UK government caps commercial payment terms at 60 days for small suppliers and enforces tight deadlines on “fake” payment disputes. Learn how freelancers can claim statutory interest and enforce mandatory 30-day defaults on late invoices
Did you know if a client, regardless of size, specifies a payment term for example, 90 or 120 days), the contract terms are deemed “illegal” and default to a mandatory 30-day term? That also means you, as a freelancer or business owner, can automatically charge an interest rate of 8% —over the Bank of England interest rate—on Day 31.
UK freelancers, sole traders, and independent contractors will soon gain robust legal protection against late-paying corporate clients. Details outlined in the Small Business Commissioner Late Payment Update confirm that large firms must pay smaller vendors promptly. That means contracts extending beyond sixty days will become illegal unless a small supplier explicitly requests longer terms.
Emma Jones stated earlier this year she was “on a mission to make life easier for small firms by getting money moving faster,” adding, “circumvention of payment terms will soon be a thing of the past”.
Jones launched a YouTube channel earlier this year interviewing hiring company executives, such as Dan Foley, Director of Finance Shared Services, Kier, about what they are doing to ensure contractors are being paid on time.
“Small or large, businesses will have to pay each other within 60 days”
-Small Business Commissioner Emma Jones
Strict interest penalties for late corporate payers
The incoming Commercial Payments Bill introduces mandatory statutory interest set at eight per cent above the Bank of England base rate.
Persistent corporate offenders face public investigation, formal naming, and substantial financial fines from statutory enforcement bodies.
These reforms aim to stop large companies from using independent freelancers as free credit lines. Overdue invoices, as many of our readers may have experienced firsthand, damage personal cash flow and threaten small business survival across the country.
The Commercial Payments Bill sets out how late payment interest is enforced for UK freelancers and sole traders. Rather than relying on individual freelancers to confront clients, the Bill uses automatic statutory terms, void contract rules, and regulatory oversight.
Mandatory statutory interest
Under existing laws, freelancers technically have the right to claim statutory interest at 8% above the Bank of England base rate. However, large clients routinely force freelancers to sign contracts waiving or lowering this rate.
The Bill closes this loophole by making statutory interest an implied, non-waivable term in all commercial contracts. Any contractual clause attempting to reduce, delay, or exclude late payment interest will be automatically void by law.
What are the hard 60-day payment cap and 30-day default rule?
- 60-Day Maximum Cap: Payment terms exceeding 60 days (or 30 days for public authorities) are declared void
- 30-Day Implied Replacement: If a client specifies an illegal payment term (e.g., 90 or 120 days), the contract defaults to a mandatory 30-day term. Interest automatically starts accumulating on Day 31
Tight deadlines on fake disputes
A common corporate tactic is raising vague “quality issues” months after an invoice is issued to freeze payment. The Bill forces clients to formally raise any dispute at least eight days before the invoice becomes due.
If a client fails to flag an issue before this deadline, the invoice stands, and attempting to stall triggers an automatic financial penalty on the client.
Freelancers: use the enforcement powers of the SBC
Freelancers rarely take late-paying corporate clients to court due to legal costs and fear of losing future work. The Bill transforms the Small Business Commissioner’s Office into an official regulator with enforcement authority:
- Free dispute adjudication: Freelancers can escalate payment disputes directly to the SBC for binding adjudication without going to court.
- Direct fines for persistent payers: The SBC can independently investigate corporate payment records and issue binding financial penalties of up to 1% of a firm’s annual UK turnover for systemic late payments.
- Public reporting of interest paid: Large businesses will be legally forced to publish data showing both the statutory interest they owed and the interest they actually paid to small suppliers on GOV.UK.
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