The Scale of the Problem
Late payments are a major cash flow threat to UK businesses.
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. A contractual rate must be a "substantial remedy" for late payment; if it is not, the statutory rate applies.
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 Fair Payment Code
The Fair Payment Code replaced the Prompt Payment Code in late 2024. It is a voluntary code administered by the Office of the Small Business Commissioner, with three award tiers:
Gold: paying at least 95% of all invoices within 30 days
Silver: paying at least 95% of all invoices within 60 days, including at least 95% of invoices to small businesses within 30 days
Bronze: paying at least 95% of all invoices within 60 days
If your customer holds a Fair Payment Code award and pays outside its terms, raise it with them first. The Small Business Commissioner also offers a free complaints service for payment disputes between small suppliers and larger customers.
Payment Practices Reporting (Large Companies)
Large UK companies are legally required to publish their payment practices and performance twice a year. A company is in scope if it meets two of three tests: £54 million turnover, a £27 million balance sheet, or 250 employees. 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 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. 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 from service to respond, or 28 days from service to file a defence if they acknowledge the claim
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
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
You can serve a Statutory Demand, a formal demand for payment, on a company that owes you £750 or more or on an individual who owes you £5,000 or more. If it is ignored for 21 days, it 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 public procurement rules, which require 30-day payment. In practice, many take longer. You can:
Reference public procurement rules 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 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 to every invoice: a major 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: pre-due, on-due, 7 days, 14 days.
Chase across multiple channels: email, SMS, WhatsApp.
Track your DSO 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 a change with a major impact on collection speed.
Shuttle Links Checkout works with 40+ gateways, supports white-label branding, and sends links via email or SMS. See how it works.