Guidance

Commercial Payments Bill: overview

Published 19 May 2026

Overview

The Commercial Payments Bill is central to the government’s plan for small and medium-sized businesses. It will tackle the problem of late payments to them, that costs the UK economy £11 billion per year and sees 38 UK businesses close every day.

The bill has been developed after listening to businesses of every size, sector, region and nation in the UK. It will be the most significant legislation to tackle late payments in over 25 years.

Outcome of the late payments consultation

A public consultation on tackling poor payment practices ran from 31 July 2025 to 23 October 2025. It sought views on a proposed set of legislative measures to address late, long and disputed business-to-business payments.

In total, the late payments consultation received 867 responses from a wide range of stakeholders from across the UK, including all business sizes and a variety of sectors including retail, finance and manufacturing. On 24 March 2026, the government published its response to the consultation, setting out its legislative approach.

Measures being taken forward in the bill

The bill will tackle late payments between businesses and improve the flow of cash through supply chains, facilitating a more productive economy. It will improve payment practices by: 

• imposing maximum payment terms of 60 days, with strictly limited exemptions
• mandating interest on late payments at 8% above the Bank of England base rate
• giving suppliers the right to a fixed sum where a purchaser raises a dispute late or without sufficient information
• prohibiting the deduction and withholding of retention payments under the terms of a construction contract. We will consult further on the timing for implementation

Underpinning these new legislative measures to address poor payment practices will be new, stronger powers for the Small Business Commissioner (SBC) and new reporting requirements for large businesses.

The SBC will be given the power to: 

• investigate larger businesses suspected of persistently engaging in poor payment practices and breaching payments legislation, make recommendations and take enforcement action where appropriate (including the power to make directions and impose financial penalties)
• adjudicate contractual payment disputes between small and larger businesses outside of the court process and make binding interim decisions
• take enforcement action against larger businesses that are in breach of their statutory reporting requirements on payment practices and performance

These powers will support the mission of the SBC to drive good payment practice, building on initiatives such as the Fair Payment Code.

Scrutiny and reporting of payment practices

The UK’s largest companies and limited liability partnerships are currently required to report on a half-yearly basis on their payment practices, policies and performance. We will be introducing additional requirements in secondary legislation for large companies to report the amount of interest they have paid and the interest they owe.

We will also require boards or audit committees of persistently late-paying large companies to publish commentary on why their payment performance is poor and what actions they are taking to fix this.  

Next steps

We have introduced this bill to Parliament in May 2026. We will provide an appropriate lead-in time before the powers come into force, allowing businesses time to prepare for any changes that may affect them. This will include a transition period.

These measures will not be applied retrospectively. Instead, payments, contracts and disputes will be judged according to the rules in place at the relevant time.