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Late Payment Interest in Canada (2026)

5% per year (federal default) — Interest Act (federal): where a contract provides for interest but no rate, the rate is 5% per year. Otherwise contract terms govern; provincial courts set pre-judgment rates. On a $5,000 invoice 60 days overdue, the money already owed to you looks like this:

Total owed on a $5,000 invoice · 60 days late

$5,041.10

Growing $0.68 every day it stays unpaid

principal
$5,000
interest
$41.10

Rate verified 2026-07-06 · Source: Justice Laws — Interest Act · Methodology

Calculate your invoice

Rate prefilled from the Canada default (5% per year (federal default)) — override it if your contract sets its own.

C$

60 days overdue

%

Canada default: 5% per year (federal default)

Total now owed to you · Canada

$5,041.10

$5,000 principal · 60 days overdue at 5%

interest accrued
$41.10
growing daily by
$0.68

Simple interest: amount × (5% ÷ 365) × 60 days. Information, not legal advice — contract terms can override statutory defaults.

The rule in plain English

Canada has no automatic statutory right to interest on late private invoices — your contract governs. Two important defaults sit underneath that rule.

Federally, the Interest Act says that where interest is payable but no rate is fixed, the rate is 5% per year. It also requires annualised disclosure: a "2% per month" clause that never states the annual equivalent (26.82% effective) is only enforceable at 5%.

If you sue, provincial pre-judgment interest applies: in Ontario, the Courts of Justice Act rate is set quarterly (2.5% for Q2 2026); in British Columbia, the Court Order Interest Act uses a rate tied to prime (prime was 4.45% in July 2026, with the registrar’s COIA rate set each 1 January and 1 July).

Practical upshot: put an explicit annual interest rate in your terms of trade (1.5–2% per month, stated with the annual equivalent, is common) — without it you are limited to weak defaults.

Legal basis: Interest Act, R.S.C. 1985, c. I-15, s. 3.

Worked example

invoice = $5,000, 60 days overdue, rate = 5.00%

daily interest = $5,000 × (5.00% ÷ 365) = $0.68

interest = $0.68 × 60 days = $41.10

total owed = $5,041.10

What to include in your demand letter

A short, factual letter recovers more invoices than a heated one. Checklist (general guidance, not legal advice):

  • Invoice number, date, original due date, and the exact principal outstanding.
  • The interest calculation shown line by line — principal, rate (5% per year (federal default)), days overdue, daily amount — so there is nothing to dispute.
  • The legal or contractual basis for the interest (Interest Act, R.S.C. 1985, c. I-15, s. 3).
  • A single clear deadline (7 or 14 days is customary) and the payment details — remove every excuse for delay.
  • What happens next if unpaid: a letter before action, small claims / court filing, or referral to collections — stated plainly, without threats you don’t intend to keep.
  • A note that interest continues to accrue daily until payment — quote the per-day figure from the calculator above.

FAQ

What interest can I charge on a late invoice in Canada?
Interest Act (federal): where a contract provides for interest but no rate, the rate is 5% per year. Otherwise contract terms govern; provincial courts set pre-judgment rates. On a $5,000 invoice 60 days overdue, that is about $41.10 in interest. (Interest Act, R.S.C. 1985, c. I-15, s. 3; verified 2026-07-06.)
Do I need a clause in my contract to charge this?
Effectively yes. Canada has no automatic statutory right to add interest to a private commercial invoice — your contract or terms of trade should specify the rate. Without one, you are limited to the default legal rate on liquidated debts, typically only recoverable once you pursue the claim.
How is late payment interest calculated?
Simple interest on a daily basis: invoice amount × (annual rate ÷ 365) × days overdue. Interest normally runs from the day after the due date. The calculator above shows the formula with your own numbers.
Does the Canada rate change?
Interest Act 5% is fixed. Ontario CJA rate resets quarterly (2.5% in Q2 2026 — Q3 2026 rate needs checking); BC COIA rate resets each 1 Jan / 1 Jul.
Can I really send an invoice for the interest?
Yes — the standard practice is a short statement or updated invoice showing the principal, the daily interest accrued to date and the legal basis (Interest Act, R.S.C. 1985, c. I-15, s. 3). Many creditors find the demand itself prompts payment. This site provides information, not legal advice; for significant sums, confirm your position with a professional before escalating.

This page is general information about Canada, verified 2026-07-06 against Justice Laws — Interest Act. It is not legal advice, and statutory rules have exceptions and transition rules that a short summary cannot capture. Contract terms often override statutory defaults. For significant or disputed sums, consult a qualified professional in your jurisdiction.

Other jurisdictions

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