The UK late payment rules got a proper shake up this year, and if you run a small tech business or consultancy that invoices bigger clients, it is worth understanding what has actually changed. Late payment is not some abstract policy issue for people like us. It is the reason cash flow forecasts turn into fiction and the reason so many small suppliers end up financing their biggest customers for free, whether they agreed to or not.
I have been on the wrong end of this more times than I care to count across CampSuite, Crocodile HR and various consulting engagements. A sixty day payment term quietly becomes ninety once an invoice goes missing in someone's approval chain, and by the time you notice, you have effectively lent a much bigger company several months of unpaid work. So when the government published its response to the late payment consultation in March, I read it properly rather than skimming the headline.
What Actually Changed in 2026
After a public consultation that ran through the back half of 2025, the government confirmed a package of reforms in March. The headline points are a maximum payment term of sixty days for large firms dealing with smaller suppliers, mandatory statutory interest on late invoices, and stronger powers for the Small Business Commissioner to investigate and fine persistent offenders. Finance directors are also being told, in fairly blunt terms, that how their business treats suppliers is now their personal responsibility rather than something to quietly delegate to accounts payable.
This sits alongside payment reporting rules that already require companies with more than two hundred and fifty employees to disclose their payment practices in their annual Directors' Report. That includes the average number of days taken to pay invoices, the proportion paid within thirty days, the proportion paid between thirty one and sixty days, and the proportion that misses the agreed terms entirely. For the first time, a big client's payment habits are supposed to be a matter of public record rather than something you only discover the hard way.
The Sixty Day Cap, and Why It Is Not the Win It Sounds Like
The original ambition floated during consultation was a maximum of forty five days. That got dropped in favour of sixty, which tells you plenty about how much pushback came from large businesses that quite like using their suppliers as free working capital. Sixty days is still a long time to wait for money on work you have already delivered, particularly if you are running a small SaaS business or consultancy with wages and infrastructure bills that do not wait for anyone.
Mandatory Interest and Personal Accountability
Statutory interest at the Bank of England base rate plus eight percent is no longer just something you are technically entitled to claim and almost never do. It becomes mandatory, which at least removes the awkwardness of having to raise it yourself. Persistent late payers also risk losing their place on the Fair Payment Code, the gold, silver and bronze scheme that replaced the old Prompt Payment Code, and with it their eligibility for public sector contracts. That last part has actual teeth, because plenty of large firms care far more about keeping government work than they do about one annoyed small supplier.
Why I Am Not Popping the Champagne Just Yet
Late payment reportedly costs the UK economy around eleven billion pounds a year and plays a part in roughly fourteen thousand business closures annually. Those numbers should embarrass every business that treats its supplier terms as a cash management tactic. But a rule is only as good as a small supplier's willingness to actually enforce it, and that is where I think this reform will quietly disappoint people.
Picture the reality. You are a five person consultancy with one client who accounts for a third of your revenue. That client pays you eighty days late on a regular basis. Are you going to be the one who invokes mandatory interest and reports them to the Small Business Commissioner, knowing full well you need that relationship for next year's renewal? Most business owners I know would rather write off the interest than risk the account. The power imbalance that caused this problem in the first place has not gone anywhere, it has just been given a slightly stronger legal footing.
What This Actually Means If You Run a Small Tech Business
I would not sit around waiting for legislation to fix your cash flow. Sort your own house first, and treat the new rules as leverage rather than a solution.
Set your own payment terms at fourteen to thirty days regardless of what a bigger client tries to impose on you, and put mandatory interest explicitly into your contracts even if you never intend to charge it. Its presence alone changes a conversation. Invoice the moment work finishes rather than batching invoices up at the end of the month, because every day you delay sending an invoice is a day you have added to however long it takes to get paid.
It is also worth checking a prospective client's Fair Payment Code status before you sign anything significant. A business with a gold rating has at least demonstrated it pays on time consistently, which tells you more about how a working relationship will actually feel than anything in a sales pitch. And if a client is chronically late despite everything you try, sometimes the honest answer is not more paperwork, it is deciding the relationship is not worth keeping, which is exactly the judgement call I wrote about in my piece on when to fire a client.
My Honest Take
These reforms are a genuine step forward, and mandatory interest plus real Small Business Commissioner enforcement is more than we had before. But I would not build a business plan around large companies suddenly becoming better payers because a regulation told them to. The businesses that actually improve their cash position are the ones that control their own terms, chase invoices early, and are not afraid to walk away from a client relationship that keeps them financing someone else's balance sheet.
I talk this through with clients fairly regularly as part of consulting engagements, because payment terms are a business decision, not just a legal formality to copy from the last contract template you found. Get them right at the start of a client relationship and you will spend a lot less time chasing money you have already earned.
