UK Late Payment Protections 2026: The £72k Problem and Your Rights
Late payment is getting worse, not better — and the government may finally be about to act. Fresh survey data puts the average pile of unpaid invoices at £72,000 per UK firm, and a new Commercial Payments Bill promises tougher protections. Here's what the numbers mean for you, what you can already claim under existing law, and what would change if the Bill becomes law.
This is general information, not legal advice. For large amounts or disputes, talk to a lawyer in your jurisdiction.
The picture in 2026: £72,000 owed, terms getting shorter
Bibby Financial Services' latest SME Confidence Tracker — based on more than 1,000 UK business owners and decision makers — paints a bleak picture of late payment in 2026:
- Businesses are owed an average of £72,000 in outstanding invoices, rising to £143,000 among mid-sized firms.
- 60% say customers are taking longer to pay than a year ago.
- 40% have cut the payment terms they offer customers, just to protect their own cashflow.
- Average bad debt has climbed above £30,000.
- Roughly a third want effective late-payment legislation passed by the end of this parliament.
Supply chains are under strain too: 58% of firms have had at least one supplier cease trading or become insolvent in the past six months. When clients can't pay, they pass the problem down the line — and freelancers, with the thinnest cash buffers, feel it first.
The headline for self-employed people: chasing late payments is a time drain on the one resource you can't bill for — your own hours.
The Commercial Payments Bill: what's proposed
In response, the government is working on a Commercial Payments Bill that would strengthen late-payment protections. The proposals being discussed include:
- A maximum 60-day payment term between businesses, so large clients can't stretch payment to 90 or 120 days as standard practice.
- Mandatory interest on late payments, making it automatic rather than something you have to demand.
- Stronger powers for the Small Business Commissioner, including real enforcement teeth rather than the current name-and-shame approach.
Important caveat: the Bill is not yet law. It still has to pass, and the details may change. Don't stop chasing today's late payers while waiting for tomorrow's protections — which brings us to what you can do right now.
What you can already claim today
The UK already has the strongest late-payment protections of any of our covered markets, under the Late Payment of Commercial Debts (Interest) Act 1998. If you're selling to a business (not a consumer), you have an automatic right to charge interest on overdue invoices — no contract clause required.
The short version:
- Statutory interest: 8% per year above the Bank of England base rate, simple interest, accruing daily from the day after the payment due date. Check the current base rate at the Bank of England's site — at typical recent rates this puts the statutory rate well above 10%.
- Fixed compensation per invoice on top: £40 for debts under £1,000, £70 for £1,000–£9,999.99, and £100 for £10,000 or more. Per invoice, not per client — five overdue invoices means five compensation payments.
- No agreed payment date? The law implies a 30-day term: the debt becomes overdue 30 days after delivery or after the client received the invoice, whichever is later.
- Business-to-business only. The Act doesn't cover invoices to private individuals acting as consumers.
The main exception: if your contract already provides a "substantial remedy" for late payment — e.g., its own interest clause — that can displace the statutory right. You can't simply waive the Act away with an exclusion clause.
Most freelancers never claim statutory interest — but they don't have to. Stating it is often enough: "statutory interest at 8% over base rate plus £40 compensation per invoice is now accruing" is one of the most effective sentences you can put in a chasing email.
Our late fee calculator works out exactly what an overdue invoice is costing — interest plus compensation — so you can quote the number with confidence.
What to do this week
Whether or not the Bill passes, late payments cost you money every day they sit unpaid. Five practical moves:
- Put late-payment terms on every invoice. Reference the statutory right explicitly: "Late payments are subject to statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998, plus fixed compensation per invoice." It signals you know your rights.
- Shorten your payment terms. You're not alone — 40% of UK firms have already cut theirs. Moving from 30 days to 14 days, or asking for a deposit on new client work, is standard practice, not aggression.
- Calculate what's owed. Run your overdue invoices through the late fee calculator — interest plus compensation per invoice. You'll often find the real number is larger than you expected.
- Chase in writing, escalating calmly. A polite reminder before the due date, a firmer note after it, and a final demand referencing statutory interest and a deadline. Our late payment reminder templates give you the wording.
- Keep an audit trail. Invoice dates, sent reminders, payment dates — if the new Bill introduces stronger enforcement, clean records are what let you use it.
What to watch
The Commercial Payments Bill is the one to follow: if the 60-day cap and mandatory interest make it into law, the leverage shifts meaningfully toward small suppliers. We'll update this guide as the Bill moves through parliament.
In the meantime, the law as it stands already gives you more power than most freelancers use. The protections you don't invoke are worth nothing — the ones you do invoke, even once, tend to fix the problem permanently. Clients who learn that your invoices accrue interest at 8% over base rate rarely pay late twice.