Late payment rules for small businesses: what the new Bill proposes and what to do now

If you invoice other businesses, you will know the feeling: the work is done, the invoice is out, and the money turns up weeks after you expected it. The government has now put a Bill before Parliament aimed squarely at that problem. Nothing has changed in law yet, but the direction is clear, and there are things you can set up now that will help whatever the final wording says.

What the Bill proposes

The Small Business Protections (Late Payments) Bill was introduced to Parliament on 19 May 2026. The Small Business Commissioner's website refers to it as the Commercial Payments (Late Payments) Bill and lists five main reforms:

• A 60-day maximum payment term for large businesses paying smaller suppliers, with limited exemptions.
• Mandatory interest on late payments at 8% above the Bank of England base rate.
• Defined timeframes for raising disputes about an invoice, so a late challenge cannot be used to delay payment.
• Expanded powers for the Small Business Commissioner to investigate, adjudicate and enforce.
• A ban on unfair withholding of retention payments in construction.

The Commissioner's page says the government estimates late payment costs the economy £11 billion a year, and quotes figures of 38 business closures a day and 86 hours spent chasing late payments. Separate research the Commissioner published in July 2026 puts overdue invoices owed to UK small businesses at £26 billion.

Two practical points are worth knowing. First, the Commissioner's page does not set out turnover or headcount thresholds for who counts as a "large" business or a "smaller" supplier, and says details may change before the Bill becomes law. Second, no commencement date is confirmed there. One law firm summary expects implementation in 2027 after Royal Assent, but treat that as an expectation, not a date.

What the law already gives you today

You do not have to wait for the Bill. GOV.UK explains that the Late Payment of Commercial Debts rules already apply to business to business sales. If you agree a payment date, it must usually be within 60 days for business transactions (30 days for public authorities). If no date is agreed, a payment is late 30 days after the customer gets the invoice, or after you deliver the goods or service, if that is later.

Once a payment is late you can claim interest. The statutory rate is 8% plus the Bank of England base rate. GOV.UK gives a worked example: if you were owed £1,000 and the base rate were 0.5%, the annual interest would be £85, which works out at roughly 23 pence a day. To collect it, you send the customer a new invoice for the interest. Note that the statutory rate does not apply where your contract sets a different interest term, which is one reason the Bill's plan to make interest mandatory matters.

You can also charge a fixed sum for debt recovery costs, once per late payment:

• £40 for debts up to £999.99.
• £70 for debts from £1,000 to £9,999.99.
• £100 for debts of £10,000 or more.

GOV.UK adds that you may also be able to claim reasonable costs each time you try to recover the debt, on top of those fixed sums.

How people feel about it

The mood in the coverage I found is largely positive. News reports describe small business groups welcoming the Bill as a "historic moment" for small firms. The Commissioner's July 2026 announcement cites Enterprise Research Centre research comparing 20 jurisdictions, which concluded that transparency and voluntary approaches alone consistently fail, and that mandatory caps backed by active enforcement are what change behaviour at scale.

On Hacker News, where freelancers and small suppliers talk shop, the late payment threads are practical rather than political: how to chase a client who is two days late, which tools automate reminders, and what email templates work. It is a reminder that for most owners this is a daily admin problem, not a policy debate.

What to do this week

The Commissioner's guidance suggests using e-invoicing, noting that those who use digital systems get paid faster. You do not need to wait for e-invoicing rules to take that on board. Here is a sensible checklist:

• Put your terms in writing. State the payment date or number of days on every quote and invoice. Without an agreed date, the 30-day default applies.
• Invoice promptly and clearly. The clock for late payment starts from the invoice or delivery, so a late invoice means a late payment date. Include a purchase order number, if the customer uses them, and a clear contact for queries.
• Automate reminders. Most accounting packages can send a reminder before the due date and another when it passes. This removes the awkward part of chasing.
• Record disputes quickly. The Bill plans fixed timeframes for raising invoice disputes, so get into the habit of asking customers to flag any problem straight away, in writing.
• Know your interest and fixed fees. Mention the statutory interest and the fixed sum in your terms so there are no surprises, and keep a note of when you last chased.
• Keep an eye on the Bill. The Commissioner says it will update its page as the Bill develops, so check back for thresholds, exemptions and a start date.

Where technology helps

Late payment is partly a cash flow problem and partly a process problem. Invoices that go out days late, get sent to the wrong person or sit in an inbox are common reasons for delays, and those are things software can fix. Connecting your quoting, job completion and invoicing steps means an invoice goes out the moment work is signed off, and reminders follow without anyone having to remember. If your current process relies on spreadsheets and memory, our process automation work is the kind of thing that closes those gaps.

This article is general information, not legal advice. If a large customer is paying you very late, the Small Business Commissioner's office can offer support, and a solicitor can advise on a specific dispute. The Bill may change as it passes through Parliament, so check the official pages for the current position before you rely on any detail.