The Commercial Payments Bill: What Businesses Need to Know

Introduction

Introduced to Parliament on 19 May 2026, the Commercial Payments Bill represents a significant reform to payment legislation. Targeting a problem that costs the economy £11 billion per year, the Bill introduces a package of hard-edged protections that businesses cannot avoid through contract.

Key Provisions

1. Mandatory Payment Terms. The Bill imposes a statutory cap of 60 days on payment terms (30 days for public authorities). Terms exceeding this will be void, with a 30-day implied term applying in their place (or where the contract does not contain a payment term). Limited exemptions exist; for example, where both parties are large businesses.
2. Mandatory Statutory Interest. Contractual attempts to vary or exclude the right to statutory interest at 8% above the Bank of England base rate will be void. This closes the loophole that currently allows parties to agree lower contractual interest rates as an alternative to the statutory default.
3. Invoice Dispute Deadlines. Disputes must be raised (with sufficient information for the supplier to understand what the dispute is about) at least eight days (in most cases) before payment falls due. Failure to comply triggers an automatic financial penalty: the higher of £40 or 1% of the contract price or, where only part of the contract price is disputed, 1% of the disputed amount, with no ability to contract out of this consequence.
4. A Strengthened Small Business Commissioner. The Small Business Commissioner (SBC) receives substantially expanded powers, including the ability to investigate payment practices, adjudicate disputes, require publication of payment data, and issue enforcement directions. Financial penalties of up to 1% of annual UK turnover may be imposed on non-compliant businesses. Businesses reporting 25% or more of invoices paid late are likely to trigger investigation.
5. Enhanced Board-Level Reporting. Large businesses with persistently poor payment records will be required to publish commentary on GOV.UK explaining why performance is poor and what steps are being taken to improve it. Reporting obligations will also expand to require disclosure of interest owed and interest actually paid.

What Businesses Should Do Now

In practice, extended payment terms beyond 60 days and contractual provisions that replace the statutory interest rate with a lower rate are commonplace in commercial contracts. The Bill will render these arrangements unenforceable, creating a formidable new regime combining void contractual terms, mandatory interest, automatic penalties and regulatory enforcement. The legislative timetable provides some runway for preparation, but businesses that wait for Royal Assent to act will find themselves behind the curve. As such, businesses may wish to take this opportunity to:

• Audit payment terms in standard and bespoke contracts for compliance with the 60-day cap;
• Review and update invoice dispute processes to meet the proposed statutory deadline; and
• Assess exposure to SBC enforcement, particularly where payment data already shows high rates of late payment.