Late Payments: What Businesses Need to Know About the Proposed New Rules
Late payment is far more than an administrative inconvenience. For businesses operating on tight margins, waiting weeks or months longer than expected for an invoice to be settled can have a significant impact on cash flow.
It is also an area currently receiving considerable attention from the Government.
The Commercial Payments Bill, introduced to Parliament in May 2026, proposes a number of changes designed to address late payments between UK businesses.
What is being proposed?
Among the measures proposed is a maximum payment term of 60 days, subject to limited exemptions.
The Bill also proposes mandatory interest on late payments at 8% above the Bank of England base rate and additional protections where payment disputes are raised late or without sufficient information.
The Small Business Commissioner would also receive stronger powers, including powers relating to investigations, disputes and enforcement.
These proposals are not yet the rules businesses are operating under today, and businesses should therefore be careful to distinguish between the current law and changes that may be introduced following the Bill's passage through Parliament.
What are the rules now?
Businesses already have rights when commercial invoices are paid late.
Where a payment date has been agreed, payment terms for transactions between businesses are generally expected to be within 60 days, although a longer period can currently be agreed provided that it is fair to both businesses.
Where no payment date has been agreed, a payment will generally become late 30 days after the relevant trigger, such as receipt of the invoice or delivery of the goods or services.
Businesses may also have the right to claim statutory interest and debt recovery costs.
However, the contractual position matters. Businesses should understand both their statutory rights and what their individual contracts say.
Why review your contracts now?
You don't necessarily need to wait for new legislation before improving your payment processes.
Your contracts should make it clear:
When invoices can be issued
When payment is due
What happens if an invoice is disputed
Whether interest can be charged on overdue sums
What happens if payment remains outstanding
Whether services or deliveries can be suspended for non-payment
It is also worth looking beyond the wording of your contracts.
If your contract says invoices are payable within 30 days but your business routinely waits several weeks before chasing overdue accounts, the contractual protection may not be delivering its intended commercial benefit.
Prevention is often better than recovery
Strong payment terms cannot guarantee that every customer will pay on time.
They can, however, remove uncertainty and give your business a clearer position from which to act when payment is late.
With payment practices receiving increased legislative scrutiny, now is a sensible time to review both your contractual terms and the processes that sit behind them.
Need help reviewing your payment terms? Lawpoint can help you ensure your commercial contracts clearly set out when and how your business should be paid.
