Commercial Payments Bill: what UK businesses should check in their contracts now
What does the Commercial Payments Bill propose?
A 60-day cap. Payment terms in most business-to-business contracts could not exceed 60 days, or 30 days with a public authority buyer. Longer terms would be void (Macfarlanes).
Automatic interest. Suppliers would be entitled to simple interest at 8% above the Bank of England base rate on overdue payments, and terms trying to exclude or vary that right would be void (Macfarlanes).
Stronger enforcement. The Small Business Commissioner would gain powers to investigate, run an adjudication scheme and fine persistent late payers up to 1% of annual UK turnover, according to Macfarlanes.
Transparency. Large companies would have to give more detail on their payment practices, including board commentary on poor performance.
Invoice disputes. Baker McKenzie reports a requirement to raise invoice disputes at least eight days before the due date, with a penalty for missing it (Baker McKenzie). Details may change as the Bill passes through Parliament.
Which contracts would be exempt?
The government's response proposed exemptions for contracts between two large companies, contracts where the smaller business is the buyer, and some cross-border sales (Mayer Brown). Macfarlanes notes that these exemptions do not apply where either party is a public authority and must be documented in writing. The definition of a "large undertaking" and further exemptions are still to be settled in later regulations, so check how you would be classed.
Where does the Bill stand?
The Bill was introduced in the Lords in May 2026. It had its Second Reading on 9 June and completed Committee Stage on 21 July 2026, with Report Stage scheduled for 15 September 2026 (UK Parliament). The House of Lords Library has a briefing on the Bill, and the explanatory notes explain each clause. Check Parliament's website for its latest stage, because this post was last updated on 7 October 2026.
Construction contracts are reported to have a two-year transition, and the Bill would also prohibit retention payment clauses after that period (Macfarlanes).
What are the rules on late payment today?
Right now, you can claim interest and debt recovery costs if another business pays late. Payment is generally late 30 days after the invoice or delivery, unless the contract sets different terms (GOV.UK). The Bill would restrict how far contracts can depart from this. If you need help recovering a late payment, see our debt recovery fees page.
What should you check in your commercial contracts now?
Payment terms: note every contract and template with terms longer than 60 days, or 30 days if you deal with public bodies.
Late payment clauses: find any interest rate or remedy that differs from 8% above base rate.
Dispute procedures: check how and when invoice disputes must be raised, and whether your team could meet an earlier deadline.
Counterparty size: work out whether you or your customers could fall within the large-company or smaller-buyer exemptions.
Construction and retention: if you use retention clauses, plan for the transition period.
Cash flow: model what shorter payment terms mean for your own suppliers.
Our earlier guide on contract agreements and your rights covers drafting basics, and our commercial law team can review the contracts you use most.
Frequently asked questions
What is the Commercial Payments Bill?
It is a Bill before the House of Lords that would set a 60-day maximum payment term for most business-to-business contracts (30 days where a public authority is the buyer) and give suppliers a right to interest at 8% above the Bank of England base rate on late payments.
Is the Commercial Payments Bill law yet?
No. It has passed Second Reading (9 June 2026) and Lords Committee Stage (21 July 2026). Report stage was scheduled for 15 September 2026. Implementation is expected no earlier than 2027.
Which contracts would the 60-day cap apply to?
Most business-to-business contracts. Exemptions are proposed for contracts between two large companies, where the smaller business is the buyer, and some cross-border sales. Exemptions do not apply where either party is a public authority. Final details may change.
What are the rules on late payment today?
Under existing law, you can claim interest and debt recovery costs when another business pays late. Payment is generally late 30 days after receiving the invoice or delivery, unless the contract says otherwise.
Should I change my contracts now?
You should review them. Check your payment terms, interest and dispute clauses so you are ready, but wait for the final Act before rewriting templates, as the Bill may still change.
About this article
Written by: Sundre Communications, the content team that prepares Themis Crown Advocates Limited's articles.
Legally reviewed and approved by: Mya, Themis Crown Advocates Limited.
Published by: Themis Crown Advocates Limited, SRA ID 8008980, Companies House no. 15561948, 124-128 City Road, London EC1V 2NX.
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This article is general information, not legal advice for your situation. It reflects the law and reported developments as at the date shown and may change.
