Late Payment Interest Calculator

The prescribed rate of interest is set by the Minister of Justice under the Prescribed Rate of Interest Act (Act 55 of 1975). It is currently 11.5% per annum. This rate applies when a debt is payable by law but no interest rate has been agreed upon between the parties.

You can charge interest on late payments if your contract or invoice terms explicitly state that interest will be charged on overdue amounts. If no rate is specified in the agreement, the prescribed rate of 11.5% per annum applies. It is best practice to include late payment terms in all invoices and contracts.

Daily interest is calculated by dividing the annual interest rate by 365 to get the daily rate, then multiplying the outstanding amount by the daily rate and the number of days overdue. For example, at 11.5% per annum the daily rate is approximately 0.0315%, so R10,000 overdue by 30 days would accrue about R94.52 in interest.

The National Credit Act (NCA) regulates credit agreements and caps interest rates for credit transactions. However, ordinary trade credit (B2B invoices) is generally exempt from the NCA. The prescribed rate under the Prescribed Rate of Interest Act applies to trade debts unless a different rate is contractually agreed.

Late payment interest received is taxable income and must be declared. Conversely, late payment interest paid on trade debts may be deductible as a business expense, provided it was incurred in the production of income. Consult your accountant to ensure correct treatment in your tax return.