The Scale of the Problem
Late payments are the single biggest cash flow threat to UK businesses. The numbers speak for themselves:
£23.4 billion owed to UK SMEs in late payments at any given time (Federation of Small Businesses)
50,000 businesses close each year because of late payments (FSB)
87% of UK businesses have been paid late in the past 12 months (BACS)
The average UK small business is owed £9,000 in overdue invoices
If you're reading this, you probably have at least one invoice that's past its due date. This guide covers every option available to you — from a friendly reminder to a County Court claim — and the legal rights that back them up.
Your Legal Rights as a UK Creditor
Before you start chasing, know what the law gives you.
Late Payment of Commercial Debts (Interest) Act 1998
This is the most important piece of legislation for anyone collecting B2B debts in the UK. It gives you the right to:
Statutory interest — 8% per year above the Bank of England base rate, calculated daily from the due date. This applies automatically to all commercial (B2B) debts unless your contract specifies a different rate. Your contract cannot set a rate lower than the statutory rate if doing so would be "grossly unfair."
Fixed compensation for recovery costs:
£40 for debts up to £999.99
£70 for debts between £1,000 and £9,999.99
£100 for debts of £10,000 or more
Reasonable recovery costs beyond the fixed compensation — if your actual costs of chasing the debt exceed the fixed compensation amount, you can claim the difference.
Key point: You don't need to mention these rights in your contract or on your invoices for them to apply. They're statutory rights that exist automatically for B2B transactions.
The Prompt Payment Code
The UK Prompt Payment Code is a voluntary standard administered by the Office of the Small Business Commissioner. Signatories commit to:
Pay 95% of invoices within 60 days
Work towards 30-day payment as standard
Not change payment terms retrospectively
If your customer is a PPC signatory and is paying beyond 60 days, you can file a complaint with the Small Business Commissioner.
Payment Practices Reporting (Large Companies)
UK companies with over 500 employees are legally required to publish their payment practices and performance twice a year. Check your customer's payment history at GOV.UK Payment Practices. If their published data shows average payment days of 60+ but they agreed 30-day terms with you, that's useful evidence for any formal dispute.
The Collection Timeline: Day by Day
Before the Due Date: Set Yourself Up
Invoice immediately — don't wait days or weeks after delivering work.
Include a [payment link](/blog/pay-now-button-invoices/) on every invoice. One click to pay beats copying bank details.
Confirm receipt — send a brief email the day after invoicing: "Just confirming you received invoice #1234. Let me know if anything needs adjusting."
Send a courtesy reminder 3-5 days before the due date.
Day 1-7: First Overdue Contact
Action: Send a friendly payment reminder email with the payment link.
Tone: Assume it's an oversight. "Just flagging that invoice #1234 is a few days past its due date. You can pay here: [link]."
Don't do: Mention interest, penalties, or legal action. It's too early and will damage the relationship unnecessarily.
Day 7-14: Second Contact
Action: Send a firmer email. If no response to the email, resend the payment link via SMS.
Tone: "I've been in touch about this — can you let me know when payment will be made?"
SMS is critical here. Payment reminder emails have a ~20% open rate. SMS has a 98% open rate. If the customer hasn't responded to email, it may not be rudeness — they may not have seen it.
Day 14-21: Escalate the Channel
Action: Try WhatsApp or a phone call. Send the payment link again through whatever channel gets a response.
Tone: Direct. You need either payment or communication. "I need to resolve invoice #1234 this week. Can you pay via this link or let me know what's holding things up?"
See our multi-channel payment collection guide for channel-specific tactics.
Day 21-30: First Mention of Legal Rights
Action: Send a formal email or letter referencing the Late Payment Act.
Tone: Professional, factual. State your rights without threatening.
Under the Late Payment of Commercial Debts (Interest) Act 1998, we are entitled to charge statutory interest of 8% above the Bank of England base rate on overdue commercial debts. We would prefer not to apply these charges.
This is the tipping point where many invoices get paid. The legal reference prompts action without being aggressive. See our overdue invoice templates with UK legal references.
Day 30-45: Apply Statutory Charges
Action: Send a formal letter applying statutory interest and fixed compensation. Send by post (on letterhead) and email.
Include:
Original invoice amount
Interest calculation (daily rate x days overdue)
Fixed compensation (£40/£70/£100)
Revised total
Payment link
7-day deadline
This is also when to send a formal dunning letter — a physical letter carries more weight than email at this stage.
Day 45-60: Letter Before Action
Action: Send a Letter Before Action (LBA) in compliance with the Pre-Action Protocol for Debt Claims.
Requirements:
Send by recorded delivery AND email
State the full debt (original + interest + compensation)
List all previous collection attempts with dates
Give the debtor 30 days to: (1) pay, (2) propose a payment plan, or (3) dispute in writing
State that court proceedings will follow if no response
The LBA is a legal requirement before you can issue a County Court claim. Without it, a judge may refuse costs or strike out your claim. See our Letter Before Action template.
Day 75+: Legal Action
If the LBA period passes with no response, you have three main options:
Option 1: Money Claim Online (Under £100,000)
Money Claim Online is the UK government's digital service for issuing County Court claims. It's straightforward and doesn't require a solicitor.
Court fees:
Claim Value | Fee |
|---|---|
Up to £300 | £35 |
£300.01-£500 | £50 |
£500.01-£1,000 | £70 |
£1,000.01-£1,500 | £80 |
£1,500.01-£3,000 | £115 |
£3,000.01-£5,000 | £205 |
£5,000.01-£10,000 | £455 |
£10,000.01-£100,000 | 5% of claim |
Court fees are recoverable from the debtor if you win (which is likely if you've followed the pre-action protocol properly).
Process:
Register at Money Claim Online
Enter the defendant's details and the claim amount (including interest and compensation)
Pay the court fee
The court sends the claim to the defendant
The defendant has 14 days to respond (acknowledge) and then 28 days to file a defence
If no defence is filed, you can request a default judgment
With a judgment, you can enforce via bailiffs, attachment of earnings, or a charging order
Timeline: A straightforward undefended claim typically resolves in 6-10 weeks from filing.
Option 2: Debt Recovery Agency
If you'd rather not deal with court proceedings, a debt recovery agency handles everything for you.
Cost: Typically 5-15% of the recovered amount (no recovery, no fee in most cases).
Best for: Debts where the debtor has acknowledged the debt but simply won't pay. Also useful for high volumes of smaller debts where court action isn't cost-effective individually.
Considerations: Some agencies use aggressive tactics that may damage your business relationships. Choose a member of the Credit Services Association (CSA) for regulated, professional collection.
Option 3: Statutory Demand and Insolvency
For debts over £750, you can serve a Statutory Demand — a formal demand for payment that, if ignored for 21 days, gives you grounds to petition for the debtor's winding-up (companies) or bankruptcy (individuals).
Warning: This is a nuclear option. It's appropriate when the debtor has the means to pay but is choosing not to. It's NOT appropriate for genuine disputes or when the debtor is in financial difficulty (which could make it an abuse of process). Take legal advice before using this route.
Mediation
Before going to court, consider mediation — a neutral third party helps you and the debtor reach an agreement. The Small Business Commissioner offers a free complaints service for disputes between small suppliers and larger customers.
Courts increasingly expect parties to have attempted alternative dispute resolution before issuing proceedings. Refusing reasonable mediation can result in costs penalties even if you win.
Special Situations
Public Sector Clients
Government departments, NHS trusts, and local authorities are subject to the Public Contracts Regulations, which require 30-day payment. In practice, many take longer. You can:
Reference the Public Contracts Regulations in your chase letters
File a complaint with the Small Business Commissioner
Claim statutory interest (the Act applies to public sector debts)
Check their published Payment Practices data
Large Corporate Clients
Large companies (500+ employees) must publish payment practices data. If their data shows average payment of 50+ days, factor that into your credit terms. Consider:
Requiring a purchase order before starting work
Asking for staged payments (50% upfront, 50% on completion)
Using their published data in your escalation letters
International Clients
The Late Payment Act only applies to transactions governed by English, Scottish, or Northern Irish law. For international clients, check what late payment legislation applies in their jurisdiction, and include explicit payment terms and governing law in your contract.
Prevention: Reducing Future Overdue Invoices
Collecting overdue payments is reactive. Here's how to prevent them:
Add [payment links](/blog/pay-now-button-invoices/) to every invoice — the single biggest lever for reducing late payment.
Run credit checks before extending terms to new customers.
Set clear terms in writing before starting work.
Invoice immediately — the day you deliver, not days or weeks later.
Automate [payment reminders](/blog/payment-reminder-email-templates/) — pre-due, on-due, 7 days, 14 days.
Chase across [multiple channels](/guides/multi-channel-payment-collection/) — email, SMS, WhatsApp.
Track your [DSO](/blog/dso-benchmarks-uk/) monthly and benchmark against your industry.
For the complete breakdown, see our guide on 10 strategies to reduce debtor days.
Common Questions
Can I charge interest on consumer debts?
No. The Late Payment of Commercial Debts Act only applies to B2B transactions. For consumer debts, you need to follow FCA regulations, and interest can only be charged if agreed in the original contract.
Do I need a solicitor to issue a County Court claim?
No. Money Claim Online is designed for litigants in person (self-representation). For straightforward debt claims where the debtor hasn't disputed the work, you can handle the entire process yourself. For claims over £10,000 or where there's a genuine dispute, consider legal advice.
What if the debtor says they can't afford to pay?
Offer a payment plan. A structured arrangement (e.g., £500/month over 6 months) is almost always better than writing off the debt or spending months in court. Include a payment link for each instalment to make it easy to stick to the plan.
Can I report a late payer to a credit agency?
Not directly as a supplier. However, if you obtain a County Court Judgment (CCJ) and the debtor doesn't pay within 30 days, the CCJ is recorded on their credit file for 6 years — which can significantly affect their ability to borrow.
What about writing off bad debts?
If you've exhausted all options and the debtor genuinely cannot pay (or has been dissolved/gone bankrupt), write off the debt and claim VAT bad debt relief. You can reclaim VAT on debts written off as bad if: (a) VAT was charged and accounted for, (b) the debt is at least 6 months old, and (c) the debt has been written off in your accounts. Claim on your next VAT return.
Get Started
The best time to set up a collection process is before you need one. Start by adding payment links to every invoice — it's the single change with the highest impact on collection speed.
Shuttle Payment Links work with 40+ gateways, support white-label branding, and can be sent via email, SMS, WhatsApp, or QR code. See how it works.