What does the UK Small Business Protections Bill do?

The bill caps commercial payment terms at 60 days, makes statutory interest at 8% above the Bank of England base rate mandatory on all late payments, and requires buyers to raise invoice disputes at least eight days before the due date or pay an automatic penalty.

When does the UK late payment reform take effect?

The Small Business Protections Bill had its first House of Lords reading on 19 May 2026. No implementation date has been announced, but the reforms are not expected to take effect before 2027. Businesses should use the lead time to improve their credit control processes now.

How can a small business enforce the new payment rules?

You will need a documented record of when invoices were issued and when you chased them. Automated credit control workflows log every contact automatically, making it straightforward to demonstrate that a payment is overdue and to calculate statutory interest owed.

The UK Late Payment Reform 2026: What the New 60-Day Cap Means for SME Cash Flow

Q: How much are UK SMEs owed in unpaid invoices?

According to DUA, late payments close around 38 UK businesses every day, with small firms collectively owed an estimated £26 billion in unpaid invoices. 82% of UK SMEs report cash flow difficulties as a result of customers paying late.

Late payments close around 38 UK businesses every single day, according to DUA, with small firms collectively owed an estimated £26 billion in unpaid invoices. The Small Business Protections Bill, which had its first House of Lords reading on 19 May 2026, introduces a 60-day payment cap and mandatory statutory interest - legal tools that only work if your credit control process is already equipped to use them.

What the new law introduces

The bill makes three significant changes to commercial payment rules in the UK:

Reform	What it means
60-day payment cap	Large businesses cannot contractually extend payment terms beyond 60 days. The current loophole allowing mutual agreement to longer terms is removed.
Mandatory statutory interest	All commercial contracts must carry the right to statutory interest at 8% above the Bank of England base rate. Contracting out is no longer permitted.
Invoice dispute deadline	Buyers must raise disputes at least eight days before the payment due date or automatically owe a penalty of £40 or 1% of the contract price, whichever is higher.

The bill is expected to take effect no earlier than 2027. If you currently accept 90-day payment terms from large clients, those terms become non-compliant once the law passes.

Why the law alone does not solve the problem

A statutory right to interest means nothing if you do not know which invoices are overdue, when the dispute deadline falls, or whether you have a documented record of chasing. The bill strengthens your legal position; it does not build your process.

82% of UK SMEs already report cash flow difficulties, according to research published by QX Global Group in 2026. The most consistent finding across all late payment research is that the biggest driver is not deliberate non-payment - it is invoices that are forgotten. Most late payers eventually pay. The businesses that get paid on time are those with a visible, consistent follow-up process.

How automated credit control closes the gap

A structured, automated credit control workflow works like this:

Send a payment confirmation the day the invoice is issued.
Send a friendly reminder three to five days before the due date.
Send a firm chaser on the day the invoice falls due if it remains unpaid.
Escalate any invoice more than seven days overdue to a human for review.
Log all contact automatically so every invoice has a clear audit trail.

This is not aggressive collection. It is consistent, documented follow-up - and consistency is what gets invoices paid before they become a statutory interest calculation.

The new dispute deadline also matters here. If a buyer can only raise a valid dispute up to eight days before your payment date, you need the invoice issued and delivered on time. Automated invoicing removes the gap between work completed and invoice sent, which is often where the dispute window quietly closes.

What to do now

The most useful preparation before the law takes effect is process, not legal. Audit your current average payment time. If large clients routinely pay you at 60 or 90 days, the new cap will change that - but only if you are already equipped to send invoices promptly, chase consistently, and document every step. Set up your credit control workflow now and it will be earning its keep long before the legislation takes effect.