The day late payments stopped being legal

Small Print standalone | Publishing Thursday 2 July 2026

Small Print covers contracts, not policy. But when the law governing your contracts is about to change, that is contract literacy. Here is what the Small Business Protections Bill does, and what you should do before it comes into force.

On 13 May the King’s Speech promised it. On 19 May 2026 the government introduced the Small Business Protections Bill, formally the Commercial Payments Bill. The govenrment has described it as “the toughest late payment regime in the G7.”

Here is what it would do for the freelancer, the founder, the SME, and what to do before it comes into force.

One thing before we start. This is information, not legal advice. The bill is not law yet, and the detail may change. I will flag where it matters.

For twenty years, the answer to “what can I do about a late payment?” has been a small one.

• You could send a polite reminder.

• You could send a less polite one.

• You could threaten the Late Payment of Commercial Debts (Interest) Act 1998, statutory interest at 8% above base rate, and fixed compensation: £40, £70 or £100 depending on the size of the debt.

• You could chase.

• You could wait.

• You could write off the invoice and the relationship and learn to spot the client who was always going to do this earlier next time.

What you could not usually do, in practice, was make the law feel commercially useful.

That may be about to change.

What the bill actually does

The Small Business Protections Bill was introduced to Parliament on 19 May 2026. It is the most significant piece of UK commercial payments legislation in a generation. It does five things.

1. A hard 60-day cap on payment terms

The bill would introduce a statutory maximum payment term of 60 days for large businesses paying smaller suppliers. For public authorities, the 30-day position remains.

Any contractual term that tries to go beyond the new cap, i.e. Net 75, Net 90, “120 days from end of month following invoice”, would be void.

Contracts with no payment term are already treated, under the late-payment regime, as payable within 30 days. The bill keeps the direction of travel very clear, making cler that payment terms cannot be used as free working capital for bigger buyers.

There are limited exemptions, including where both parties are large businesses, where the purchaser is the smaller party, and where goods or services are being imported or exported. Those exemptions do not help most freelancers and SMEs dealing with larger domestic clients. They are not the problem this bill is solving.

If you are the smaller party being paid by a larger UK client, none of these exemptions apply to you.

What it means in plain English: the days of larger clients writing “Net 90” into standard terms and expecting smaller suppliers to absorb the cashflow cost are numbered. If the bill passes in its current form, those terms will not work where the new cap applies.

2. Mandatory 8% statutory interest, and you cannot contract out of it

Statutory interest at 8% above the Bank of England base rate on late payments already exists. The change is that, under the bill, it becomes mandatory.

Under the bill, a client cannot draft around it, offer you a lower rate in the contract, impose conditions on your right to claim, or delay the date that interest accrues.

Any clause that tries would be void.

What it means in plain English: late payment becomes more expensive for the client by default. Not because you negotiated brilliantly. Because the statute says so.

3. The “use it or lose it” rule on invoice disputes

The bill introduces a statutory deadline for raising a payment dispute.

If a client wants to dispute an invoice, they must do so at least 8 days before the payment due date, with enough detail for you to understand the basis of the dispute.

If they miss that deadline, or the dispute is not specific enough, the bill gives you a right to a fixed sum: the higher of £40 or 1% of the disputed amount.

There is a carve-out. This provision does not turn a bad invoice into a payable one, but it does make vague, tactical, last-minute disputes much less comfortable for the client.

What it means in plain English: the “we’ll get back to you” tactic, where a client raises a vague concern at the last minute to delay payment, becomes financially expensive for the client. The asymmetry of cost starts to move.

4. The 30-day acceptance trigger

Payment terms often start running from a contractual milestone, usually completion of an “acceptance” or “verification” procedure.

The bill says that procedure is treated as completed within 30 days unless it is fair and reasonable for a longer period to apply.

What it means in plain English: the “we haven’t signed off yet, so payment terms haven’t started” clause, common in SaaS, software, design, and consulting contracts, gets a built-in time limit. The clock cannot be paused indefinitely just because the buyer has not got around to approval.

5. The Small Business Commissioner gets teeth

The Small Business Commissioner has existed since 2017. Most freelancers have never heard of it. That is about to change.

Under the bill, the SBC gets:

• The power to adjudicate payment disputes between small and larger businesses outside the court process

• The power to investigate payment practices of larger organisations without needing a complaint first

• The power to issue enforcement directions requiring a company to pay or change practice

• The power to impose financial penalties for non-compliance

• The power to publish payment-practice data

What it means in plain English: you get a stronger route than chasing alone, especially where the problem is a larger client with poor payment practices. For the first time, there is an office being given real enforcement tools for the payment problem businesses your size actually face. The deterrent shifts from theoretical to operational.

Three things this does not fix

It does not automatically fix old contracts. The bill is not retrospective. Payments, contracts and disputes will be judged by the rules in place at the relevant time. If you have a Net 90 contract from 2024 still running, do not assume the law quietly rewrites it for you. That is a contract to renegotiate at the next natural break point.

It does not make non-payment impossible. Clients who refuse to pay will still exist. What the bill changes is what they pay when they finally do, and what it costs them to delay.

It does not yet have a commencement date. The bill was introduced on 19 May 2026. It still needs to pass through Parliament, secure royal assent, and have its commencement regulations and transition period confirmed before the key measures have legal effect. The direction is clear. The date is not.

What to do before it comes into force

Five things. None of them require a lawyer.

1. Audit your existing contracts

Pull every active contract you have. Find the payment term clause. Note the number of days. Make a list of every contract that exceeds 60 days.

Those contracts may not automatically become non-compliant. They predate the law, but they are the contracts you most want to renegotiate at the next natural break point.

2. Update your standard contract template

If you send your own contracts — and most freelancers do, in the form of quotations, terms of business, statements of work — update them now.

• Payment term: 30 days from invoice (clearer and more supplier-friendly than the statutory backstop)

• Interest clause: reference the statutory regime explicitly. “Late payment will incur statutory interest at 8% above the Bank of England base rate, plus any compensation or fixed sums available under applicable late-payment legislation.”

• Acceptance clause: if you have one, add a 30-day longstop. “Acceptance will be deemed complete 30 days after delivery unless written notice of non-acceptance is given before that date.”

3. Write down what a “dispute” looks like

Every contract should now specify what counts as a valid dispute. A client cannot weaponise vagueness if your contract has defined the terms.

Suggested clause: “Any dispute relating to an invoice must be notified in writing at least 8 days before the payment due date, must specify the disputed amount and the basis of the dispute, and must include the contractual or factual ground for the dispute.”

This mirrors the bill’s direction of travel and pre-empts any “we’ll dispute it whenever we feel like it” behaviour.

4. Familiarise yourself with the Small Business Commissioner

If you have a payment problem with a larger client, that office is the one to know. It is currently underused. That is going to change.

Bookmark smallbusinesscommissioner.gov.uk. Read what they do. Note the complaint process.

For many freelancers and SMEs, this is the first time a UK regulator has been given teeth around your specific problem. Use it.

5. Have the conversation now, not later

The clients who currently pay you in 90 days, 75 days, or “when we get round to it” know this bill is coming. The good ones will renegotiate proactively. The bad ones may try to keep you on the old terms until the law forces their hand.

If you have a client whose payment behaviour you would not accept under the new regime, raise it now. Frame it as commercial fairness, not legal threat. Most reasonable clients will at least understand why you are asking to align with the incoming legislation early. The ones who refuse have told you something important about themselves.

The wider point

For two decades, UK freelancers and SMEs have been quietly subsidising larger businesses’ cashflow. Late payments cost the UK economy almost £11 billion a year. Over 1.5 million businesses are affected. Around 38 businesses close every day because money they have earned does not arrive on time.

The Small Business Protections Bill is not a complete solution. There will be loopholes, exemptions, transition rules, and clients who simply break the rules and gamble on enforcement being slow. But it is the single biggest shift in the contract balance for non-lawyers in twenty years.

The contracts you sign now, the ones written into a regime that is about to change, will look different from the contracts you sign once the new rules are in force. You can be ready for that, or you can be caught by it.

Be ready.

Louise

Writer, Small Print · Founder, BeforeYouSign

beforeyousign.uk