The UK is closer to new rules on late bills. The Commercial Payments Bill cleared the House of Lords on 20 October 2026. It reached the House of Commons on 21 October. It now awaits its second reading.
The Bill aims to help small firms get paid. A public review drew 867 replies. But it is not law yet. Its new rules do not apply today.
Why Is This News Important for UK SMEs?
Late bills can leave firms short of cash. Staff still need to be paid. Suppliers still need their money.
UK government research from 2025 puts the cost at almost £11 billion a year. Firms are owed about £26 billion at any one time. Over 1.5 million firms face late bills each year.
The study links late payments to 14,000 firms closing each year. That is 38 a day. Firms that used staff time to chase bills spent 86 hours a year on average.
What New Late Payment Rules Does the Bill Propose?
Payment terms: Most covered private deals would have a 60-day limit. Some deals are exempt. A term above the cap would be void. A 30-day term could take its place. Public bodies would face a 30-day cap, as many do now.
Late interest: Late bills can draw interest now. The rate is 8 percentage points above the Bank of England base rate. The Bill would stop buyers using contract terms to avoid it.
Invoice disputes: Buyers would need to raise most disputes by the start of eight days ending on the due date. They must give enough detail. If not, the supplier may claim a fixed sum. This is the higher of £40 or 1% of the sum in dispute. Exceptions apply.
Enforcement: The Small Business Commissioner could check repeat, late payers. It could also settle some disputes. Some breaches could lead to fines of up to 1% of a large firm’s annual turnover. Large firms would report interest owed and paid. Boards with poor payment records would need to say why.
Construction: A phased ban would stop firms from keeping back retention funds. The draft gives firms two years before the ban on new clauses.
When Could These Rules Take Effect?
The Bill must still pass the Commons and gain Royal Assent. If it passes, most rules may start in late 2027 or early 2028.
The construction ban has its own start date. The new rules will not apply to past deals or debts.
What Should Firms Do Now?
Check payment terms in your contracts. Send clear bills. Track late debts. Act fast on invoice disputes and unpaid sums.
If passed, these rules could mean interest, extra fees, or fines for firms that ignore them. Do not wait to fix cash gaps.
How Can LANOP Help SMEs Prepare for the New Late Payment Rules?
The proposed Commercial Payments Bill could change how UK businesses manage customer payments, unpaid invoices, and payment terms. For SMEs, this means keeping clear financial records and having a reliable process to deal with late payments before they affect daily operations.
At LANOP Business & Tax Advisors, we help businesses review outstanding invoices, track overdue payments, and improve cash flow planning. We can also help you review your current payment processes, maintain accurate financial records, and identify gaps that may cause delays or disputes.
As the Bill moves through Parliament, businesses should start reviewing their payment terms and credit control procedures. Our team can help you understand the financial impact of delayed payments and prepare your accounting processes for the proposed changes, while keeping your business finances on track.
