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Commercial Payments Bill: what it means for late payment

The Commercial Payments Bill has cleared the House of Lords. It would cap most payment terms at 60 days and make late payment interest compulsory. Here is what is proposed, what you can already do under today's rules, and five steps to get paid faster.

The Commercial Payments Bill, a major overhaul of UK late payment rules, cleared the House of Lords on 20 October 2026 and now moves to the House of Commons. It is not law yet, but it would cap most payment terms at 60 days, make late payment interest compulsory and give the Small Business Commissioner real powers, so now is a good time to tighten how you invoice and get paid.

An 18th-century handwritten invoice and receipt dated 1772

Photo by Onesimus Ustonson, Public domain, via Wikimedia Commons

If you supply other businesses, you have probably waited 60, 90 or more days for a bigger customer to pay. Here is what is proposed, what already applies today, and the practical steps worth taking now.

What the Commercial Payments Bill proposes

The Bill was introduced in the Lords on 19 May 2026. Its main measures, as they stand after the Lords stages, are:

  • A 60-day maximum payment term for most business-to-business contracts. Longer terms would be void, and a 30-day term would apply instead. Public bodies would be held to 30 days.
  • Compulsory statutory interest. Interest on late payment would be set at 8% above Bank of England base rate, and contracts could no longer replace it with a lower rate.
  • Deadlines for disputing invoices. A customer would generally have to raise a dispute at least 8 days before payment is due. If they dispute late, or without enough detail, you could claim a fixed sum of £40 or 1% of the contract price, whichever is higher.
  • A stronger Small Business Commissioner, able to adjudicate payment disputes, investigate persistent poor payers and impose fines.
  • A ban on retentions in construction contracts, after a transition period.
  • More reporting from large companies on the late payment interest they pay and owe.

According to law firm Farrer & Co, proposed exemptions include contracts between two large companies, contracts where the buyer is the smaller party, and import or export contracts. The rules would cover UK-to-UK transactions only.

When would it start?

No start date has been set. Lawyers following the Bill expect the main measures in 2027 at the earliest, and they are not expected to apply to contracts signed before the law takes effect. The Commons can still change the details, including the 60-day limit. Some peers pushed for 45 days, and that idea may come back.

The rules that apply today

You do not have to wait for the new law to act on late payment. Under the Late Payment of Commercial Debts (Interest) Act 1998, as explained on GOV.UK:

  • If no payment date is agreed, a payment is late 30 days after the customer receives your invoice or you deliver the goods or service, whichever is later.
  • You can charge statutory interest of 8% plus Bank of England base rate, unless your contract sets a different rate. The Bank of England held base rate at 3.75% in September 2026, which makes the statutory rate 11.75% a year at the time of writing.
  • You can also claim a fixed sum per late invoice: £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more.

As a simple worked example using the GOV.UK method: a £5,000 invoice paid 30 days late would carry about £48 in statutory interest at 11.75%, plus the £70 fixed sum. Many owners never claim this because they worry about the customer relationship. The Bill aims to make that conversation easier by making interest the default rather than the exception.

What this means for your business

For most small firms, the Bill is good news, but it will not fix cash flow on its own. Even a 60-day cap is a long wait if your suppliers, staff and rent need paying every month. And interest only helps if you track overdue invoices and are willing to claim it.

The businesses that benefit most will be the ones that get their own processes in order first.

Five steps to take now

  1. Check your terms. Make sure every quote, contract and invoice states a clear payment date. If a large customer insists on terms over 60 days, note it and review it when the new rules start.
  2. Invoice the day the work is done. Every day you delay the invoice adds a day to your wait. Include a purchase order number, a clear description and your bank details so there is no reason to dispute it.
  3. Take payment at the point of sale where you can. For consumer sales, deposits and smaller jobs, taking a card payment on the spot or on completion removes the invoice wait altogether. The cost of card acceptance varies a lot between providers, so it is worth checking what you pay.
  4. Track overdue invoices weekly. Know who owes what and for how long. The Small Business Commissioner has a free late payment interest calculator.
  5. Plan for the gap. If one slow-paying customer can leave you short, it is better to look at options before it happens than in a hurry. Funding can help bridge a gap, but it has a cost and must be repaid, so it should fit your trading pattern.

Frequently asked questions

Is the 60-day payment cap law now?

No. The Commercial Payments Bill has passed the House of Lords and is now in the House of Commons. It still needs Royal Assent and regulations setting start dates, which lawyers expect no earlier than 2027.

Can I charge interest on late invoices today?

Yes. Under current law you can usually charge statutory interest of 8% plus Bank of England base rate on business-to-business debts, plus a fixed sum of £40, £70 or £100 per invoice, unless your contract sets a different arrangement. GOV.UK explains how to calculate it.

Will the new rules apply to my existing contracts?

They are not expected to apply retrospectively, so contracts signed before the law starts should stay on their current terms. Transitional rules have not been published yet, so check again once the Bill becomes law.

Get paid faster and plan your cash flow

If customers can pay you by card on the spot, you wait less for your money. We can look at your current setup with a free card fee review, help you choose the right card machines or set up Square POS as a Square POS specialist.

If late payers are squeezing your cash flow, we can also talk you through business finance options, from business loans to revenue-based finance. Approval and terms depend on your trading history, and there is no obligation.

Call or WhatsApp 07777 175890.

Jos Finserv Ltd (company no. 14560046) is an independent broker. For business finance we are a credit broker, not a lender, and we may receive commission from providers. Approval and terms depend on your trading history. No obligation.

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