He is allowed to charge you 8% per annum but not 8% over the base rate and he is also allowed to charge you a one-off payment of £100 for a debt of £3000.
The relevant provisions are the Late Payment of Commercial Debts (Interest) Act and the Late Payment of Commercial Debts Regulations.
Make sure that even though he says it is unacceptable, you keep paying the £500 per month which you have proposed because if he decides to take you to court, you will have finished paying long before the court hearing.
Can I clarify anything for you?
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I’m sorry, I may have misled you. Unless there is a provision for late payment amount and interest in his original contract paperwork (if any), he is not entitled to any late payments on or interest at all if this is a residential job. It only applies to business 2 business debts.
If he issues court proceedings he will be entitled to add the 8% interest onto the outstanding balance from the date the money was due but not before he issues court proceedings.
However, if it’s a commercial plumbing job then the one-off payment of £100 applies because of the amount of the debt and the 8% applies on the outstanding balance from the date it was due, he does not have to issue court proceedings.
If he decides to come round with threats or to send someone else and you feel threatened, simply call the police. It doesn’t matter whether you do owe this money or not he simply cannot do that. It is actually an offence under the Administration of Justice Act, “unlawful harassment of debtors”