What the New Late Payment Rules Mean for Sussex SMEs

You’ve done the work, sent the invoice and waited. Then waited some more. The UK’s proposed late payment rules could finally shift that burden.

In JetSpace’s 2024 survey of Sussex businesses, 45% wanted legislation compelling larger companies to pay invoices within 30 days. They haven’t quite got their wish, but Parliament is now considering something with considerably more bite than another voluntary payment pledge.

The Commercial Payments Bill would cap most business-to-business payment terms, make statutory interest unavoidable and penalise customers who raise invoice disputes too late. It would also turn the Small Business Commissioner into a regulator with genuine enforcement powers.

Given that late payments are estimated to cost the UK economy £11 billion each year this is welcome news. Concern is rising too: 27% of private SMEs reported late-payment concerns in the second quarter of 2026, up from 20% in the previous quarter and above the historic norm of 23%.

There is one crucial qualification. The Bill isn’t law yet. Nothing has changed today, so you shouldn’t start adding penalties to invoices as though Royal Assent were a minor administrative detail. What you can do is understand the proposals, review your contracts and get ready while there’s still time.

The new late payment rules aren’t law yet

The Commercial Payments Bill remains a Bill before Parliament, not an Act. It was introduced in the House of Lords on 19th May 2026, received its second reading on 9th June and subsequently reached Report stage. Its detailed committee examination concluded on 21st July 2026, followed by a Report stage debate on 15th September 2026.

It still needs to complete its remaining stages, pass through the House of Commons and receive Royal Assent. The eventual law could therefore differ from the Bill described here.

The Government has also promised an appropriate lead-in period, transitional arrangements and no retrospective application. Existing late invoices won’t suddenly acquire new rights because the legislation has passed. Nor should businesses expect the full regime to appear overnight.

That makes this a preparation window. Contracts agreed now may still be running when the rules take effect, particularly for agencies, consultants and suppliers working under continuing service agreements. Waiting for the commencement date before opening the contract drawer would be leaving it rather late.

There’s another reason to pay attention now. The proposals change the balance of power between suppliers and customers. Existing law gives SMEs rights, but exercising them can mean challenging the very client you want to retain. The Bill is designed to make key protections automatic, reducing the need for a small supplier to negotiate, threaten or repeatedly send the world’s least convincing “just following up” email.

What the 60-day payment cap would actually do

The Bill proposes a maximum payment term of 60 days between businesses and 30 days where a public authority is buying.

Those are maximum terms, not recommended ones. You can still agree that payment is due sooner. If your standard invoice says payment is due within a fortnight or within a month, the Bill doesn’t require you to give customers longer.

The more striking change concerns non-compliant contracts. A payment term exceeding the applicable cap would be void and replaced with an implied 30-day term. The same default would apply where a contract contains no payment period.

Imagine a Brighton design studio accepting a large customer’s procurement terms requiring payment three months after invoice approval. Under the proposed regime, that extended term wouldn’t simply be frowned upon. Subject to the final law and any applicable exemption, it would be replaced.

There are important exceptions. The proposed cap may not apply where both parties are classed as large undertakings or where the buyer is smaller than the supplier. The awkward bit is that “large undertaking” hasn’t yet been defined and will be clarified through secondary legislation.

Businesses near that eventual boundary will need to watch the detail. For most small Sussex suppliers selling to much larger UK customers, however, the direction is hard to miss.

Local firms asked for customers to be compelled to pay within a month. The Bill’s general ceiling is twice that long, and the Government has abandoned its earlier proposal to reduce the maximum to 45 days for the time being. It’s less ambitious than some SMEs wanted, but a legally enforceable ceiling is very different from guidance that a determined procurement department can ignore.

The contract clause that could stop working

At present, qualifying suppliers can claim statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998. In practice, customer contracts can exclude or vary that right, and many suppliers never enforce it.

The Bill would close that escape route. Contract terms attempting to vary or exclude the right to statutory interest would be void.

The proposed rate is eight percentage points above Bank Rate. Following the Bank of England’s September 2026 decision to hold Bank Rate at 3.75%, that would currently produce a late-payment interest rate of 11.75%.

The statutory rate is reset using Bank Rate at fixed reference dates, so it shouldn’t be hard-coded forever into an invoice template. The principle is more important: customers would no longer be able to draft away the statutory interest entitlement.

Our Cash Flow Survival Guide explains the existing interest and compensation rules, as well as practical ways to prevent and chase overdue invoices. Those rights remain relevant until the new regime takes effect.

For suppliers, the proposed change removes an uncomfortable decision at the contracting stage. You wouldn’t have to choose between signing the customer’s interest waiver and risking the work. For buyers, it makes slow payment potentially more expensive and much harder to treat as an unofficial source of working capital.

Last-minute invoice disputes would carry a price

Most small business owners recognise the routine. An invoice sits untouched until its due date. Only then does somebody query a purchase order, challenge a line item or ask for information already provided weeks earlier.

A genuine invoice dispute needs resolving. A late, vague objection that simply delays payment is a different creature, and the Bill tries to separate the two.

Legal analyses of the proposals say that, in most cases, a buyer would need to raise a dispute with sufficient supporting detail at least eight days before payment is due. Missing that deadline or providing inadequate information would trigger a fixed liability.

That penalty would be the greater of £40 or 1% of the contract price. Where only part of an invoice is disputed, the calculation would instead relate to the disputed amount.

This replaces the earlier consultation proposal described in our previous cash-flow article, which referred to a longer dispute window. The new deadline is much closer to the payment date.

The practical lesson is simple: your records will matter. Keep dated proof showing when the invoice was sent, which address received it, what supporting documents were included and when any query arrived. If you use an accounting platform, check that it preserves the original despatch record rather than merely showing the latest edited version.

Your invoice should also make it easy for customers to raise legitimate problems promptly. Include the purchase order, clearly describe the work, name the person who commissioned it and provide a direct contact for queries. Better records protect your position, but cleaner invoices reduce the likelihood of a dispute arising at all.

A Small Business Commissioner with enforcement powers

A right is only as useful as the route for enforcing it. Taking a valuable customer to court is expensive, time-consuming and commercially awkward, particularly for a small supplier facing a national company with its own legal team.

The Bill would expand the Small Business Commissioner’s role significantly. The Commissioner would be able to investigate larger businesses, issue directions, impose financial penalties and adjudicate contractual payment disputes outside the court process. Interim decisions could be binding.

For serious non-compliance, financial penalties could reach 1% of the business’s annual UK turnover. That is a sanction a large customer is more likely to notice than a sternly worded reminder.

Transparency would increase as well. Large businesses would have to report more information about statutory interest owed and paid. Boards or audit committees at persistently late-paying companies would be required to publish commentary explaining their poor payment performance.

Together, those changes could make payment behaviour a governance and reputational issue, rather than a private frustration left for individual suppliers to fight.

Five things Sussex SMEs should do before the Bill lands

You don’t need to rebuild your finance process around legislation that hasn’t passed. A short readiness review now, however, could save hurried work later.

1. Audit your customer contracts. Search for payment periods beyond the proposed cap, clauses replacing statutory interest and language that restricts your right to claim it. Record which agreements are due for renewal.

2. Separate public-sector customers. The proposed maximum for public authorities is shorter than the general business-to-business limit. Flag those contracts so you can apply the correct rule when the legislation commences.

3. Improve your invoice trail. Save proof of despatch, delivery and receipt alongside the invoice and supporting documents. Give each query a dated written response, even if the initial conversation happens by phone.

4. Update templates, but don’t jump the gun. Draft revised contract and invoice wording now, then have it checked against the final Act and commencement regulations before using it. Don’t describe proposed rights as current law.

5. Watch the unresolved definitions. Secondary legislation will determine who counts as a large undertaking and may clarify how exemptions operate. That detail could decide whether the cap applies to particular customer relationships.

This is useful housekeeping even if the Bill changes. Clear payment terms, accurate invoices and accessible evidence make ordinary credit control easier under the current rules too.

Predictable cash flow also makes it easier to commit to predictable costs. Whether you’re running a consultancy in central Brighton or growing a team in sunny Shoreham, knowing what leaves the bank each month matters. A fully serviced office with utilities and day-to-day running costs included won’t make a slow customer pay, admittedly, but it does remove a few unwelcome surprises from the other side of the ledger.

The proposed late payment legislation can’t rescue an invoice that’s overdue today. Until it becomes law, your existing contracts and current legal rights still apply. Keep invoicing promptly, follow up consistently and use the remedies already available where appropriate.

What the Bill offers is a change in leverage. The clock, the interest charge and the penalty for a late dispute would no longer depend so heavily on whether a small supplier feels able to challenge a powerful customer. For Sussex SMEs that have spent years financing somebody else’s payment habits, that would be progress worth preparing for.

If you found this useful, you might also enjoy our guide to what the Employment Rights Act means for Sussex SMEs, our take on what the UK Government’s industrial strategy means for SMEs and our practical overview of small business cost-saving ideas.

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