The Biggest Crackdown on Late Payments in 25 Years — What It Means for Freelancers

A landmark moment for small businesses

On 19 May 2026, the UK government introduced the Small Business Protections Bill to Parliament — the most significant overhaul of late payment law since the Late Payment of Commercial Debt Act 1998. For freelancers and sole traders, it's the reform many have been waiting decades for.

The numbers behind the bill tell the story. Late payments cost the UK economy an estimated £11 billion a year, and 38 businesses close every single day because of cash flow problems caused by clients simply not paying on time. The new legislation sets out to change that.

What's actually changing

The bill introduces four major protections for small businesses:

• 60-day payment cap — large companies will be legally required to pay smaller suppliers within 60 days. No more 90, 120, or open-ended payment terms buried in contracts.
• Mandatory interest on late payments — if a payment is late, interest automatically accrues at 8% above the Bank of England base rate. You won't need to chase it; it'll be owed by law.
• Retention ban in construction — a long-standing issue in the sector, the practice of withholding payment under construction contracts will be prohibited.
• Board-level accountability — large firms with poor payment records will have to publish explanations and improvement plans at audit committee level. No more hiding behind procurement departments.

The Small Business Commissioner also gets significantly expanded powers — including the ability to investigate payment practices, adjudicate disputes, and issue fines potentially worth tens of millions for persistent offenders.

Why this matters day-to-day

For freelancers and sole traders working with larger clients, late payments aren't just an annoyance — they're an existential risk. A single large invoice sitting unpaid for three months can derail your finances, force you to delay your own bills, and in the worst cases push you out of business entirely.

The 60-day cap gives you a clear, enforceable ceiling. If a client tries to impose 90-day or longer payment terms in a contract, those terms will be void. And the mandatory interest provision means that if they do pay late, the financial penalty isn't a courtesy reminder — it's a legal obligation.

"Today we're changing that with the toughest action on late payments in a generation." — Prime Minister Keir Starmer

What to do right now

The bill has entered Parliament but will take time to pass into law. In the meantime, there are practical steps you can take today to protect your cash flow:

• Set clear payment terms on every invoice. 30 days is standard for freelancers. State them prominently, not in small print.
• Include a late payment clause. You're already entitled to charge interest under the 1998 Act — most freelancers just don't. Mentioning it on your invoice makes clients take the deadline seriously.
• Send invoices immediately. A slow invoice is a slow payment. The sooner it lands in a client's inbox, the sooner the clock starts.
• Follow up promptly. An automated reminder a few days before the due date — and again the day after — dramatically reduces late payments without awkward conversations.
• Keep records. If you ever need to escalate to the Small Business Commissioner under the new regime, clear documentation of invoice dates, amounts, and communication will be essential.

Invoa handles the invoicing and the chasing automatically, so you can focus on the work. Every invoice you send is timestamped, tracked, and followed up — giving you the paper trail you'd need if you ever had to escalate.

What happens next

The bill still needs to pass through both Houses of Parliament before it becomes law. Bills of this nature typically take several months to complete their passage — so realistically, you're looking at late 2026 or early 2027 before the rules come into force.

We'll update this post as the bill progresses. In the meantime, the practical steps above apply regardless of legislation — and the direction of travel from government is clearly on the side of small businesses.