Judicial Rate of Interest in Scotland – Time for Change?
July 2026Two consultations conducted by the Scottish Government over the last decade have highlighted a broad consensus that the current fixed judicial interest rate of 8% per annum is no longer appropriate. The question now is whether legislative reform will follow.
Key Takeaways
- In 2006, a Scottish Law Commission report recommended there should be a change to the judicial interest rate from 8% per annum to a specified percentage above the Bank of England base rate.
- Following a consultation in 2019, the Scottish Government consulted for a second time in 2025 on changes to the judicial rate of interest.
- Responses to the most recent consultation indicate there is a consensus that the judicial interest rate should be changed and for the new rate to be linked to the Bank of England base rate.
- It remains to be seen whether proposals for change will be taken forward by the Scottish Government.
Judicial interest rate in Scotland
For over 30 years the judicial interest rate for court awarded damages has been set at the rate of 8% per annum. There is currently no discretion to modify this rate when applying interest from the date of judgment.
In September 2006, a report by the Scottish Law Commission’s on Interest on Debt and Damages described the current judicial interest rate as “mildly penal” when compared with the Bank of England base rate over the prevailing time the Commission carried out its work on its report.[1] The Commission recommended that the judicial rate of interest should be amended from a prescribed rate of interest to a specified percentage above the Bank of England base rate.
The Bank of England base rate is the official rate of interest that the central bank charges other financial institutions for borrowing money.
Since 2006, the base rate has been consistently lower than the judicial rate in Scotland, with the highest rate reaching 5.75% in July 2007 and the lowest at 0.1% in March 2020.[2]
The purpose of an award of interest
Pre-judgment interest is intended to compensate a claimant who has been kept out of the use of their money through no fault of their own. Post-judgment interest seeks to compensate a claimant where damages have been awarded but not paid at the time they should have been paid.
Awards for interest should therefore be compensatory and not a penalty. However, it is considered that the current judicial rate of interest is generally higher than what a claimant might ordinarily earn by way of interest had they invested funds in the general market.
For instance, Lord Hodge’s Opinion issued in 2011 in the case of Farstad Supply AS v Enviroco Limited noted that for the prevailing period the judicial rate had “for several years exceeded what is readily available to the unsophisticated investor in the market”.[3]
The 2019 Consultation
The Scottish Government consulted on the judicial rate of interest in 2019 as part of its review into the operation of the reforms introduced by the Bankruptcy and Debt Advice (Scotland) Act 2014.
In response to the consultation, 76% of respondents considered the judicial rate of interest was no longer appropriate.[4] There was a mix of views from respondents about whether any new judicial interest rate should be set at the Bank of England base rate, the base rate plus 1% or 2%, or at a different rate.
The 2025 Consultation
At the end of 2025, a further consultation was launched by the Scottish Government on the Personal Injury Discount Rate and the judicial rate of interest.[5]
As part of the consultation, the Scottish Government sought views on whether the Bank of England base rate should be used to determine the judicial interest rate or whether there may be an alternative method for determining the rate.
The results of the consultation were recently published at the end of June this year.[6] Similar to the consultation in 2019, 76% of respondents confirmed that they agreed that the judicial rate should be linked to the Bank of England base rate. A majority of respondents proposed that the Bank of England base rate plus 1% would be an appropriate judicial rate of interest.
Whilst expressing no views on policy, the Senators of the College of Justice indicated they could see there are benefits in moving to a judicial rate of interest which broadly follows a tracker rate, but highlighted that any change will need to consider the whole range of pecuniary court judgments.
Concluding thoughts
The judicial rate of interest in Scotland has remained unchanged for over three decades. The review by the Scottish Law Commission in 2006 and the responses to the two consultations undertaken by the Scottish Government on this issue recognise there is a need for change.
In publishing the results of its most recent consultation in June this year, the Scottish Government noted there was general consensus in the way any new proposed judicial rate of interest should be determined but indicated there is more work to do to determine what the appropriate rate should be.
Whilst committing to bringing forward provisions to make changes to the law at the next legislative opportunity, no firm commitment has been made by the Scottish Government on when that may happen.
As at the time of writing (28 July 2026), a judicial rate of interest at the Bank of England base rate plus 1% would equate to 4.75%. If that rate was applied by the courts in Scotland, defenders would see a noticeable reduction in court awarded interest. It therefore remains to be seen whether any change will be forthcoming and what that change will look like.
If you have any questions regarding the information discussed in this article, please contact Lindsay Ogunyemi and Callum Mackinnon.
[1] Report on interest on debt and damages (SLC 203)
[2] Interest rates and Bank Rate: our latest decision | Bank of England
[3] Farstad Supply AS v Enviroco Ltd | Westlaw UK
[4] reviewofbankruptcyanddebtadvicescotlandact2014-reportofthesummaryofconsultationresponses.pdf
[5] Chapter Three – Judicial Rate of Interest – Consultation on the inflation index for the calculation of the personal injury discount rate and the methodology for calculating the judicial rate of interest – gov.scot
[6] Analysis of responses – Consultation on the inflation index for the calculation of the personal injury discount rate and the methodology for calculating the judicial rate of interest
Download PDF
