The Late Payment of Commercial Debts (Interest) Act 1998, amended several times since, applies to contracts for goods or services between businesses (including sole traders) and with the public sector. It gives suppliers three rights on late payment: statutory interest, fixed compensation, and reasonable recovery costs.
The Act also implies a default payment period of 30 days where none is agreed and limits very long payment terms. A further reform, the Commercial Payments Bill, was before Parliament in 2026 and would cap most terms at 60 days from no earlier than 2027.
Example
A freelancer invoicing a limited company can add interest to an overdue invoice even if the contract never mentioned it.