the 2002 order uses the rate in force on 31 December for interest that starts running from January to June, and on 30 June for interest that starts from July to December. Bank Rate was 3.75% on both 31 December 2025 and 30 June 2026, so any invoice that fell overdue during 2026 carries 11.75% a year. The tool picks the right reference date from the due date you enter.

Interest starts the day after the due date. The tool works it out as: unpaid amount × 11.75% × days overdue ÷ 365, rounded to the penny only at the end. It prints the daily figure too, because the letter has to say interest is still running.

On top, section 5A of the Act gives a fixed sum once interest starts: £40 below £1,000, £70 for a debt of £1,000 up to £9,999.99, and £100 for £10,000 and over. That sum is per invoice, not per letter. If your reasonable costs of recovering the debt come to more, the Act lets you claim the difference, though the tool only adds the fixed sum.

For a homeowner there is no statutory rate. If the matter reaches court, the judge can add simple interest under section 69 of the County Courts Act 1984, and GOV.UK says the rate is usually 8%. The homeowner letter says no interest is being added now and that you may ask the court for it. To leave that line out, answer No to "Mention that a court may add interest?"

Three unpaid jobs, three letters

1. An electrical contractor chasing a limited company (the tool's starting example). Okafor Electrical Ltd invoiced Northgate Builders Ltd £3,600 for first and second-fix on a block of four flats. Invoice INV-0217 was dated 1 August 2026, due 31 August. The letter is dated 21 October 2026, which is 51 days overdue. The tool's Letter date starts at today's date, so set it to 21 October 2026 to get these figures. Interest: £3,600 × 11.75% = £423 a year, or £1.16 a day; × 51 ÷ 365 = £59.10. Compensation for a debt between £1,000 and £9,999.99: £70. Total demanded: £3,729.10, to be paid by 4 November 2026, 14 days after the letter. No protocol enclosures, because the debtor is a company.

2. A plumber chasing a homeowner. A £1,240 balance for a replacement cylinder and pipework, invoice INV-0209, dated 14 August 2026 and due 28 August. Choose "Homeowner" and the tool drops the interest and compensation lines, states that no interest is being added, and, with the Letter date set to 21 October 2026, sets the reply date to 20 November 2026, 30 days later. It adds the statement of account and the enclosure list. If it went to court online, the fee for a £1,240 claim is £80.

3. A carpenter chasing a sole trader builder. £640 for hanging doors on a site, due 30 September 2026, letter dated 21 October: 21 days overdue. Interest: £640 × 11.75% × 21 ÷ 365 = £4.33 (about 21p a day). Compensation for a debt under £1,000: £40. Total: £684.33. Because a sole trader is an individual, the letter also carries the protocol wording, the enclosures and the 30-day reply date of 20 November 2026.

If the deadline passes: claiming online

Most money claims in England and Wales can be started online. GOV.UK's court claim guide bases the issue fee on the amount you claim plus any interest. These are the fees as listed on 21 October 2026:

• up to £300: £35;
• £300.01 to £500: £50;
• £500.01 to £1,000: £70;
• £1,000.01 to £1,500: £80;
• £1,500.01 to £3,000: £115;
• £3,000.01 to £5,000: £205;
• £5,000.01 to £10,000: £455;
• £10,000.01 to £200,000: 5% of the claim.

Mistakes that weaken your claim

Seven days for a homeowner. A short deadline looks firm, but the protocol gives an individual 30 days from the date on the letter. A judge looks at whether you complied in substance, and can reflect a failure in costs or interest (Practice Direction, paragraphs 13 to 16). Sending the right letter costs you a few weeks; skipping it can cost you money at the end.

Statutory interest on a homeowner's bill. The 1998 Act needs both sides to be acting in the course of a business. Claiming it from a private customer overstates the debt, and the Reply Form gives them a box to say so.

Statutory interest when your terms set a rate. If your quote or terms said 2% a month, or any other rate, that is what you claim. Answer No to "Claim statutory interest and compensation?" and add your own rate to the letter by hand.

Threats you will not carry out. Say what you will do if they do not pay: issue a claim. Do not promise bailiffs or a mark on their credit file. For a trade debt, both would only follow a court judgment, and the official Information Sheet already explains the register of judgments to them.

No proof of posting. Keep a copy of the letter and ask the Post Office for a certificate of posting. If the case goes to court, you will want to show when it went.

Treating this page as legal advice. It is general information about the rules in England and Wales, checked against the sources linked here. If the debt is large, disputed or more than a few years old, speak to a solicitor or Citizens Advice before you issue a claim. Scotland and Northern Ireland have different court procedures.

Common questions