Are the Rules on Late Business Payments About to Change?
Parliament returns today after the conference recess. One piece of legislation worth watching closely is the Commercial Payments Bill.
Late payment is hardly a new problem for UK businesses. The rules surrounding it could, however, be about to change considerably.
Introduced to Parliament in May 2026, the Commercial Payments Bill forms part of the Government’s attempt to tackle late and poor payment practices between UK businesses.
The proposals are significant.
- Maximum payment periods.
- Mandatory statutory interest.
- New consequences where invoice disputes are raised late.
- Stronger powers for the Small Business Commissioner.
- A new route for certain payment disputes to be dealt with outside court.
- Changes to payment reporting.
And, within construction, action against retentions. There is an important point before we go any further. The Commercial Payments Bill is not yet law.
Parliamentary scrutiny has continued throughout 2026. A series of amendments have been put forward as the Bill has progressed.
Some challenge the payment periods contained within it. Others seek to introduce additional requirements. Until the Bill completes its journey through Parliament, the detail can still change.
So, what is actually being proposed? Which areas have attracted further debate? And what does any of this mean if your business is already waiting to be paid?
Key Takeaway
The Commercial Payments Bill proposes substantial changes to UK business payment practices.
Measures contained within the Bill include:
- Maximum payment periods for qualifying commercial contracts.
- Mandatory statutory interest on qualifying late payments.
- A new fixed sum where certain invoice disputes are raised too late or without enough information.
- Stronger investigatory and enforcement powers for the Small Business Commissioner.
- A new adjudication scheme for certain payment disputes involving small businesses.
- Measures dealing with retentions in construction contracts.
However, proposed legislation and current law are not the same thing.
Businesses therefore need to distinguish between: the rules that apply now;
And the rules Parliament is considering for the future.
That distinction is particularly important if you already have an unpaid invoice. Future legislation will not make today’s debt disappear. Nor do you need to wait for the law to change before dealing with money that is already overdue.
What Is the Commercial Payments Bill 2026?
The Commercial Payments Bill is proposed legislation designed to strengthen the rules governing payments under commercial contracts. Government has described the reforms as the most significant legislative action on late payment in more than 25 years.
Why? Because the Bill goes considerably further than telling businesses they should pay suppliers promptly. It proposes changing the rules around how long qualifying payments can be delayed. Statutory interest would also be strengthened. Disputes raised shortly before payment is due are addressed.
Meanwhile, the role of the Small Business Commissioner would expand substantially. A Government consultation on late, long and disputed business-to-business payments preceded the Bill during 2025. Responses came from hundreds of businesses and stakeholders across different sectors and regions. The resulting legislation is aimed not only at individual unpaid invoices, but at payment culture more widely. That distinction matters.
Debt recovery deals with money that has already not been paid. This Bill is trying, in part, to change some of the behaviour that creates those unpaid accounts in the first place.
Why Is the Government Changing the Rules on Late Payment?
Because late payments are costing businesses money. A lot of it. Government estimates put the cost to the UK economy at approximately £11 billion every year. Late payment has also been associated with around 38 business closures every day. Our separate look at the latest UK late payment statistics shows a more nuanced picture.
Large businesses paid 15% of invoices outside agreed terms during 2025, compared with 25% in 2018. That is progress. It does not mean the problem has disappeared. Businesses are still spending time chasing money that should already have arrived. Suppliers continue to carry unpaid balances.
One company’s decision to delay payment can very quickly become somebody else’s cash-flow problem. The Commercial Payments Bill is an attempt to put firmer limits around that behaviour.
Is the Commercial Payments Bill Law Yet?
No. That is perhaps the most important answer in this article. The Bill has been progressing through Parliament during 2026, but it still needs to complete the required parliamentary stages before it can receive Royal Assent and become an Act. Parliament’s conference recess also interrupted that journey.
- The House of Commons rose for recess on 16 September.
- Two days later, the House of Lords followed.
- Both Houses return on 12 October 2026.
That means businesses reading about the reforms need to be careful with headlines announcing, “new late payment rules”. Some changes may ultimately become law. Others may be amended before that happens. Certain proposals may disappear altogether.
Until the Parliamentary process is complete, they remain proposals. Existing late-payment law continues to matter in the meantime.
What Changes Have Been Put Forward as the Bill Has Gone Through Parliament?
Several practical issues have attracted debate. Amendments put forward ahead of Report Stage included proposals concerning:
- Moving one payment period within the Bill from 30 days to 35 days.
- Requiring certain intermediaries collecting money on behalf of suppliers to pass it on within seven days.
- Reviewing whether the maximum payment period for private purchasers should ultimately reduce from 60 days to 45 days.
- Introducing a more standardised approach to defining different business sizes.
Not every amendment proposed during a Bill’s passage becomes law. Some may be accepted. Others can be withdrawn or rejected. The important point for businesses is that the precise detail has been subject to scrutiny.
A headline saying “60-day payment terms are coming” therefore misses part of the story. Parliament has been considering how those limits should work, which businesses they should cover and whether the proposed periods go far enough.
Will Business Payment Terms Be Limited to 60 Days?
The Bill has proposed maximum payment periods for qualifying commercial contracts. Within the version amended at Committee Stage, payments involving a public-authority purchaser were subject to a 30-day maximum. For other purchasers, the proposed maximum was 60 days.
Exclusions and possible exemptions also form part of the legislation, so the contracts covered by the rules matter. That would represent an important change from the current position.
At present, businesses can agree business-to-business payment periods longer than 60 days where those longer terms are fair to both parties. The Bill seeks to create much firmer boundaries. Where a qualifying contract does not properly specify a payment period, a 30-day term is also proposed.
Put simply: A larger client should not necessarily be able to impose increasingly long payment terms simply because it has the commercial bargaining power to do so.
The precise boundaries may still change; the direction is much clearer.
Could the Maximum Payment Period Eventually Fall From 60 Days to 45 Days?
Possibly. But 45 days should not be treated as the current proposed maximum. An amendment put forward during the Bill’s progress concerned a future review of the 60-day period.
Under that proposal: Government would need to bring forward legislation reducing the maximum for private purchasers to 45 days within a specified period. Or. explain why it had decided not to do so.
That is different from saying Parliament has already replaced 60 days with 45. The debate does, however, raise a useful commercial question.
How long should a supplier reasonably be expected to finance its client's business?
Thirty days. Forty-five. Sixty? The number matters.
Particularly where the supplier has already carried out the work, delivered the goods and incurred its own costs. Every additional day the purchaser holds the money is another day the supplier does not have it.
Will Businesses Still Be Able to Agree Shorter Payment Terms?
Yes. A maximum is not a target. If two businesses agree payment within 14 days, a statutory maximum of 60 days would not turn those terms into 60 days.
Likewise, existing 30-day terms do not need to become longer simply because legislation permits a higher maximum in applicable circumstances. This point matters.
Payment terms remain part of the commercial agreement between businesses. Proposed legislation is intended to set boundaries. It is not an invitation for every purchaser to take the maximum amount of time available. If your terms say 30 days, payment is expected according to those terms. Not whenever the client reaches day 60.
Will Statutory Interest on Late Payments Become Mandatory?
That is one of the more significant proposals. Businesses already have statutory rights relating to interest on qualifying late commercial payments. Under the current rules, statutory interest is generally calculated at 8% above the Bank of England base rate.
Contractual provisions can currently affect whether statutory interest applies. The Commercial Payments Bill proposes changing that position. Under the proposed framework, qualifying debts would carry statutory interest as an implied contractual term.
A contractual clause attempting to exclude that entitlement, restrict it or substitute another rate would be void where the new provisions applied. That would strengthen the statutory position considerably. For businesses that routinely pay suppliers late, the change matters.
Late payment would not simply be a question of whether the supplier feels comfortable asking for interest. The entitlement would be built more firmly into the payment framework itself.
Can Businesses Still Agree Their Own Late Payment Interest Rates?
Current law allows businesses to include contractual provisions dealing with interest on overdue invoices. Those clauses can affect whether statutory interest is available.
The Commercial Payments Bill proposes a different approach for qualifying debts. Contractual terms attempting to exclude or vary the statutory entitlement would be ineffective where the new regime applied. That could include provisions which:
- Restrict entitlement to interest.
- Delay when interest begins to run.
- Substitute a different interest rate.
Businesses should therefore not assume that an interest clause operating today will necessarily work in the same way under the proposed regime.
That does not mean contracts need rewriting immediately. The legislation has not yet completed its passage through Parliament. It does mean payment terms and late payment clauses may eventually need reviewing.
What Happens if a Client Raises an Invoice Dispute Late?
This is one of the more interesting parts of the Bill. We regularly talk about the difference between an unpaid invoice and a genuine commercial dispute. They are not the same thing.
Sometimes there was a problem with the work. Goods may have been defective. In other cases, the amount invoiced is genuinely contested.
Those disputes need dealing with properly.
There is, however, another situation. The invoice has been submitted. Nobody complains. Payment becomes due. Then, suddenly:
“We dispute the invoice.”
The Commercial Payments Bill proposes consequences where a purchaser raises certain disputes too late or fails to provide enough information for the supplier to understand what is actually being challenged.
Under the proposed provisions, a supplier could become entitled to a fixed sum.
That amount would be the higher of:
- £40; or
- 1% of the contract price, or 1% of the disputed amount where only part of the price is challenged.
Qualifications and exceptions apply. The wider point is straightforward. If an invoice is genuinely disputed, raise the issue and explain the problem.
Do not leave it until payment is due and then rely on the word “dispute” as though that settles the matter. For suppliers, the practical position is similar now. If a client raises a dispute after you chase payment, establish what they are actually saying.
- When did the issue first arise?
- What evidence exists?
- What does the contract say?
- Is the client challenging liability or simply delaying payment?
B2B Debt Recovery Solutions can look at that with you. You do not need to decide whether a dispute is genuine before asking us to take a fresh look at the position.
Could Intermediaries Have to Pass Supplier Payments on Within Seven Days?
Payment held by intermediaries has also entered the Parliamentary debate. One amendment put forward concerned situations where an intermediary receives money on behalf of a supplier.
The proposed requirement would place a limit around how long that money could be held before being passed on. Seven days was the period proposed.
Again, the distinction matters. An amendment is not automatically law. But the issue itself is commercially important. Sometimes a client’s payment has already been made.
The problem is that the money remains somewhere between the person who paid it and the supplier expecting to receive it. Clearer rules in that area could make a significant difference for businesses relying on intermediaries to collect funds.
What New Powers Could the Small Business Commissioner Have?
The Small Business Commissioner already works to address late and unfavourable payment practices affecting small businesses. Under the Commercial Payments Bill, the office could receive considerably greater powers.
Those proposals include the ability to investigate larger businesses suspected of persistent poor payment practices. Recommendations and enforcement action could follow where appropriate.
A new adjudication scheme for certain payment disputes also forms part of the proposals. Meanwhile, responsibility for enforcing payment-practice reporting requirements would be strengthened. Taken together, the changes would move the office further away from simply encouraging businesses to behave better.
There would be greater scrutiny. Enforcement could carry more weight. Financial consequences may also follow where relevant requirements are breached.
Could the Small Business Commissioner Fine Businesses for Poor Payment Practices?
Yes, that forms part of the proposed enforcement framework. The Bill contains powers connected with financial penalties and the Commissioner’s expanded role. Detailed rules will matter.
This is not a proposal under which every invoice paid one day late automatically produces a fine. The wider focus is on poor payment practices and compliance with relevant requirements. Procedural safeguards are also built into the proposed regime.
But the direction is significant.
Poor payment behaviour could move from being something that damages supplier relationships and reputation to something carrying a more direct regulatory consequence. For larger businesses with substantial supplier bases, payment performance therefore becomes an increasingly important management issue.
Will Small Businesses Have a New Way to Resolve Payment Disputes Without Going to Court?
Potentially. The Bill proposes a Small Business Commissioner adjudication scheme for certain payment disputes. Under that framework, a small business could refer an eligible dispute with a larger business to adjudication.
The resulting decision would have binding effect unless and until the matter was finally resolved through another applicable process. That could include legal proceedings, arbitration where relevant, or a subsequent written agreement.
For some businesses, this could create another useful route. Not every disputed invoice justifies court proceedings. A disagreement may be genuine. The amount involved may matter considerably to the supplier.
Litigation may nevertheless be disproportionate in cost or management time.
Adjudication could sit between informal chasing and more substantial legal proceedings. It would not remove the role of mediation. Nor would it make litigation unnecessary. The sensible route will still depend on what the dispute is actually about.
Will Large Businesses Have to Report More About Their Payment Practices?
Greater transparency forms another part of the wider reforms. Large companies and limited liability partnerships are already required to report information about their payment practices and performance. Further reporting is proposed.
That could include additional information around interest paid and interest owed. Persistently poor payment performance may also attract greater scrutiny at board or audit committee level. On the surface, that sounds administrative. The commercial point goes further.
Late payment becomes harder to treat purely as an accounts department problem when senior management is required to take responsibility for how suppliers are being paid. Greater transparency can help suppliers too.
Before offering substantial credit, information about how a potential client actually pays other businesses is useful. A company can have impressive turnover. That tells you something. Its treatment of suppliers tells you something else.
Why Does the Definition of a Small or Large Business Matter?
Because several proposed protections depend on who is supplying and who is purchasing. The Small Business Commissioner adjudication scheme is one example. Its application depends on the size and status of the businesses involved. Different provisions within the Bill also rely on categories of undertaking.
Turnover may matter. Employee numbers could matter. Balance-sheet size may also be relevant.
Amendments have been proposed around creating a more standardised definition of business size. The final criteria therefore deserve attention.
Calling yourself an SME does not necessarily mean every statutory provision referring to a “small business” automatically applies to you.
Legal definitions matter.
What Could the Commercial Payments Bill Mean for the Construction Sector?
Construction receives particular attention. One major proposal concerns retention clauses.
Retentions allow part of a payment to be withheld, generally as security against defects or incomplete work. Government concerns include money becoming trapped in supply chains and suppliers being exposed where a business holding retained money later becomes insolvent.
The Bill therefore contains provisions designed to prohibit relevant retention clauses in construction contracts. Transitional arrangements are expected. This is not intended to become an overnight change simply because Royal Assent eventually takes place.
For construction businesses, however, reform could significantly alter long-established payment practices. The issue also connects directly with wider commercial risk. Construction continues to appear prominently in UK company insolvency figures.
Money held back higher in a supply chain can matter considerably to the businesses further down it.
Will the New Rules Apply to Existing Contracts and Unpaid Invoices?
Not generally. This is particularly important for anybody reading this article because they already have an unpaid invoice. The proposed commercial payment changes are not intended simply to rewrite every existing contract retrospectively.
Key provisions dealing with payment periods, statutory interest and disputes are designed to apply according to commencement and transitional rules. That creates two different questions.
What will the law require for future qualifying contracts?
And:
What rights do you have under the contract and law applying to the debt you are owed today?
Do not confuse them.
An invoice already sitting unpaid needs to be dealt with on the basis of the position that applies to it now. You do not need to wait for future legislation before deciding whether to chase, negotiate, formalise the recovery process or seek help.
When Could the New Late Payment Rules Take Effect?
There is no single date we can circle on the calendar yet. First, the Commercial Payments Bill must complete its Parliamentary journey. Royal Assent would then turn the Bill into an Act.
Even at that point, not every substantive provision would necessarily begin operating immediately. Several measures are designed to commence through later regulations.
Different parts of the legislation may therefore start at different times. Transitional arrangements will also matter. In practical terms, businesses need to watch two dates:
when the legislation becomes law;
and
when the particular rules affecting their contracts actually come into force.
Those dates may not be the same.
Should Businesses Change Their Credit Control Processes Now?
Do not rebuild your entire credit control system around legislation that has not yet come into force. But do look at what you are doing now.
- Are your payment terms clear?
- Do you know when invoices become due?
- Are invoices issued promptly?
- Can you see how long individual clients actually take to pay?
- Have payment promises been recorded?
- Are disputes dealt with when they first arise?
- Or do they sit unanswered until an invoice is already overdue?
- Do you know which clients repeatedly pay outside terms?
- Is somebody responsible when ordinary chasing stops working?
None of those questions needs to wait for Parliament. A change in law may eventually give businesses additional protections. It cannot replace sensible credit control.
Equally, you do not need to get everything perfect before speaking to B2B Debt Recovery Solutions. If an account has already stopped moving, bring us the position as it stands.
We can look at what has happened, what has already been tried and what the sensible next step may be.
Already Waiting for Payment? Speak to B2B Debt Recovery Solutions
The Commercial Payments Bill is about what part of the UK’s payment landscape may look like in future. If your invoice is already overdue, your problem exists now.
You do not need to wait for the Bill to become law. Nor is there a requirement to wait until the account reaches 60 or 90 days overdue. Another reminder will not automatically work because the previous six did not.
If you supplied what you agreed to supply and payment is due, you should not have to spend indefinitely chasing your own money.
We will take a fresh look at the position and help you decide what needs to happen next.
The Commercial Payments Bill remains subject to Parliamentary scrutiny. Businesses should check the legislation in force when making decisions about individual contracts or debts.
