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Time to Pay Up - Government unveils toughest crackdown on late payments in over 25 years

SMALL businesses were to be paid on time; that was the clear message from Government on:- 24 March 2026, as it cracked down on late payments, with the largest set of reforms in over a generation.

The Small Business Commissioner was given sweeping new powers to investigate poor payment practices, adjudicate payment disputes, and fine the worst offenders; with fines worth tens of millions for firms that persistently paid late or failed to comply with the new laws.

The measures tackled a problem costing the UK economy £11 billion every year and eased the cost of living for entrepreneurs and SME owners who were often forced to wait months; or even years; to receive money they had already earned and had to chase endlessly to receive it.

Some 38 businesses shut their doors every single day because they were not paid on time; the equivalent of 266 a week, and well over 1,000 in any given month.

Every small business owner, including:- tradespeople, freelancers, family firms and the self employed, had to waste time and money chasing unpaid invoices when they could have been growing their business.

These measures, which were the toughest in the G7, built upon and strengthened legislation on late payments, 1st laid out in the:- 1998 Late Payment of Commercial Debt Act, over 25 years ago. They went further than any previous Government and boosted our economy while giving small businesses better cashflow.

The changes included:- a new 60 day cap on payment terms on all large firms when paying smaller suppliers. New mandatory interest on late payments was also introduced, with a requirement for all commercial contracts to include:- statutory interest set at:- 8% above the Bank of England base rate.

For example, if a small business was owed:- £10,000 by 1 of its customers and was paid 60 days later than the agreed payment date, they were owed:- £10,293.15, including:- mandatory interest (£10,000 plus £193.15 interest plus £100 compensation).

The Government also proposed to ban the withholding of retention payments under the terms of construction contracts, consulting on its implementation. This was intended to prevent small firms losing retentions to insolvency or non-payment.

Business Secretary Peter Kyle said:- "Far too many businesses are forced to shut down because they have not been paid; that is simply unacceptable. We are unveiling the strongest, most robust changes to payment laws in over a generation; laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier."

After working closely with the Federation of Small Businesses, boards or audit committees of persistently late-paying large companies were required to publish explanations for poor payment performance and the actions they were taking to address it.

FSB Policy Chair Tina McKenzie said:- "Late payments are a blight on our economy, so FSB is pleased to have worked in partnership with the Government to deliver the toughest legislation in the G7. The new laws will finally bring a stop to big businesses using their small suppliers as sources of free credit. For the 1st time, audit committees and boards will question and challenge poor payment performance, publish it in annual reports for all to see, and put it right. Paying in 60 days is not prompt; but strengthening that as the absolute maximum cap after years of dithering is a good step towards encouraging payments in 30 days across all supply chains. Improving the Small Business Commissioner's powers will also help, mandating CEO's of Britain's poor payers to take the phone call. This is real progress, and we'll keep working with the Government to make sure new laws are brought in as soon as possible."

Minister for Small Business and Economic Transformation, Blair McDougall said:- "I know 1st hand how difficult late payments can be, forcing you to decide if you can afford to keep a business running, pay employees or even buy Christmas presents for your children. That is why I'm proud to be leading the charge on tackling a problem that has been left untouched for far too long. These are genuinely game changing measures that will ensure no business, no employer, no family has to endure the immense strain of being left strapped for cash they have already earnt."

Emma Jones CBE, Small Business Commissioner said:- "We are on a mission to make life easier for small firms by getting money moving faster through the economy by tackling late payments. The measures the Government has announced today will strengthen the role of my office in taking on the worst payers alongside ensuring small businesses have a stronger voice on payment terms and late payment interest. These reforms will reduce the hours spent chasing debt allowing small businesses to focus on more productive and enjoyable growth."

At the time, some small businesses had more cash in the bank because the Small Business Commissioner recovered 3 times more overdue invoices in 2025 than in 2024. This benefit was brought to the whole economy.

The measures followed the launch of the Small Business Plan by the Prime Minister last year, which in addition to laying out late payments plans, also launched the Business Growth Service, which was already transforming the Government support offer for small firms, and increased access to finance for SMEs and entrepreneurs with a massive £4 billion finance boost.

This was a more interventionist Government, backing the British business community with landmark reforms that also helped to control inflation and made our economy more resilient from global shocks.

Debbie Williams, Co-Founder of John Williams Heating Services, said:- "As a family run business that has served our community for more than 20 years, we see 1st-hand the strain that late payments place on small companies. Cashflow pressures don't just affect the balance sheet; they impact our ability to take on apprentices, invest in training and continue providing reliable service to local families. We welcome the Government's focus on tackling late payments, as timely and fair payment practices are essential for the stability and growth of businesses like ours."

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