Late Payment Law UK — What Tradespeople Can Do When Customers Don't Pay

You Have More Rights Than You Think

Most self-employed tradespeople don't know it, but UK law gives you a clear framework for chasing late payments — including the right to charge interest automatically, add debt recovery costs, and eventually take a customer to court through a streamlined process that doesn't require a solicitor.

The problem is that most tradespeople don't know these rights exist, or feel awkward using them. This guide explains exactly what you're entitled to and how to use it without torching the customer relationship unnecessarily.

What Counts as a Late Payment?

A payment is late once it passes the due date on your invoice. If you didn't specify a due date, the law assumes payment is due within 30 days for business customers and 30 days for public sector customers.

For domestic customers (homeowners), the rules are slightly different — there's no automatic statutory interest entitlement in the same way, but you can still take action through the small claims court if they refuse to pay.

The legislation that covers late payment between businesses is the Late Payment of Commercial Debts (Interest) Act 1998. It applies to contracts for goods and services between businesses, which includes most trade work done for landlords, letting agents, property developers and construction companies.

Statutory Interest — What You Can Charge

If a business customer pays you late, you're entitled to charge statutory interest automatically — no need to have mentioned it in your quote or invoice. The rate is 8% above the Bank of England base rate. At current rates (mid-2026), that works out at approximately 13% per year.

On a £1,000 invoice that's been unpaid for 60 days, that's around £21 in interest — not a fortune, but it's yours by law and it signals to customers that late payment has a cost.

You can also add a fixed compensation charge per unpaid invoice:

£40 for invoices under £1,000
£70 for invoices between £1,000 and £9,999
£100 for invoices of £10,000 or more

These amounts don't need to be in your contract — they're automatic under the Act.

The Escalation Ladder

Rather than going straight to threats or legal action, most experienced tradespeople use a structured approach to chasing payments. This protects the relationship where possible while making clear that you're serious.

Step 1 — Friendly reminder (7 days overdue)

A short, polite message. Assume it slipped through — because sometimes it genuinely does. "Hi [name], just following up on invoice DR-0051 for £480. Let me know if you need anything from me to process it."

Step 2 — Firm reminder (14 days overdue)

Reference the invoice number, the amount, the original due date. Make clear payment is now overdue and you'd like it resolved this week. You can mention that statutory interest may apply if it remains unpaid.

Step 3 — Final notice (21 days overdue)

State that you intend to pursue the debt formally if payment isn't received within seven days. Reference the Late Payment Act. This often prompts payment from customers who've been stalling.

Step 4 — Small claims court

For amounts under £10,000, the small claims court is designed to be used without a solicitor. The process is mostly online through gov.uk. Filing fees range from £35 to £455 depending on the claim amount. If you win — and you will, if the debt is legitimate and you have a paper trail — the customer pays the court fees too.

Building a Paper Trail

The single most important thing you can do is create a clear paper trail from the start of every job. This means:

A written quote or estimate that the customer agreed to (even a WhatsApp confirmation counts)
A professional invoice with a due date, invoice number and your payment details
Records of every reminder you've sent and when

If you ever end up in the small claims court, the judge will want to see that you gave the customer a clear invoice, a reasonable amount of time to pay, and a genuine attempt to resolve it before going legal. A solid paper trail makes this straightforward.

Prevention Is Better Than Cure

The best way to avoid late payment problems is to reduce the risk upfront. A few approaches that work well for tradespeople:

Take a deposit — 25–50% upfront for bigger jobs is standard and signals that you're professional
Invoice immediately — send the invoice the moment you finish the job, while the customer is still happy with your work
Set clear payment terms — 7 days is standard for tradespeople; 30 days is too long and trains customers to be slow
Send automatic reminders — so you don't have to remember to chase every invoice manually

Dayrates handles all of this for UK tradespeople. You can send invoices from site in minutes, set automatic payment reminders at 7, 14 and 21 days, and track exactly what's outstanding at any point. Try it free for 14 days — no card needed.