UK late payment reforms: 60-day cap, 8% interest

Nobody should have to spend evenings chasing invoices. On 24 March 2026, Small Business Minister Blair McDougall wrote to CEOs and CFOs with a clear warning: get ready for stronger late‑payment rules. He points to the cost-about £11 billion a year, 38 business closures every day, and 133 million hours lost to chasing overdue bills. The instruction is clear: pay small suppliers on time. (assets.publishing.service.gov.uk)

So what changes are coming? The Government’s package sets a hard 60‑day ceiling on business‑to‑business payment terms with only narrow exceptions, makes statutory interest payable on every late invoice, introduces firmer time limits for raising disputes, and equips the Small Business Commissioner with real enforcement powers-investigations, binding decisions, and penalties for persistent offenders. (assets.publishing.service.gov.uk)

Who needs to act first? Large companies and their finance teams. Alongside existing reporting duties, boards and audit committees will face closer scrutiny of payment performance and, where results are poor, be expected to explain what went wrong and how they will fix it. This moves late payment from the back office to the boardroom. (gov.uk)

The planned 60‑day cap will carry very limited carve‑outs. Exemptions flagged by ministers include contracts where both parties are large companies, deals where the buyer is the smaller party, and transactions involving imports or exports. Outside those cases, terms longer than 60 days should not appear. (assets.publishing.service.gov.uk)

What does ‘8% above base rate’ mean for you? Under current law, the statutory rate for late payment is the Bank of England base rate plus eight percentage points. The reform would make paying that interest mandatory when invoices overrun, removing the option to water it down in contracts. Finance teams should build automatic interest calculations into accounts payable so any sums due are added and settled cleanly. (legislation.gov.uk)

Here’s how to get ready this week. First, map supplier terms and reset any that exceed 60 days. Second, capture invoice receipt dates and approval timestamps so you can evidence on‑time payment and compute interest if needed. Third, agree a fair, time‑boxed dispute process so queries are raised quickly and resolved without dragging on.

Your reporting duties matter. Large UK companies must continue to publish payment‑practice data twice a year on the government portal. In addition, for financial years starting on or after 1 January 2026, large companies must include headline payment statistics in their directors’ reports-bringing auditors and investors into the conversation. (gov.uk)

Construction readers should watch retentions. Government proposals include either prohibiting retention deductions in construction contracts altogether or introducing protections so retained funds are safeguarded from insolvency and late or non‑payment. Expect consultation on the detail before changes take effect. (assets.publishing.service.gov.uk)

If you already pay fast, say so. The Small Business Commissioner’s Fair Payment Code recognises firms that meet strong standards-Gold awardees pay at least 95% of invoices within 30 days-and lists household names such as BT, Aviva, AstraZeneca, Heathrow Airport and NatWest. Consider applying; it’s free and signals respect for suppliers. (smallbusinesscommissioner.gov.uk)

What this means if you’re a small supplier: you should see clearer terms, faster cash, and-crucially-interest added automatically when payments slip past agreed dates. A firm deadline for raising invoice disputes is also on the table, which would curb vague, months‑late queries that sap your time and cash flow. (assets.publishing.service.gov.uk)

Timelines matter. The minister says the Government’s response to last year’s consultation was published on 24 March 2026, with legislation to follow; the department has previously said it intends to legislate as soon as Parliamentary time allows. Watch for commencement dates and any phasing. (assets.publishing.service.gov.uk)

If you teach or study business, treat this as a live case study in how policy shifts behaviour. Track company payment reports, note what boards say in annual reports from 2026, and watch how enforcement by the Small Business Commissioner develops. We’ll keep translating the legal detail into practical steps you can use in class or at work.