Mandatory 60-Day Payment Terms and Claiming Your Statutory Interest on Late B2B Invoices

Two rules are often confused. Under the Late Payment of Commercial Debts (Interest) Act 1998, payment terms in business-to-business contracts should normally be no longer than 60 days. Businesses can expressly agree a longer period, but it must not be grossly unfair to the supplier. Separately, qualifying late commercial debts can attract statutory interest at 8% above the Bank of England base rate. With Bank Rate currently at 3.75%, the statutory rate is 11.75% a year, alongside fixed compensation of £40, £70 or £100 depending on the size of the debt.

Statutory interest does not always apply where the contract already provides a different contractual interest remedy, so check the agreed terms before calculating a claim. A stricter statutory regime is progressing through Parliament, but it is not yet law.

What the 60 day rule actually says today

The common belief is that 60 days is an absolute ceiling under the current rules. It is not. For commercial transactions, parties can expressly agree payment periods longer than 60 days provided the arrangement is not grossly unfair to the supplier.

Whether a longer term is grossly unfair depends on the circumstances, including whether it significantly departs from good commercial practice without objective justification and the relative bargaining positions of the parties. Signing a customer’s 90 or 120-day standard terms therefore does not automatically settle the issue if those provisions are legally challengeable.

Getting your own paperwork right remains the best starting point. Our guides to writing watertight terms and conditions and contract clauses that reduce late payment cover the wording businesses should consider.

Claiming statutory interest and compensation

Where no payment date has been agreed, a payment generally becomes late 30 days after the later of receiving the invoice or receiving the goods or services.

You may also be able to recover reasonable debt recovery costs where those costs exceed the applicable fixed compensation amount. The GOV.UK guidance explains the current rules. Our note on how to claim statutory interest on late payments covers the practical process.

At the current 11.75% statutory rate, a £20,000 qualifying debt remaining unpaid for 90 days after its payment date would accrue approximately £579.45 in simple statutory interest, or about £6.44 per day, plus £100 fixed compensation where the statutory regime applies.

Interest is useful leverage, particularly when the debtor understands that the amount continues increasing each day. Businesses should, however, check whether their contract contains its own late-payment interest provisions before assuming that the statutory rate can be claimed.

What the Commercial Payments Bill would change

The Commercial Payments Bill was introduced in the House of Lords on 19 May 2026 and received its second reading on 9 June. It completed committee stage on 21 July 2026, when 30 government amendments were agreed, and report stage is scheduled for 15 September 2026. It has not received Royal Assent and its proposed measures are therefore not yet in force.

If enacted in its current form, the Bill would create a much firmer maximum payment-term regime. Relevant business payments would generally have a maximum contractual period of 60 days, while public authorities would generally face a 30-day maximum. A term attempting to exceed the applicable limit would be void, and where no valid payment term remained, a 30-day term would generally be implied.

The Bill also contains provisions allowing specified contracts to be exempted from those maximum periods through regulations, including potential size-based exemptions subject to statutory conditions.

It would also make statutory interest significantly harder to contract out of. Contract terms seeking to exclude or vary the statutory interest entitlement would generally be void.

Another proposal concerns late payment disputes. For most non-construction contracts, a purchaser who raises a relevant dispute too late, or fails to give enough information for the supplier to understand it, could become liable for an additional fixed sum. Under the current Bill, the deadline would generally fall seven days before the relevant payment date, subject to an exception for particularly short payment periods.

The House of Lords Library briefing explains the original Bill, while our guide to what the Small Business Protections Bill means for getting paid on time gives the commercial context.

One point is particularly important for contract reviews: the current Bill states that its principal new payment-term, statutory-interest and dispute provisions would not apply retrospectively to contracts entered into before the relevant provisions come into force. Review new and renewed agreements now, but do not assume an existing long-term contract would automatically be rewritten by the legislation.

When interest is not the answer

Statutory interest is leverage, not a complete recovery strategy. If a customer has stopped responding, adding interest to a balance they already ignore may achieve little. At that point, consider the escalation triggers in when to escalate an invoice.

Get formal correspondence right using writing a debt collection letter, and where a genuine query has been raised, follow our step by step approach to disputed invoices rather than leaving the issue unresolved.

Prevention remains better than enforcement. Run a business credit check before extending substantial terms, monitor the ledger through aged debtor reporting that drives action, and consider outsourced credit control where nobody internally owns the weekly collection process.

Construction contracts have additional statutory payment rules, covered under construction debt recovery. Cross-border contracts require separate analysis because UK statutory late-payment rights do not automatically govern every overseas transaction; that is where international debt collection advice can help.

Next steps

Check your standard payment terms and late-payment clauses now, and make sure your reminder process reflects the rights available under current law. If an overdue invoice has gone quiet despite repeated contact, speak to our commercial debt collection agency for an initial view on the available recovery options.