The UK’s toughest-ever late payment laws just dropped. Here’s what every freelancer and sole trader must do today: contracts, invoices and your new legal rights, fully explained
The UK government has unveiled the most sweeping late payment reforms in over a generation — giving freelancers and sole traders new legal muscle to chase, charge interest on, and report unpaid invoices. Here’s everything you need to act on today.
Do these 5 things right now
- Add a statutory interest clause to every contract and invoice (8% above Bank of England base rate; this is already your legal right and cannot now be contracted away)
- Set your payment terms to what you want, but at least 30 days or less in all contracts. Never agree to more than 60 days with a large business, since this will soon be illegal for them to demand
- Include a dispute deadline clause: clients must raise any invoice dispute within 30 days or the invoice stands. This is proposed as a legal deadline
- Register any persistent late-payer with the Small Business Commissioner — the office now has real teeth and is actively recovering overdue invoices: Contact us – Small Business Commissioner
- Check whether your large clients fall under the Payment Practices Reporting Regulations since their payment performance is published publicly on GOV.UK. Use it as leverage
More details of what to do next continue below…
Are the polite but desperate days of payment chasing over?
If you have ever lain awake at two in the morning wondering whether a client is going to pay their invoice, or spent hours drafting polite-but-desperate chaser emails, this announcement is for you.
As of 24 March 2026, the UK government unveiled what it is calling the most significant package of late payment reforms in over 25 years. For once, the language seems much more than political fanfare. These changes are substantive, enforceable, and already partially in motion.
It’s an overhaul of the powers available to the Small Business Commissioner, paired with a hard cap on payment terms, mandatory interest on late invoices, and — crucially — board-level accountability for companies that persistently drag their feet.
For freelancers, sole traders, and micro-businesses across the UK or overseas freelancers engaged by UK companies, you are no longer just a polite voice on the other end of a payment dispute. You now have the law squarely on your side.
FSB Policy Chair Tina McKenzie said:
Late payments are a blight on our economy, so FSB is pleased to have worked in partnership with the Government to deliver the toughest legislation in the G7. The new laws will finally bring a stop to big businesses using their small suppliers as sources of free credit.
What the new late payment rules say
The reforms build on the Late Payment of Commercial Debts Act 1998, which has existed for nearly three decades but has, in the words of many small business owners, been routinely ignored. The new package closes the loopholes that allowed big businesses to simply opt out of paying interest, manufacture disputes to reset payment clocks, or quietly pressure smaller suppliers into sweetheart terms that suited nobody but the payer.
The 60-day payment cap
Large businesses will no longer be able to impose payment terms beyond 60 days on smaller suppliers. Currently, a company can — and often does — write 90, 120, or even longer terms into contracts, leaving freelancers effectively acting as an interest-free bank. Under the new rules, 60 days becomes a hard ceiling. The plan is to reduce this further to 45 days after a five-year transition period.
Mandatory statutory interest — No more opting out
This is where things get particularly significant. Under the existing 1998 law, businesses technically had the right to charge 8% above the Bank of England base rate on late invoices — but clients could contract out of this by including alternative payment terms in their contracts. That loophole is being closed. Statutory interest will become mandatory across all commercial contracts, meaning there will be no legal way to waive it away.
What mandatory interest looks like in practice
- Invoice value: £10,000
- 60 days overdue
- Statutory interest owed (8% + base rate ) £193.15
- Fixed compensation owed: £100.00
- Total you are owed: £10,293.15
The Small Business Commissioner’s Office offers an interest calculator
A 30-Day dispute deadline
One of the most commonly-used tactics to delay payment is for a client to raise a dispute — often spurious — just as an invoice becomes due. This resets the clock entirely and can keep a freelancer unpaid for months. The new legislation proposes a 30-day limit on raising invoice disputes. If a client hasn’t flagged a problem within a month of receiving your invoice, the invoice stands. This is a significant protection.
The Small Business Commissioner gets real power
Previously, the Small Business Commissioner could largely offer advice, mediation, and the occasional public naming-and-shaming of poor payers. The new powers are of a different order entirely. The Commissioner will be able to investigate payment practices, conduct spot checks, compel disclosure of financial information, adjudicate payment disputes, and impose fines worth potentially tens of millions of pounds on companies that persistently pay late.
The trigger for investigation is proposed at companies reporting that 25% or more of their suppliers have been paid late. Fines will be based on unpaid statutory interest, and the government suggests penalties could be set at twice the amount owed in the most recent reporting period. For a large retailer or corporate client, that figure could be enormous. That is precisely the point.
Big firms using small suppliers as an interest-free overdraft, then calling it ‘working capital management’. If government wants this to bite, the question is enforcement, not headline rates.
–Rohit Parmar-Mistry, Founder, Pattrn Data, Burton-on-Trent
When do the rules come into force?
The honest answer is in stages, with some measures already active. Here is a clear timeline of what applies when:
October 2025: already in force
Suppliers bidding for public sector contracts worth over £5 million must demonstrate they pay their own suppliers within 45 days. If you’re a subcontractor to public sector prime contractors, this already protects you.
January 2026: already in force
Large companies are now legally required to include their headline payment performance data in their annual reports. This means you can look up your corporate client’s payment track record before signing a contract. Use it.
2026: legislation underway
The full reform package announced today, including the 60-day cap, mandatory interest, and Small Business Commissioner enforcement powers, requires primary legislation. This is expected to be brought forward during 2026, with implementation phased across 2026 and beyond.
Within 5 years, payment terms will be reduced to 45 days
The 60-day maximum payment cap is not the end goal. The government has committed to reducing this to 45 days following a further consultation period.
What this means practically is that some rights, such as charging statutory interest under the 1998 Act, already exist. The new legislation strengthens and enforces these rights. You should be writing interest clauses into your contracts now, not waiting for the new law to pass.
What to put in your contracts and invoices
Do not wait for legislation to protect you. The current law already gives you the right to charge statutory interest on late invoices — the problem is that most freelancers either don’t know this or don’t put it in writing.
- Ensure you request payment 30 days or less from date of invoice.
- You can, for example, ask for a deposit (say 25 -50% of the project fee) upfront to initiate dual commitment and the balance to be paid 7 business days from the date of invoice.
- Some industries, such as publishing, request contributors to file copy by a set date but say they can’t pay them until publication. This is a red flag. If you come across a company that proposes this as “their policy”, please alert the Small Business Commissioner’s office. Invoice as per the new regulations and rules, and ensure your contract is in line with these.
Here is the language you should be using today:
Suggested contract payment clause: Adapt as you see fit
Payment terms: All invoices are due and payable within [ X business days] from the invoice date.
Late payment interest: In the event that payment is not received by the due date, [Your Business Name] reserves the right to charge statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 at a rate of 8% per annum above the Bank of England base rate, accruing from the due date until payment is received in full.
Fixed compensation: In addition to interest, a fixed compensation charge will apply: £40 for debts under £1,000; £70 for debts between £1,000 and £9,999.99; and £100 for debts of £10,000 or more, as provided for under the Late Payment Act.
Invoice disputes: Any dispute regarding this invoice must be raised in writing within 30 days of the invoice date. Disputes raised after this period will not be considered grounds for withholding payment.
Debt recovery costs: [Your Business Name] reserves the right to recover reasonable costs incurred in recovering any unpaid sum, including legal fees.
📌Add this to every invoice footer
- State your payment due date clearly (e.g., “Payment due: 14 days from invoice date”)
- Add: Statutory interest applies under the Late Payment of Commercial Debts Act 1998
- State the interest rate: Interest accrues at 8% above the Bank of England base rate”
- Add fixed compensation: A compensation charge of [£40/£70/£100] applies to overdue invoices
- Include your bank details on every invoice — no client can claim they didn’t know where to send the money
- Number invoices sequentially — this creates an audit trail if you need to escalate
EU-based freelancers working with UK clients
If you are a freelancer based in France, Germany, the Netherlands, Spain, or elsewhere in the EU and you have UK business clients, these reforms matter to you directly. UK law governs contracts with UK businesses unless you have explicitly agreed otherwise in writing. The mandatory interest provisions, the 60-day cap, and the Small Business Commissioner’s new complaint mechanism all apply to cross-border B2B contracts where UK law is the governing law.
EU freelancers should ensure their contracts explicitly state that UK law applies and include the statutory interest clause above. You can also file a complaint with the Small Business Commissioner from outside the UK — the office handles complaints from any supplier to a UK-based business, regardless of where the supplier is located.
It is also worth noting that the EU has its own Late Payment Directive (2011/7/EU), which requires EU businesses to pay commercial invoices within 60 days (30 days for public authorities). If you are a UK freelancer working with EU clients, that directive may protect you — though the enforcement mechanisms are stronger under the new UK regime.
The human cost behind the statistics
The numbers are worrying for those not paid and the economy. Thirty-eight businesses are closing every day. Eleven billion pounds are lost annually to the wider economy. But behind those figures are:
- Freelancers who have had to choose between paying rent or a mortgage and chasing an overdue invoice
- Sole traders who have had to take on debt to cover the gap left by a client who simply chose not to pay
- Small business owners who have had to let staff go because a large corporate decided its cashflow mattered more than their debt obligations to suppliers
“For too many small businesses, late payment is death by a thousand excuses,” Kate Underwood, Founder of Kate Underwood HR and Training in Southampton, told the Newspage Agency.
She continued, “I’ve seen it far too often. Big firms drag their heels on paying because they know most small businesses haven’t got the spare cash, time or energy to take them on. And they rely on that. Meanwhile, the business owner is the one lying awake at stupid o’clock, juggling wages, suppliers and whether they can afford to keep going.”
Sarah Gatford of The Positivity Pathfinder & Head of Interactions, in Derby, told Newspage:
Late payment doesn’t just drain your bank account — it drains your belief in your business. Chasing, calculating, second-guessing whether to send that invoice reminder email or swallow the stress, again. Freelancers and sole traders aren’t a free credit line. We’re real people with real bills, running on real resilience, and that resilience has limits.
Steven Mather, Lawyer & Director at Steven Mather Solicitor in Leicester, said the new rules could be a real shift for small businesses, provided the Small Business Commissioner “actually gets stuck in, knee-deep, and helps enforce the changes.”
“If not, nothing changes,” he said, “a big business will bully a little business. Promises payment. Pays some, maybe 90+ days. Small businesses are still forced to take action in small claims courts that take 12–18 months to get anywhere, and at their own costs.”
The sceptic’s view: Will it actually work?
The reforms have been broadly welcomed, but experienced observers are quick to point out that the devil, as always, is in the enforcement. The Small Business Commissioner has historically had a staff of fewer than ten people. Giving an office that small the power to investigate the payment practices of the UK’s largest companies requires a significant budget increase. Something that previous governments promised but never delivered.
“The practical fix is boring: standardised e-invoicing, clear acceptance criteria, and a simple dispute process with deadlines. Late payment is often a process design choice, not an accident,” suggested Rohit Parmar-Mistry, Founder of Pattrn Data in a NewsPage report.
If government wants this to bite, the question is enforcement, not headline rates. A 60-day cap and mandatory interest helps, but the usual loophole is to manufacture disputes, reset the clock, or quietly pressure suppliers to accept ‘early pay’ schemes that skim margin.
The Small Business Commissioner’s new powers will only matter if it is fast, public, and willing to embarrass repeat offenders. Fines are good, but naming the board that signed off the behaviour changes incentives… But the real test will be whether the Commissioner’s office has the resources and the appetite to call out repeat offenders publicly and pursue fines aggressively.
-Parmar-Mistry, Founder of Pattrn Data
Parmar-Mistry’s observation is worth pondering. Many of the most common late-payment tactics, such as manufacturing spurious disputes, resetting payment clocks, quietly pressuring suppliers into early-payment discount schemes that effectively reduce their margin, are as he sees it, “procedural, not accidental.” The new dispute deadline of 30 days is a direct response to the manufactured-dispute problem.
Business Secretary Peter Kyle was, however, direct about the government’s intent: “We are unveiling the strongest, most robust changes to payment laws in over a generation — laws that will transform the fortunes of small businesses for years to come.”
FSB Policy Chair Tina McKenzie welcomed the reforms but struck a note of continued pressure:
Paying in 60 days is not prompt — but strengthening that as the absolute maximum cap after years of dithering is a good step towards encouraging payments in 30 days across all supply chains.
Freelancer action checklist: Effective immediately
- Update your contract template to include the statutory interest clause, 30-day dispute deadline, and fixed compensation language (see template above)
- Set your payment terms to 30 days as standard; do not volunteer 60 days, even though it will be the legal maximum
- Add interest and compensation language to every invoice footer since it signals you know your rights and will enforce them
- Look up your large clients on GOV.UK— companies in the scope of the Payment Practices Reporting Regulations publish their payment records twice yearly. Search at gov.uk/check-when-businesses-pay-invoices
- Send invoices immediately upon completing work; don’t let the 30-day clock start late
- Follow up in writing 10 days (or less if you have shorter payment terms) before the payment is due with a polite written reminder with your company logo, etc. This creates a paper trail and signals you are on top of it
- If, at day 31, payment has not been made, formally notify the client in writing that interest is now accruing under the Late Payment Act
- File with the Small Business Commissioner if payment remains outstanding — the Commissioner recovered three times more overdue invoices in 2025 than in 2024
- EU-based freelancers: Make sure your contract specifies UK law as governing law and includes the statutory interest clause
For decades, large companies have treated payment terms as a negotiating chip and sole traders as an easy target — betting, correctly, that most freelancers would absorb the cost of late payment rather than pursue it through courts. These reforms are designed to change that calculation, making late payment expensive, visible, and — thanks to mandatory board-level reporting — genuinely embarrassing at the highest levels of a company.
Minister for Small Business Blair McDougall said:
These are genuinely game-changing measures that will ensure no business, no employer, no family has to endure the immense strain of being left strapped for cash they have already earned.
The question every freelancer should now be asking is not whether these reforms will help — they will — but whether they are doing everything possible, right now, to protect themselves under the laws that already exist, while the new legislation works its way through Parliament. The contracts you send out this week are the ones that will set the terms for the months ahead.
