Late payments

By Pasecom Group Ltd editorial team · Reviewed 20 October 2026

This section is for UK businesses whose customers pay late. It covers your rights under the Late Payment of Commercial Debts (Interest) Act 1998, how to chase firmly without damaging a relationship, when to send a final demand, and what to do when an invoice is ignored. Detailed guides are listed below. Our service covers debts owed by UK limited companies, LLPs and PLCs.

When an invoice becomes late

An invoice is late from the day after the agreed payment date. If you did not agree a date, the Act treats the debt as due 30 days after the later of delivery of the goods or services and the customer receiving your invoice. For contracts between businesses, payment terms longer than 60 days must be fair to the supplier; public authorities generally have 30 days. Read when a commercial invoice is legally late for the detail.

Your statutory rights

• Interest at 8% above the Bank of England reference rate, calculated as simple interest from the day after the due date. See statutory interest.
• Fixed compensation per invoice: £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. See late payment compensation.
• Reasonable recovery costs above the fixed sum, where you can show them.

These rights apply to contracts for goods or services where both parties are acting in the course of business. They do not apply to consumer sales.

A sensible chasing sequence

1. Send the invoice promptly to the right person, with the payment terms and your bank details clearly stated.
2. Send a polite reminder shortly before or on the due date.
3. Follow up by phone and email once the invoice is overdue, and ask directly whether there is any query.
4. Send a final demand giving a short, specific deadline and stating that statutory interest and compensation will be claimed.
5. If that is ignored, send a letter before action or pass the file to a collection agency.

Keep a written record of every contact. If the customer raises a genuine dispute, deal with it on its merits; a real dispute changes what you can reasonably do next.

Cash-flow options while you wait

Some businesses use invoice finance to bridge the gap while customers pay. That is a different product from debt collection, with its own costs. If an unpaid debt becomes irrecoverable, VAT bad debt relief may allow you to reclaim the VAT you paid on it after six months; check the conditions with HMRC or your accountant.

When to escalate

The longer an invoice is left, the harder it usually becomes to collect. If a limited company, LLP or PLC has ignored reminders and a final demand on an undisputed invoice, it is usually time to escalate. Debt Collection UK, a trading name of PASECOM GROUP LTD (company 17139327), introduces claims to independent partner agencies, who collect. The fee is 15% of what is recovered, payable only when you have been paid. Upload the unpaid invoice.

Frequently asked questions

When is a commercial invoice legally late?

On the day after the agreed payment date. If no date was agreed, statutory interest under the 1998 Act generally starts 30 days after the later of delivery and receipt of the invoice.

What can I claim when a business pays late?

On a qualifying contract, statutory interest at 8% above the Bank of England base rate, fixed compensation of £40, £70 or £100 per invoice, and reasonable recovery costs where they exceed that compensation.

Can my customer's terms exclude statutory interest?

Only if the contract provides a substantial remedy for late payment. A clause that sets a token rate or excludes interest entirely can be overridden.

Can I get VAT back on an invoice that was never paid?

VAT bad debt relief may be available once the debt is more than six months overdue and has been written off in your VAT account. Check the conditions with HMRC or your accountant.

When should I pass a late invoice to a collection agency?

When reminders and a final demand have failed and the debt is not genuinely disputed. The fee is 15% of what is recovered, payable only when you have been paid. Recovery is not guaranteed.

Guides in this section