Late payments: your rights and what to do about them

Late payments are not a "you" problem

If clients owe you money right now, you're not alone. A 2025 report found that 62% of UK small businesses are owed money from unpaid invoices, with an average of £21,400 outstanding per business. That's not a minor inconvenience, it's a cash flow crisis.

Late payments cause real harm. They force freelancers to dip into savings, delay their own bills, and take on work they wouldn't otherwise accept just to cover the gap. It's the number one financial stress for self-employed people in the UK.

But the law is on your side. Here's what you can do about it.

Your legal rights (they're stronger than you think)

Under the Late Payment of Commercial Debts (Interest) Act 1998, you have the legal right to:

The Act applies to business-to-business debts only. Everything in this section assumes your client is a company, a partnership, a sole trader or a public body. If you are invoicing a private individual, see "Invoicing a consumer" below.

• Charge statutory interest on any invoice paid after the agreed terms. The rate is the Bank of England base rate + 8%.
• Claim compensation for the cost of recovering the debt: £40 for debts up to £999.99, £70 for debts £1,000-£9,999.99, and £100 for debts over £10,000.

You don't need to go to court to claim this. You just add it to a follow-up invoice. Most freelancers don't know about this right. Now you do.

Invoicing a consumer

If your client is a private individual rather than a business, the Act does not apply and none of the statutory rights above are available: no 8% above base rate, no fixed compensation, no recovery costs. Sending a consumer a demand citing the Act is unenforceable, and it undermines the rest of your letter.

What you can do instead is charge interest as a term of your contract, agreed before the work starts. Keep the rate proportionate: a consumer term that looks like a penalty rather than a genuine estimate of your loss can be struck out as unfair under the Consumer Rights Act 2015, and an unfair term can taint how the rest of your contract is read. HelloNoa handles this split for you, and puts the statutory wording on business invoices only.

How to calculate statutory interest

The Bank of England base rate is currently 3.75%, so the statutory interest rate is 11.75% per year, or roughly 0.032% per day.

On a £2,000 invoice that's 30 days late, that's about £19 in interest. Not life-changing on its own, but it sends a clear signal that you take your payment terms seriously, and the fixed compensation below is usually the bigger number.

One detail people get wrong: the rate is not the base rate on the day you invoice, and it does not move when the base rate moves. It is fixed by whichever base rate was in force on 30 June or 31 December before the debt became late, and that rate then applies for the whole time the invoice is overdue.

What's proposed for 2026 and beyond

The government published its response to the "Time to Pay Up" consultation on 24 March 2026, and introduced a Bill in the House of Lords on 19 May 2026 billed as the largest crackdown on late payments in over 25 years.

None of it is law yet. The Bill still has to complete its passage and receive Royal Assent, and the government has not confirmed commencement dates; current expectations point to 2027. So do not plan around these as though they already protect you, and do not quote them at a client who is paying late today. Your rights right now are the ones set out above, and they are already strong.

What the Bill proposes:

• Maximum 60-day payment terms: terms longer than 60 days would be unenforceable where a large business is paying a smaller supplier, with an intention to tighten this to 45 days later.
• Dispute deadline: a window in which a client has to raise an invoice dispute, rather than sitting on it for months and objecting once you chase.
• Statutory interest that cannot be signed away: narrowing the room to contract out of the interest regime.
• Stronger Small Business Commissioner: powers to investigate payment practices, adjudicate disputes outside court, and fine persistent late payers.

How to chase late payments (without ruining the relationship)

Chasing money is uncomfortable. But it doesn't have to be confrontational. Here's a tested escalation approach:

Reminder 1: On the due date

"Hi [name], just a heads up that invoice [number] for [amount] is due today. I've attached it again for your convenience. Let me know if you need anything from my end."

Reminder 2: 7 days overdue

"Hi [name], following up on invoice [number] which is now a week overdue. Could you confirm when payment will be processed? Happy to chat if there's an issue."

Reminder 3: 14 days overdue

"Hi [name], invoice [number] is now 14 days past due. As per our agreed terms, I'd appreciate prompt payment. Please note that under the Late Payment of Commercial Debts Act, statutory interest may apply to overdue invoices."

Formal notice: 30 days overdue

"Dear [name], This is a formal notice regarding invoice [number] for [amount], which has been outstanding for 30 days. Under the Late Payment of Commercial Debts (Interest) Act 1998, I am entitled to charge interest at [X]% per annum, plus a fixed compensation of [£40/£70/£100]. I expect full payment within 7 days. If I do not receive payment, I will escalate this matter to the Small Business Commissioner."

Prevention is better than chasing

The best way to deal with late payments is to reduce the chances of them happening:

• Take a deposit before you start work (30-50% is standard)
• Use shorter payment terms (14 days, not 30)
• Include late payment terms in your contract: clients who know the consequences are more likely to pay on time
• Offer payment links: the easier you make it to pay, the faster it happens
• Invoice immediately: don't wait days or weeks after delivering the work

You have more power than you think

Late payments feel personal. They're not. They're a systemic issue in the UK economy, and the law is increasingly stacking in your favour.

Know your rights. Put them in your contracts. Follow up promptly. And don't feel guilty about expecting to be paid for work you've already done.