On Tuesday 19 May 2026, the Department for Business and Trade said it was introducing the Small Business Protections Bill, formally the Commercial Payments Bill, to Parliament through the House of Lords. The measure is presented as the main legislative vehicle for tightening the UK’s late-payment regime for small suppliers, freelancers and family firms. (gov.uk) For policy purposes, the Bill marks a move beyond disclosure and voluntary codes. The government’s March 2026 consultation response had already set out a package based on hard payment limits, mandatory statutory interest, stronger reporting and new enforcement powers for the Small Business Commissioner. (gov.uk)
The Department for Business and Trade’s research, published in July 2025, estimated that late payment costs the UK economy almost £11 billion a year. The same research said around 14,000 businesses close annually because of late payment, equivalent to 38 a day, while more than 1.5 million businesses are affected each year. (gov.uk) The research also found that businesses are owed an estimated £26 billion in late payments at any given time, averaging £17,000 per affected business, and that affected firms spend about 86 hours a year chasing invoices. That gives ministers an evidence base for treating payment terms as a productivity and business-survival issue rather than a purely private contractual matter. (gov.uk)
The headline legal change is a hard 60-day cap on payment terms where large firms buy from smaller suppliers. The Department for Business and Trade said the Bill would also make statutory interest on late payment mandatory at 8% above the Bank of England base rate, removing the ability for parties to substitute weaker contractual remedies. (gov.uk) The March 2026 consultation response indicates that this 60-day ceiling is intended as a first-stage limit, with government considering a later move to 45 days after five years, subject to further consultation. The same response said implementation of the 60-day hard limit would begin with a transition period and no earlier than 2027. (gov.uk)
The Bill also changes the Small Business Commissioner’s role. Under the government plan, the office would be able to investigate suspected poor payment practices or inaccurate reporting, adjudicate payment disputes outside court, and fine persistent late payers, with penalties linked to unpaid statutory interest and potentially reaching large sums for major companies. (gov.uk) That is a material institutional change. The consultation response said the Commissioner would be able to make adjudication awards, recover the costs of adjudications and investigations, and receive further grant funding through the Department for Business and Trade. (gov.uk)
Large-company governance is also brought into scope. The government said boards or audit committees at companies with a significant proportion of late payments would be required to publish commentary on GOV.UK explaining why performance is poor and what corrective action is being taken. (gov.uk) For the construction sector, the Bill package includes action against retentions. The March 2026 response said the government proposes to prohibit the deduction and withholding of retention payments under construction contracts, while consulting further on the impact and implementation of that ban. (gov.uk)
For large businesses, the practical issue is not only when invoices are paid but how payment governance is evidenced. Contract templates, dispute windows, invoice approval processes, interest calculations and board oversight will all need review if the Bill proceeds in its current form. The existing reporting regime for large businesses is expected to carry more compliance weight because reporting data may be used to identify persistent late payers for investigation and penalty. (gov.uk) For smaller suppliers, the proposed structure matters because it reduces reliance on court action or commercial pressure alone. A right to adjudication through the Commissioner, combined with automatic interest and a statutory payment ceiling, would give microbusinesses and freelancers a clearer statutory route for pursuing payment. (gov.uk)
The Small Business Commissioner has argued that enforcement capacity is already improving. In April 2026, the office said it had supported recovery of more than £1.5 million in overdue payments during 2025-26, its highest figure in over five years, while the government’s 19 May press release said the office had recovered more in the last year than in the previous four years combined. (smallbusinesscommissioner.gov.uk) The immediate next step is parliamentary scrutiny. As of 19 May 2026, the government said the Bill was due to be introduced in the House of Lords that day, so the proposed duties are not yet in force, but the direction of UK payment regulation is now set out in clear legislative terms. (gov.uk)