The Commercial Payments Bill: what the late-payment crackdown means for small businesses
The Commercial Payments Bill - announced by the government as the Small Business Protections Bill - entered Parliament on 19 May 2026 - the government calls it the biggest crackdown on late payment in over 25 years. As introduced, it would cap business-to-business payment terms at 60 days and make statutory interest at 8% plus the Bank of England base rate a non-negotiable right that contracts cannot water down. It is not yet law: no commencement dates exist, and today’s rules apply until they do. Here’s what’s actually in it, what got dropped, and what to do while you wait.
What the Bill would change
A statutory cap on payment terms. Business-to-business contracts could not impose payment terms longer than 60 days. Today, there is no hard cap - a large customer can (and often does) put 90- or 120-day terms in front of a small supplier who isn’t in a position to argue.
Statutory interest becomes non-excludable. This is the quiet one that matters most. Under the current Late Payment of Commercial Debts (Interest) Act, a contract can substitute its own late-payment remedy as long as it amounts to a “substantial remedy” - which in practice lets stronger parties write the statutory rate out of the deal. The Bill would void any term that varies or excludes the right to statutory interest at 8% plus the Bank of England base rate. Every commercial contract would carry the same floor.
What got dropped
The government’s earlier ambition to bring the cap down further - to 45 days - was shelved after consultation, on cash-flow and competitiveness grounds. If your debtors are quoting the 45-day figure back at you from early coverage, it isn’t in the Bill as introduced.
What it doesn’t fix
A cap on payment terms is not a cap on late payment - a debtor who ignores a 60-day term is in exactly the position of a debtor who ignores a 30-day term today: in breach, accruing interest, and needing to be chased. The Bill strengthens your paper position; it doesn’t collect anything. The escalation ladder - chaser, statutory-interest demand, letter before action, then professional recovery - is untouched.
What to do now (don’t wait for the Bill)
- Claim what you’re already owed. The current Act has entitled you to 8% plus base and fixed compensation of £40–£100 per invoice since long before this Bill - the free late-payment calculator does the sums and generates the letter.
- Read your standard terms. If your contracts substitute a weaker late-payment remedy (or your customers’ terms do), that’s exactly the clause the Bill would void - and a negotiation point today.
- Don’t let the news cycle slow your chasing. A debtor “waiting to see what the new rules say” is drift with a press release attached. The six-year clock on your existing invoices keeps running.
If chasing has stopped working, compare vetted debt recovery agencies - blind, on merit, and free for creditors, because the agency you choose pays for the introduction - or let us match you to the best fit for your case.
General information, not legal advice. The Bill’s content described here is as introduced in May 2026 and may change before it becomes law.
Frequently asked questions
What is the Commercial Payments Bill?
A Bill introduced to Parliament on 19 May 2026 (announced by the government as the Small Business Protections Bill) that the government has called the biggest overhaul of late payment law in over 25 years. As introduced, it would cap business-to-business payment terms at 60 days and make statutory interest on late payment non-excludable - contract clauses that try to swap in a weaker rate would be void. It is not yet law; the current rules still apply.
Will payment terms be capped at 60 days?
That's what the Bill proposes: a statutory cap of 60 days on business-to-business payment terms. An earlier ambition to bring the cap down to 45 days was shelved after consultation. Until the Bill passes and the relevant provisions are commenced, no cap applies beyond what your contract says.
Can a contract still exclude statutory late-payment interest?
Under current law, a contract can substitute its own late-payment remedy provided it's a 'substantial remedy'. The Bill would change that: the right to statutory interest at 8% plus the Bank of England base rate would become non-negotiable, and terms varying or excluding it would be void. Until then, check what your contracts actually say.
When do the late payment reforms take effect?
No commencement dates have been announced. The Bill entered Parliament in May 2026 and the government has indicated a phased introduction. The practical position today is unchanged: the Late Payment of Commercial Debts (Interest) Act 1998 applies as it always has - and you can claim under it right now.