UK late payment laws 2026: what freelancers need to know

What’s changing

In early 2026, the UK government announced a sweeping package of reforms aimed at tackling late payments to small businesses. It has been called the biggest crackdown on late payment culture in 25 years, and for good reason. According to the Federation of Small Businesses, UK small businesses are collectively owed an estimated £23.4 billion in overdue invoices at any given time (FSB, Time to Act report). That figure has been growing, not shrinking, and the government has finally decided that voluntary codes of conduct are not cutting it.

The proposed reforms include a mandatory cap on payment terms, personal liability for company directors who oversee persistent late payment, new fining powers for regulators, and a significant expansion of the Small Business Commissioner’s authority. Taken together, these changes represent a genuine shift in how the government approaches the problem.

At the time of writing, some of these measures are still making their way through Parliament. The direction of travel is clear, but specific details may be amended before they become law. We will update this guide as things develop. In the meantime, here is what has been proposed and what it could mean for you.

The 60-day payment cap

The headline measure is a mandatory, enforceable cap on payment terms. Under the proposed rules, large businesses (those with 250 or more employees) would be prohibited from imposing payment terms longer than 60 days on their smaller suppliers. While the 2013 Late Payment Regulations already allow terms over 60 days to be challenged as “grossly unfair,” enforcement has been weak and the rules easy to circumvent through mutual agreement clauses. The 2026 proposals would close this loophole with a hard cap backed by fines.

If you are a freelancer, this matters more than you might think. Many freelancers work with agencies, consultancies, and larger companies who sit between them and the end client. These middlemen often impose extended payment terms that leave freelancers waiting months for money they have already earned. A 60-day cap would not eliminate the wait entirely, but it would put a ceiling on how long you can be made to wait.

It is worth noting that 60 days is still a long time to wait for payment, especially if you are a sole trader covering your own bills. But for freelancers currently stuck on 90 or 120-day terms with larger clients, this would be a meaningful improvement. The cap is expected to apply to new contracts and contract renewals once the legislation passes.

Director liability

One of the more eye-catching proposals is the introduction of personal liability for company directors who preside over systematic late payment of suppliers. If a company has a pattern of paying late, the directors who run that company should not be able to hide behind the corporate structure.

Under the proposed rules, directors of large companies that repeatedly fail to pay within agreed terms could face personal consequences. The exact mechanism is still being finalised. This is one of the more controversial elements of the package and may be amended as it passes through Parliament. But the intent is clear: the government wants to make late payment a boardroom issue, not just something the accounts department deals with.

For freelancers, this is potentially powerful. One of the most frustrating aspects of chasing late payments from larger companies is the sense that nobody at the top cares. If directors face personal consequences for allowing a culture of late payment, there is a real incentive to fix the underlying systems and processes that cause delays.

Fines and penalties

Currently, there are no real penalties for paying late. The existing Prompt Payment Code is voluntary: companies can sign up, and they can be removed if they do not comply, but there is no fine, no sanction, and no teeth. It is a reputational measure at best, and most freelancers have never heard of it.

The proposed legislation would change this by giving regulators the power to impose financial penalties on companies that persistently pay their suppliers late. The details of the fine structure (how much, what triggers it, and who administers it) are still being worked out. But the principle is significant: for the first time, late payment would carry a direct financial cost to the company doing it.

Whether this changes behaviour will depend heavily on the size of the fines and how actively they are enforced. A £500 fine for a company with millions in revenue is not going to move the needle. But if the fines are meaningful and enforcement is consistent, this could genuinely shift the cost–benefit calculation for large companies that treat their suppliers like interest-free lenders.

Small Business Commissioner enforcement powers

If you have not heard of the Small Business Commissioner (SBC), you are not alone. The SBC is a government-appointed body created in 2017 to handle complaints about late payment by larger businesses. In theory, it is a free alternative to going to court. In practice, its powers have been limited to “naming and shaming”, publishing the names of companies that do not pay on time. It cannot force anyone to pay, and it cannot issue fines.

The proposed reforms would significantly expand what the SBC can do. Under the new legislation, the SBC would be able to issue binding payment orders (essentially ordering a company to pay what it owes) and levy fines against persistent late payers. This would transform the SBC from a toothless advisory body into something closer to a genuine enforcement authority.

For freelancers, this is potentially one of the most useful changes. Going to court over an unpaid invoice is expensive, time-consuming, and stressful. If the SBC can resolve disputes with binding orders and without court fees, it would give small suppliers a much more accessible route to getting paid. The question, as always, is whether the resources and staffing will match the ambition.

Timeline: when is this happening?

Legislative timelines in the UK are notoriously difficult to predict. Bills can be delayed, amended, or held up at various stages. Here is what we know so far, but please treat this as indicative rather than guaranteed.

We will update this section as the legislation progresses. The key takeaway: do not wait for these laws to protect yourself. Your existing rights are already strong.

What this means for freelancers

Let’s be honest: this is good news, but it is not a magic wand. The proposed reforms address real problems and, if passed in a meaningful form, will make a genuine difference over time. But they will not solve everything overnight, and there are some important caveats to keep in mind.

The 60-day cap is the most immediately useful change for freelancers who work with larger companies and agencies. If you are currently stuck on 90-day terms, this will help. But the cap only applies to large businesses paying small suppliers. If your client is a small company too, this measure does not directly affect your arrangement. And 60 days is still a long time to wait, so setting your own shorter terms (14 or 30 days) remains important.

Director liability and the fining powers are promising, but enforcement is everything. Laws only work if someone enforces them. The expanded SBC powers are potentially the most practical change for individual freelancers, giving you a route to resolution that does not involve a court claim. But the SBC will need proper funding and staffing to handle the increased workload.

The bottom line: your existing legal rights (statutory interest, fixed compensation, the right to take court action) are still your best protection today. The new laws, if passed, will strengthen the environment around you. But you still need to chase your invoices, set clear terms, and be prepared to escalate when a client does not pay.

Your existing rights (you do not need new laws for these)

While the proposed reforms work their way through Parliament, it is worth remembering that you already have strong legal protections under existing law. The Late Payment of Commercial Debts (Interest) Act 1998 gives every UK business (including freelancers and sole traders) the right to charge interest and claim compensation on any commercial invoice that is paid late.

For a full breakdown of your current rights, including how to calculate what you are owed and how to reference these rights in your communications, read our complete guide to freelancer late payment rights.

How to protect yourself right now

You do not need to wait for new legislation to start protecting yourself against late payment. Here are practical steps you can take today.