Is an IOU legally binding in the UK?

An IOU is not a contract in itself, but it is strong evidence of a debt. The underlying agreement to lend and repay money is a binding contract under English law, and the IOU provides written proof of that agreement. If the borrower refuses to repay, the lender can use the IOU as evidence in County Court proceedings to recover the debt.

Does an IOU need to be witnessed?

No. An IOU does not legally need to be witnessed. However, having a witness sign the document strengthens its evidential value and makes it harder for the borrower to deny signing. If the amount is significant, having the IOU witnessed by an independent third party is good practice.

What is the difference between an IOU and a promissory note?

An IOU is a simple acknowledgment that a debt exists — it says 'I owe you'. A promissory note is a more formal instrument that contains an unconditional promise to pay a specified sum on a particular date or on demand. Promissory notes are governed by the Bills of Exchange Act 1882 and have specific legal requirements. For informal loans between friends or family, an IOU is usually sufficient.

Can I charge interest on an IOU?

A basic IOU does not typically include interest provisions. If you want to charge interest, you should use a loan agreement instead, which will set out the interest rate, calculation method, and repayment terms. If you do not specify interest in the IOU, the court can award interest at 8% per annum under section 69 of the County Courts Act 1984, but only from the date proceedings are issued.

How long do I have to enforce an IOU?

Under the Limitation Act 1980, you have six years from the date the debt became due to bring a court claim. If no repayment date was specified, the limitation period runs from the date of the IOU. A part-payment by the borrower, or a written acknowledgment of the debt, restarts the six-year limitation period. After six years, the debt becomes statute-barred and cannot be enforced through the courts.

Should I use an IOU or a loan agreement?

For small, informal loans between friends or family (typically under £500), an IOU is usually sufficient. For larger amounts, or where you want to include interest, a repayment schedule, or consequences for non-payment, a formal loan agreement is recommended. A loan agreement provides much greater legal protection for both parties and is clearer about the terms of the arrangement.

Free IOU Template (UK)

An IOU (I Owe You) is a simple written acknowledgment that one person owes money to another.

FreePDF & Word

Your data stays on your device — nothing is sent to any server.

parties

Borrower Name (Person Who Owes Money)*

Borrower Address*

Lender Name (Person Owed Money)*

Lender Address

debt-details

Amount Owed (£)*

Amount in Words*

Date Money Was Borrowed*

Specify the purpose of the loan

repayment

Set a specific repayment date

Repayment Date

execution

Date of IOU*

Document Preview

IOU — ACKNOWLEDGMENT OF DEBT Date: [date] I, [borrowerName] of [borrowerAddress], hereby acknowledge that I owe the sum of [amount] ([amountWords]) to [lenderName] I agree and undertake to repay the full amount of [amount] to [lenderName] upon demand. This acknowledgment of debt is made voluntarily and without any duress or undue influence. Signed by the Borrower: ___________________________ [borrowerName] Date: [date] Address: [borrowerAddress] Received and acknowledged by the Lender: ___________________________ [lenderName] Date: [date]

Important Notes

Legal Disclaimer

An IOU is a simple acknowledgment of debt. While it is not a formal contract in itself, it constitutes strong evidence of the existence of a debt and the terms of repayment. Under English contract law, the loan of money and the promise to repay it creates a binding contract supported by consideration (the provision of the money). The IOU provides written evidence of this contract. The Limitation Act 1980 provides that the limitation period for a simple contract debt is six years from the date the cause of action accrued (section 5) — typically the date the debt became due for repayment. Under section 29(5), a part-payment of the debt restarts the limitation period. Under section 30, a written acknowledgment of the debt also restarts the limitation period. An IOU is therefore not only evidence of the debt but may also serve as an acknowledgment that restarts the limitation clock. For larger amounts or more complex arrangements, a formal loan agreement providing for interest, repayment schedules, and default provisions is recommended.

This template is provided for informational purposes only and does not constitute legal advice. For complex legal matters, we recommend consulting a qualified solicitor.

Frequently Asked Questions

Related Templates

Promissory Note Loan Agreement Personal / Family Loan Agreement