Time to Pay Up: Government unveils toughest crackdown on late payments in over 25 years
Small businesses to be backed by new, stronger measures to tackle late payments.
- UK is backing听small businesses听with听the听toughest听laws听on听late payments听in the G7听
- Sweeping new powers for the Small Business Commissioner, including听multi-million-pound听fines听to听hold听big听businesses听and persistent offenders听to account听
- Measures will help tackle cost of living for entrepreneurs and SME owners by ensuring they are paid on time听and听prevent the abuse of retention听payments听in construction
Small businesses will be paid on time 鈥撎齮hat鈥檚听the听clear听message听from government听today听[24 March]听as听it听cracks down on听late payments, with听the largest set of reforms听in听over a听generation.听
The Small Business Commissioner will be given听sweeping听new powers to investigate poor payment practices,听adjudicate听payment disputes, and fine the worst offenders 鈥� with fines worth tens of millions听for firms that persistently pay late or听fail to听comply with听the new laws.听
The听measures听will听tackle a problem听costing听the UK economy 拢11 billion听every听year and听ease the cost of living for听entrepreneurs and SME owners听who are often forced to wait months听鈥撎齩r听even years听鈥� to听receive money they have already听earned听and having to chase endlessly to receive it.听
Some听38 businesses听shut their doors every single day because they are not paid on time 鈥� the equivalent of听266 a week,听and听well over a thousand in any given month.听听
Every small business owner, including tradespeople, freelancers, family firms and the self-employed,听have to听waste time and money chasing unpaid invoices when they could be growing their business.听
These measures, which will be the toughest in the G7, build upon and strengthen legislation on听late payments, first laid out in the 1998 Late Payment of Commercial Debt Act, over 25 years ago. They go further than any听previous听government and will boost our economy and give small businesses better cashflow.听
The听changes will include a听new听60-day听cap on payment terms听on all large firms when paying smaller suppliers.听New听mandatory interest on听late payments听will听also听be introduced, with a requirement for all commercial contracts to include statutory interest set at 8% above the Bank of England base rate.听听听
For听example, if a small business is owed 拢10,000 by one of its customers and is paid 60 days later than the agreed payment date, they will be owed 拢10,293.15 including mandatory interest (拢10,000 plus 拢193.15 interest plus 拢100 compensation).
We also propose to ban the withholding of retention听payments听under the terms of construction contracts, consulting on its implementation.听This will prevent small firms losing retentions to insolvency or non-payment.听
Business Secretary Peter Kyle said:听
Far too many businesses are forced to shut down because they have not been paid 鈥� that is simply unacceptable.听
We are unveiling the strongest, most robust changes to payment laws in over a generation 鈥� laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.
After working closely with the Federation of Small Businesses, boards or audit committees of persistently听late-paying large companies will听be required听to publish explanations for poor payment performance and the actions they are taking to address it.听
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.听 The new laws will finally bring a stop to big businesses using their small suppliers as sources of free credit.
For the first time, audit committees and boards will question and challenge poor payment performance, publish it in annual reports for all to see, and put it right.听 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.听 Improving the Small Business Commissioner鈥檚 powers will also help, mandating CEO鈥檚 of Britain鈥檚 poor payers to take the phone call.
This is real progress, and we鈥檒l keep working with the Government to make sure new laws are brought in as soon as possible.
Minister for Small Business and Economic Transformation, Blair McDougall said:听
I know first-hand how difficult听late payments听can be, forcing you to decide if you can afford to keep a business running, pay employees or even buy听Christmas听presents for your children.听
That听is why听I鈥檓听proud to be leading the charge on tackling a problem that has been left untouched for far too long.听听
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听they have already earnt.听
Emma Jones CBE, Small Business Commissioner said:听
We are on a mission to make life easier for small firms by getting money moving faster through the economy by tackling听late payments.
The measures the Government has announced today will strengthen the role of my office in taking on the worst payers alongside ensuring small businesses have a stronger voice on payment terms and听late payment听interest.
These reforms will reduce the hours spent chasing debt allowing small businesses to focus on more productive and enjoyable growth.
Right now, some small businesses have more cash in the bank because the Small Business Commissioner recovered three times more overdue invoices in 2025 than in 2024. We will bring this benefit to the whole economy.听
Today鈥檚 measures follow the听launch听of the Small Business Plan听by the Prime Minister last year, which in addition to laying out late payments plans, also launched the Business Growth Service, which is already transforming the government support offer for small firms, and increased access to finance for SMEs and entrepreneurs with a massive 拢4 billion finance boost.听
This is a more interventionist government, backing the British business community with landmark reforms that will also help to control inflation and make our economy more resilient from global shocks.听
Debbie Williams, co-founder of John Williams Heating Services, said:听听
As a family-run business that has served our community for more than 20 years, we see first-hand the strain that听late payments听place on small companies. Cashflow pressures听don鈥檛听just affect the balance sheet 鈥� they听impact听our ability to take on apprentices, invest in听training听and continue providing reliable service to local families.听听
We welcome the Government鈥檚 focus on tackling听late payments, as听timely听and fair payment practices are essential for the stability and growth of businesses like ours.听
NOTES TO EDITORS听
Late payments听research:听听听
This听government is backing small businesses听across the board. We are:听
- Halving childcare costs for small business owners and employees.听
- Putting more money in customers鈥� pockets by taking 拢150 off energy bills, and freezing rail fares and prescription charges.听
- Offering new incentives of 拢2,000 for SMEs who hire foundation apprentices aged 16-21, on top of a complete NICs exemption for employees under 21 and apprentices under 25.听
- Raising the rate when small businesses start to pay national insurance.听
- Slashing electricity prices for thousands of manufacturing businesses.听
- Making training for under-25 apprenticeships free for small businesses.听
- Doubling eligibility for听enterprise tax incentives听to help fast-growing firms attract investment and talent.听
- Slashing red tape to boost our pubs,听bars听and cultural venues