The Commercial Payments Bill: What It Means For Your Business Right Now
If you run a business that regularly waits on invoices from larger clients, there's a piece of legislation worth watching closely. The Commercial Payments Bill - formally known as the Small Business Protections (Late Payments) Bill - had its first reading in the House of Lords in May 2026 and is now progressing through Parliament. It's been described by government as the toughest late-payment regime in the G7, and it's aimed squarely at the practices that leave smaller businesses financing their larger clients' cash flow for free.
Why This Bill Exists
The government's own figures are stark: late payments are estimated to cost the UK economy around £11 billion a year, with business owners spending over 86 hours on average chasing overdue invoices. Officials have also cited figures suggesting late payment contributes to the closure of dozens of businesses every day. The Bill is designed to tackle that head-on, rather than relying on voluntary schemes alone.
What The Bill Actually Proposes
While it's still working through Parliament and details may shift before it becomes law, the core measures currently on the table are:
A 60-day cap on payment terms for large firms paying smaller suppliers, with tightly limited exemptions.
Mandatory statutory interest on late payments, set at 8% above the Bank of England base rate (currently 3.75%, as of September 2026).
Stronger powers for the Small Business Commissioner, including the ability to investigate suspected poor payment practices, adjudicate disputes outside the courts, and fine persistent late payers - in serious cases, into the tens of millions of pounds.
A fixed deadline for raising invoice disputes, intended to stop the tactic of raising a "dispute" right before payment is due purely to buy more time.
New reporting requirements for boards and audit committees at large companies with a track record of persistent late payment.
Where Things Stand
As of September 2026, the Bill is still making its way through the House of Lords and hasn't been scheduled for its full parliamentary debate. The government has confirmed it will allow a lead-in period once the Bill passes, to give businesses time to adjust - current expectations point to debate continuing through 2026, with implementation more likely in 2027 than this year.
That matters practically: none of this is law yet. A client citing the "new payment rules" as a reason to change terms today is getting ahead of the legislation.
What This Means While You Wait
The direction of travel is clear, and it's worth preparing for it - reviewing your standard terms, tightening up how disputes are raised and evidenced, and keeping thorough records that would hold up if the Small Business Commissioner ever had cause to look at a client's payment history. But none of it replaces the tools you already have.
Existing law already entitles you to statutory interest and compensation on overdue commercial invoices, regardless of what a client's terms say. If an invoice has gone quiet or a client is sitting on a payment using a disputed technicality, professional debt recovery can get things moving now, rather than waiting twelve months or more for a Bill still working through the Lords.
FAQs
Is the Commercial Payments Bill law yet? No. It's progressing through Parliament, with implementation more likely in 2027 than 2026.
What was it called before? It's also referred to as the Small Business Protections (Late Payments) Bill - the two names refer to the same legislation.
What's the proposed payment term cap? 60 days for large firms paying smaller suppliers, with limited exemptions.
What interest rate would apply to late payments? 8% above the Bank of England base rate, which currently stands at 3.75%.
What can I do before the Bill becomes law? Rely on your existing statutory right to interest and compensation, tighten your contract terms around disputes, and consider professional debt recovery for invoices that are already overdue.
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