What this means for you

If you've ever chased a large customer for payment and watched 60, 90 or even 120 days go by, the government has introduced legislation aimed squarely at that problem. The Small Business Protections Bill — listed in Parliament as the Commercial Payments Bill [HL] — was introduced in the House of Lords on 19 May 2026, described by the government as the biggest crackdown on late payments in over 25 years.

The important caveat up front: this is a bill, not yet an Act. As of today, it's still going through Parliament, and none of its provisions are in force. Nothing changes for your invoices or payment terms until it completes its parliamentary stages and any transitional provisions take effect.

What the bill proposes

Once (and if) it becomes law in its current form, the bill would:

  • Cap payment terms at 60 days for large firms paying smaller suppliers, with only strictly limited exemptions.
  • Mandate interest on overdue payments, set at 8% above the Bank of England base rate — a level intended to remove any financial incentive for large customers to pay late.
  • Ban retention clauses in construction contracts.
  • Give suppliers a right to a fixed sum where a purchaser raises a dispute over an invoice late, or without giving enough information to justify it.
  • Strengthen the Small Business Commissioner's powers, allowing it to investigate persistently poor payment practices, adjudicate disputes outside the courts, and issue financial penalties — potentially running into tens of millions of pounds for the worst repeat offenders.
  • Require large companies to report on interest paid and owed for late payments, and require boards or audit committees of persistently late-paying firms to publish explanations of their payment performance and what they're doing about it.

Where things stand right now

The bill began in the House of Lords, where it completed committee stage on 21 July 2026. It still needs to finish its remaining Lords stages and then pass through the House of Commons before it can receive Royal Assent. There's no confirmed date yet for when the 60-day cap, the mandatory interest rate or the expanded Small Business Commissioner powers will take effect, and the government has said there will be a lead-in period before the new rules apply. Treat this as a strong signal of direction, not a rule to comply with today.

What you should do now

  • Don't assume the 60-day cap or mandatory interest rate already applies — check the bill's progress before relying on it in a dispute with a customer.
  • If you're a small supplier being paid on long terms today, keep records of payment dates and any late-payment interest you're entitled to claim under existing law (the current statutory right to claim interest on late commercial payments still applies, separately from this bill).
  • If you sit on a board or are involved in supplier payment policy at a larger company, start thinking now about what a 60-day cap and published payment reporting would mean for your cash flow planning — arriving early is easier than scrambling once the rules bite.
  • Keep an eye on the bill's progress through Parliament for a confirmed commencement date.

How ReceiptTidy helps

Whichever way this bill lands, one thing doesn't change: businesses need clean, dated records of every invoice they issue and receive, to know exactly what's owed, by whom, and since when — which becomes even more valuable if you ever need to claim late-payment interest or refer a dispute to the Small Business Commissioner. ReceiptTidy captures your receipts and invoices as they arrive — by photo or email forward — extracts the supplier, date, amount and VAT with AI, and syncs the reviewed records into Xero, QuickBooks, FreeAgent, Sage or Zoho Books, so you always have an accurate, up-to-date picture of what's outstanding on both sides of your business.

Sources

This article is general information, not tax or legal advice. Check the latest HMRC / GOV.UK guidance or speak to an accountant about your situation.