The government has confirmed what it’s calling the toughest crackdown on late payments in over 25 years, and for the many UK small businesses that have quietly written off late invoices as a cost of doing business, the rules are finally changing in their favour. The reform is working its way through the legislative process now, with implementation expected later this year or in early 2027 — which makes this the right moment to understand what’s coming, not after it’s already law.

Late payment isn’t a minor irritant for most small businesses — it’s a cash flow crisis waiting to happen. Chasing invoices, delaying supplier payments in turn, and dipping into overdrafts to cover the gap are all symptoms of a problem that larger firms have historically been able to push downhill onto smaller ones with far less leverage to push back.

What’s actually changing

Maximum payment terms will be capped at 60 days, a hard limit on how long a client can legally sit on an invoice before paying it. Alongside the cap, mandatory interest on late payments is being introduced: unpaid invoices will attract statutory interest at 8% above the Bank of England base rate, automatically, without the small business having to negotiate or threaten legal action to secure it.

A new 30-day invoice verification deadline is also coming in. Clients will be required to confirm or formally dispute an invoice within a month of receiving it, closing off the common tactic of simply going quiet on an invoice to buy extra time without ever formally rejecting it.

Perhaps most significant for smaller firms without the resources for lengthy legal disputes: the Small Business Commissioner is getting substantially expanded powers, including the ability to investigate poor payment practices, adjudicate disputes directly, and fine persistent offenders — with penalties potentially reaching into the tens of millions for the worst cases. Businesses will be able to escalate unpaid interest claims to the Commissioner and get them resolved through adjudication rather than the courts.

Why this hits small suppliers hardest

Large clients have historically had the leverage to dictate payment terms simply because a small supplier can’t afford to walk away from the relationship, even when payment is consistently slow. That imbalance is exactly what the reform targets — not by banning long contracts outright, but by making it financially uncomfortable for a client to sit on an invoice past the deadline, with interest accruing automatically rather than only when a small business has the time and appetite to chase it.

The 30-day verification deadline closes a particularly common loophole. Plenty of small businesses have experienced an invoice going unanswered for weeks, with no formal dispute raised and no payment made, leaving them unsure whether to chase, wait, or write it off. Once a client is required to either confirm or formally dispute an invoice within 30 days, that grey area disappears — silence will no longer be a viable delay tactic.

What to do now, before the rules land

Review your standard contract terms and check what payment period you’re currently specifying. If it’s longer than 60 days, or vague, this is worth tightening up now so your paperwork already matches the direction of travel.

Start recording late payments properly — dates invoiced, dates paid, and any communication about delays. When the new interest and Commissioner powers come into force, businesses with a clear paper trail will be in a far stronger position to claim what they’re owed without a drawn-out dispute.

If your invoicing and contract terms live in scattered spreadsheets and email threads, this is also a good moment to get them properly documented. Smallprint provides straightforward legal templates that make sure your payment terms are clearly and correctly stated from the outset, which matters far more once statutory interest and formal disputes are involved.

The takeaway

For years, chasing a client for payment has meant weighing the cost of the fight against the size of the invoice. These reforms are designed to tip that calculation back in favour of the business that did the work and is owed the money — but only if your own paperwork and payment records are in good enough shape to use them.