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How the New Commercial Payments Bill Will Impact UK SME Cash Flow in 2026
If you run a small business, the Commercial Payments Bill is one of the most significant proposed changes to payment law in more than 25 years. It aims to tighten payment terms, make statutory late payment interest harder to avoid, and give the Small Business Commissioner stronger enforcement powers.
The Bill was introduced in the House of Lords on 19 May 2026 and had its second reading on 9 June 2026. Its committee stage date has not yet been announced, so the rules are not law yet. There will also be a lead-in period before the measures come into force. Still, the direction is clear enough for SMEs to start preparing.
Late payment is not a small problem. Evidence cited by Parliament says 44% of invoices from UK SMEs are paid late, with late payment estimated to cost the UK economy around £11bn a year. Around 14,000 businesses are estimated to close each year due to late payment. If you have ever waited on a £6,000 invoice while your own suppliers expect paying, you already know why this matters.
What the Bill actually changes
The Bill introduces several measures aimed at improving payment behaviour in UK business-to-business contracts. The most important is a 60-day maximum payment term for contracts within scope, with limited exemptions. It will not apply retrospectively, so existing payments and disputes will still be judged under the rules in place at the relevant time.
The second major change is mandatory statutory interest on late payments at 8% above the Bank of England base rate. With Bank Rate held at 3.75% on 18 June 2026, that makes the current statutory rate 11.75%. The Bill also supports stronger powers for the Small Business Commissioner to investigate poor payment practices, adjudicate certain disputes and take enforcement action.
There is also a practical 30-day rule for acceptance or verification procedures. In simple terms, a buyer should not be able to delay payment by saying goods or services are still being checked for an open-ended period, unless a longer period is genuinely justified.
| Measure | What it means for you |
|---|---|
| 60-day maximum payment term | Contracts within scope cannot use longer payment terms, except in limited cases |
| Mandatory statutory interest | 8% above base rate, currently 11.75%, applies to late debts |
| 30-day verification rule | Buyers have less room to delay payment by extending checks |
| Retention ban in construction | Withholding retention sums under construction contracts is expected to be prohibited |
| Small Business Commissioner powers | Stronger investigation, adjudication and enforcement powers |
Why this helps your cash flow, and where it falls short
Better law does not collect your money for you. A statutory right to interest has existed since 1998 under the Late Payment of Commercial Debts (Interest) Act, but many businesses do not use it because they worry about souring the customer relationship.
What the Bill does change is leverage. When a large customer knows the legal ceiling is tighter and statutory interest cannot simply be negotiated away, the discussion starts from a fairer place. That shift in tone is something a good outsourced credit control service can build into your chasing process.
There is one limitation to keep in mind. The measures are expected to apply to UK-to-UK business transactions, not global supply chains or international trade. If you export, international debt recovery will still depend on your contract terms and the jurisdiction you agreed to.
What you should do before the rules bite
You do not need to wait for Royal Assent to get ahead. Review contracts where payment terms exceed 60 days, tighten your terms and conditions, and make sure your invoices are correct from the day they are sent. A clean invoice paid on time beats a strong legal claim months later.
It also helps to know when in-house chasing has run its course. If a debtor has gone quiet and your reminders are being ignored, that is usually the point to bring in a commercial debt recovery partner. A formal late payment demand often carries more weight when it is sent before the debt ages further.
Frequently asked questions
When will the Commercial Payments Bill become law?
There is no confirmed commencement date yet. The Bill has completed second reading in the House of Lords, and its committee stage date has not yet been announced.
Does the 60-day cap apply to every contract?
No. The Bill includes limited exemptions, and the detail will depend on the final legislation and any secondary rules.
Can I still claim interest on late invoices right now?
Yes. The existing Late Payment of Commercial Debts (Interest) Act 1998 already gives eligible businesses the right to statutory interest at 8% above base rate, plus fixed compensation. You can reclaim costs and interest on overdue B2B invoices today.
Will the Bill help with overseas customers?
Probably not directly. Export invoices will still rely mainly on your contract terms and the relevant jurisdiction.
Take action early
The Commercial Payments Bill is welcome, but it will reward businesses that already run tight credit control. If late payers are squeezing your cash flow and you would rather not wait on Parliament, speak to the team at Taurus Collections about recovering what you are owed and putting stronger protections in place.
Need Expert Debt Collection Advice?
If your business is dealing with overdue invoices or difficult debtors, speak to Taurus Collections for practical, professional support with commercial debt recovery.
Karl Baker
Karl Baker is the founder of Taurus Collections and his company has helped recover over £1.1 million worth of debt with an average recovery rate of 91.5%.