Late payment crackdown: where the Commercial Payments Bill has got to

This article is for business owners who wait 60, 90 or more days to be paid by bigger customers, and want to know when the law will change and what to do in the meantime. The Commercial Payments Bill, which the Small Business Commissioner calls the Late Payments Bill, is moving through Parliament. Below we set out where it has got to, what it would change and how to fund the gap until it takes effect. Smart Funding Solutions is a broker, not a lender: we compare whole-of-market options, arranging funding from £10,000 to £20 million.

01Where the Bill has got to

The Bill started in the House of Lords. According to the UK Parliament bill tracker, it has passed these stages so far:

• First reading: 19 May 2026.
• Second reading: 9 June 2026.
• Committee stage: 21 July 2026.
• Report stage: 15 September 2026.
• Third reading: 20 October 2026, completing its Lords stages.

Update, 22 October 2026: the Bill has now been brought from the House of Lords and is in the House of Commons, published as Bill 166 on 21 October 2026, according to the UK Parliament bill page. No date has yet been shown for its Commons second reading.

In the Commons, the Bill has its own readings and committee stage, then goes to Royal Assent. In a recent update on the Bill, the Small Business Commissioner said the ideal is for the Bill to pass both Houses by the end of 2026 or early 2027, and that secondary legislation usually takes three to four months after Royal Assent before an Act takes effect. Gowling WLG expects the provisions to take effect in mid to late 2027, so the new rules will not change your invoices for some time yet.

02What the Bill would change

The Small Business Commissioner's summary, Late Payments Bill: what it could mean for your business, sets out the main measures:

• A 60-day cap on payment terms when large businesses pay smaller suppliers, with limited exemptions.
• Mandatory interest on late payments at 8% above the Bank of England base rate.
• A time limit for disputing invoices, so a customer cannot raise a query at the last minute to delay payment.
• New powers for the Small Business Commissioner to investigate poor payment practices, with investigations that could lead to serious fines, and a legal right for small businesses to adjudication.
• A ban on retentions deducted and withheld under construction contracts.

Law firm Gowling WLG's analysis of the Bill adds detail on the current draft: a 30-day cap where the customer is in the public sector, fines of up to 1% of turnover, and a penalty of 1% of the disputed amount or £40, whichever is higher, where an invoice is disputed less than eight days before it is due. These details could still change as the Bill goes through the Commons.

03What 8% above base rate means for your invoices

Businesses already have a right to statutory interest on late commercial payments, but contracts can set a lower rate. Gowling WLG notes that contractual rates are typically 2% to 4% above base. The Bill would make any term that excludes, reduces or varies the statutory rate void.

The Bank of England held Bank Rate at 3.75% on 17 September 2026, so 8% above base works out at 11.75% a year. On a £20,000 invoice paid 30 days late, that is roughly £190 of interest. It is a real deterrent for large customers, but it does not put cash in your account on the day you need to pay wages or suppliers. Our guide to chasing late payments covers how to claim interest and recover debts today.

04Why late payment still matters for cash flow

The Small Business Commissioner says late payments cost the economy £11 billion a year and that an average of 38 businesses close each day as a result of late payment. Until the new rules are in force, long payment terms remain legal and common in many supply chains.

A business can be profitable on paper and still run short of cash because its money is tied up in unpaid invoices. That gap is what working capital loans and invoice finance are designed to bridge.

For the latest official figures on late payment, cash flow and SME lending in one place, with a link to each source, see our UK small business and SME finance statistics.

Businesses already have a right to statutory interest on late commercial payments, but contracts can set a lower rate.

05How to fund the wait until the law changes

Invoice finance releases cash against invoices you have already issued, often within days of raising them. The main types are:

• Invoice factoring: the lender advances funds and runs your credit control, collecting payment from your customers.
• Invoice discounting: you keep control of collections, and customers need not know a lender is involved.
• Selective invoice finance: fund one invoice or one slow-paying customer, rather than your whole sales ledger.
• Construction invoice finance: built for applications for payment and staged contracts, where retentions and long terms bite hardest.

Our invoice finance hub compares each option, and our guide to how much invoice finance costs explains service fees and discount charges. If your customers are consumers rather than businesses, a revolving credit facility can play a similar role.

06How to compare your options

1. List your unpaid invoices by customer and age. Lenders look closely at who owes you money, not just how much.
2. Run your figures through our invoice finance calculator to see what could be released.
3. Use Instant Quotes to see your lender matches instantly, with no credit check.
4. Compare offers on the total cost, the notice period and whether customers will know about the facility.

The new law should make late payment rarer and costlier for large customers, but it is still some way off. Get your Instant Quotes to see which lenders could free up your cash now. Lenders make every decision, and all finance is subject to status.