What the UK’s New Late Payment Laws Mean for Businesses in 2026

Late payment has been a long-standing challenge for UK businesses – particularly SMEs managing tight cash flow and limited internal resources.

In March 2026, the UK government announced what it described as the biggest crackdown on late payments in over 25 years, introducing significant reforms designed to protect smaller businesses from persistent late payers. 

For businesses regularly dealing with overdue invoices, these changes are significant.

But while the reforms are positive, they do not remove the need for businesses to actively manage overdue accounts and take action when payments continue to stall.

What changes are being introduced?

The government has announced several major reforms, including:

A new 60-day payment cap

Large businesses will no longer be able to impose excessively long payment terms on smaller suppliers. A maximum payment term of 60 days will apply in most circumstances. For many SMEs currently operating on 90-day or even 120-day terms, this is a significant shift.

Mandatory interest on late payments

One of the biggest changes is that statutory interest on late payments will become mandatory. This means businesses that pay late may automatically face interest charges of 8% above the Bank of England base rate.

Historically, many suppliers have chosen not to enforce this right in order to preserve relationships. These reforms may change that dynamic.

Greater powers for the Small Business Commissioner

The Small Business Commissioner will receive stronger enforcement powers, including the ability to:

This introduces greater accountability for businesses that repeatedly delay payments.

What this means for businesses owed money

While these reforms are welcome, they do not automatically solve late payment issues.

Businesses may still face:

And many businesses will still need to actively seek to recover overdue balances.

Legal rights are only valuable when they are acted on.

How Lovetts supports businesses dealing with late payers

At Lovetts we act on behalf of businesses recovering overdue debts – helping clients move matters forward when internal processes are no longer delivering results.

From Letters Before Action through to formal legal recovery where necessary, we help businesses assess the most effective route based on their specific circumstances.

While the new legislation is a positive step, businesses still need clear recovery strategies when payments continue to stall. And that’s where experienced legal support can make the difference. 

8 May 2026