Getting paid
Late payment: your rights as a small business
You have delivered the work. You should be able to ask for payment without feeling that you are putting the relationship at risk.
The essentials
The Late Payment of Commercial Debts (Interest) Act 1998, as amended, gives suppliers rights when qualifying commercial debts are paid late. These can include simple interest and a fixed recovery sum. Check the contract and the facts before making a demand.
Calculate late payment interestWhat can you claim?
For a qualifying business debt, statutory interest is eight percentage points above the applicable Bank of England reference rate. It is simple interest, so interest is not added to the principal to earn more interest. See GOV.UK’s interest guidance.
The reference date depends on when interest first starts: use the preceding 31 December for January–June starts, or 30 June for July–December starts. Our calculator uses that reference rate for the debt, following article 4 of the 2002 Rate of Interest Order and the Scottish equivalent.
| Debt value | Fixed sum |
|---|---|
| Less than £1,000 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
The fixed sum is charged once per qualifying debt, not on every reminder. Reasonable recovery costs may also be recoverable to the extent that they exceed the fixed sum: do not charge twice for the same costs. Sources: GOV.UK recovery costs and section 5A of the Act.
These are rights for qualifying supplies of goods or services in a commercial relationship, including qualifying supplies to public authorities. They are not a general late-fee rule for consumers, tax or personal loans. A contractual late-payment remedy can affect whether statutory interest is available; whether it is a substantial remedy matters. See the Act, including sections 8 and 9.
“Will I upset my client if I use it?”
It is understandable to hesitate when a customer provides regular work. But an agreed payment date is part of the deal. Asking a business to honour it is a reasonable commercial conversation. Your wages, suppliers and tax bills do not pause because a client has missed a payment run.
Make the conversation about the account rather than the person. Check that the invoice reached the right team, ask whether anything prevents payment, and give a clear account of what is overdue. Explain the basis of any charges calmly. A consistent process can make the request feel less personal.
No one can promise that a customer will react well. You can choose a proportionate approach, including considering a documented settlement, while taking advice about the effect of any waiver. Repeated late payment is also a reason to review credit limits, deposits and the work you accept. The commercial risk of continuing to supply deserves attention too.
“Our records show that invoice [reference], due on [date], remains unpaid. Please confirm when payment will reach us, or let us know promptly if there is an issue with the invoice. We would like to resolve this directly. We also reserve any applicable rights to statutory interest and recovery compensation.”
This example is an opening reminder. Check the facts and your contract before using it; it is not a formal legal demand.
A practical approach to an overdue invoice
- Check the basics. Confirm the legal customer, agreed terms, delivery or acceptance, invoice receipt and outstanding balance.
- Speak to accounts payable. Find out whether it is an administrative delay, a genuine dispute or a cash-flow problem.
- Put it in writing. Record the amount, due date, requested payment date and any agreed plan.
- Calculate carefully. Separate the principal, interest and fixed sum. Explain the rate and dates. Keep supporting records.
- Review further supply. Consider deposits or lower limits for new orders, subject to existing contractual obligations.
- Escalate appropriately. The Office of the Small Business Commissioner may be able to help with eligible complaints. Get advice before court action, insolvency action or stopping contracted work.
Common questions
When does an invoice become late?
Start with the agreed payment date. Without an agreed date, the statutory starting point is generally 30 days after the later of receiving the invoice or delivery of the goods or services; acceptance or verification arrangements can affect the calculation. Business terms longer than 60 days require express agreement and must not be grossly unfair. Public-authority rules differ. See GOV.UK on when payment becomes late.
Do I need to mention the Act on the invoice?
A qualifying statutory entitlement does not depend on printing the Act on the invoice. Agreeing clear payment terms before work starts still helps prevent misunderstandings. A sentence added later cannot automatically rewrite an existing contract.
What if the customer disputes the work?
Investigate the dispute and establish what is actually payable. A calculator cannot decide whether you performed the contract or whether the customer has a valid defence. Get advice where liability or the due date is contested.
What if they have paid part of the invoice?
Do not keep charging interest on money that has been paid. The dates and allocation of payments matter. Our calculator assumes one unchanged principal; obtain a tailored calculation for partial payments, credit notes or instalments.
Can I claim after the invoice has been paid?
There may still be a right to interest for the period of delay, subject to limitation, prescription, settlement and waiver. Keep the original due date and actual payment date. The Commissioner’s guidance covers invoices paid late as well as unpaid invoices.
Have the announced late-payment reforms already changed these rules?
As at 18 October 2026, the Commercial Payments Bill is still before Parliament. Proposed reforms should not be treated as rights already in force. Check enactment, commencement and transitional rules before relying on a later change.
General information for UK businesses, not advice on a particular debt. Contract dates, governing law and the UK nation involved can affect your position, recovery procedure and time limits. Take professional advice where needed.