Getting paid on time: your late payment rights and 7 ways to speed up payment before Christmas
Late payment is one of the most common worries we hear from clients – and it tends to get worse in the run-up to Christmas, when customers close for a week or two and invoices drift into January. Here’s what the law already lets you do, what’s changing, and the simple habits that make the biggest difference.
When is a payment actually late?
If you agreed a payment date with your customer, it’s late the day after that date. Between businesses, agreed terms should usually be no more than 60 days (30 days for public authorities), unless a longer period is fair to both sides.
If you didn’t agree a date, the payment is late 30 days after your customer receives the invoice, or 30 days after you deliver the goods or service – whichever is later (GOV.UK: late commercial payments).
What you can charge on a late invoice
If you sell to another business, the Late Payment of Commercial Debts (Interest) Act 1998 lets you claim:
- Statutory interest at 8% above the Bank of England base rate – unless your contract sets a different rate. If you add interest, send a new invoice for it (GOV.UK).
- A fixed sum for each late payment: £40 for debts up to £999.99, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more (GOV.UK).
- Reasonable extra costs of recovering the debt.
These rights are for business-to-business sales only – they don’t apply to sales to consumers.
Should you actually charge it?
That’s a judgement call. Many businesses never charge interest to good customers who are occasionally a few days late. But putting a line on your invoices and terms – “We may charge interest and compensation on late payments under the Late Payment of Commercial Debts (Interest) Act 1998” – sets expectations from the start, and is often enough on its own.
What’s changing: the Commercial Payments Bill
The government introduced the Commercial Payments Bill in the House of Lords on 19 May 2026. Among other things, it would cap payment terms at 60 days for large businesses paying smaller suppliers and make late payment interest compulsory. It’s still going through Parliament, so none of this is law yet and there’s no start date. We’ll post an update when there is.
7 ways to get paid faster
- Invoice straight away. The day you finish the job, not the end of the month.
- Agree terms up front. Put your payment terms in your quote or engagement letter, and repeat the due date on every invoice.
- Make paying easy. Show your bank details clearly and, if you use Xero, add a pay-now link so customers can pay from the invoice.
- Automate the reminders. Xero can send reminders before and after the due date, so the chasing happens even when you’re busy.
- Use repeating invoices for regular work, so nothing gets forgotten.
- Chase early and politely. A quick call a few days after the due date works far better than a letter weeks later.
- Check before you give credit. For a new customer or a big order, ask for a deposit or stage payments.
Plan ahead for December and January
December is short for most businesses, so get your invoices out early in the month and chase anything overdue before the Christmas break.
January matters too. If you’re in Self Assessment, 31 January is the deadline for any balancing payment for 2025 to 2026 and, for many people, the first payment on account towards 2026 to 2027 – each payment on account is usually half of last year’s bill (GOV.UK: payments on account). Setting money aside now, and keeping an eye on a simple three-month cash flow forecast, takes the stress out of January.
How we can help
We’re a Xero Gold Partner, and we help clients set up invoice templates, pay-now links, automatic reminders and cash flow forecasts – and talk through what to do when a customer just won’t pay.
If you’d like to get paid faster before Christmas, book a free call with our team: www.kara-accountants.net/contact/
This article is general information, not advice for your specific situation. Rules are as published on GOV.UK on 5 November 2026.
