Later means at a subsequent time — see you later. Latter means the second of two things already mentioned: "tea or coffee — I prefer the latter." Latter always needs two items, and it pairs with former for the first.
The core difference
One is about time; the other is about position in a list of exactly two.
- later — subsequently: a later edition, later that evening.
- latter — the second of two: the former … the latter.
The two-item rule
Latter strictly refers to the second of two. With three or more, the correct word is last — "the last of these", not "the latter". Using latter for the final item in a longer list is a common slip.