We dive into the legal safeguards that protect your business from late payments in the UK.

Receiving late payments from the public sector can have a devastating impact on your business. From reduced cash flow to wasted resources, this can cause unnecessary stress and hinder business growth.

But did you know that there is actually legal protection against late payments in the UK? This falls under the Late Payment of Commercial Debts (Interest) Act 1998

This legislation allows businesses to claim compensation for late payments of commercial debts. In the process, protecting them against the negative effects of untimely payment.

Our guide breaks down how this important piece of legislation protects your business and how to make a late payment compensation claim.

What Is The Late Payment of Commercial Debts (Interest) Act 1998?

The Late Payment of Commercial Debts (Interest) Act 1998 is an important piece of legislation that legally protects businesses experiencing late payment.

It does this by outlining rules around the payment of interest and your right as a business owner to claim compensation for late payments. This is known as a late payment compensation claim.

While understanding the general crux of this legislation is helpful for any UK business, it’s best to work with late payment specialists if you plan to make a claim.

Read our comprehensive guide to find out more about the Act.

How Does The Act Protect My Business?

If you reside in the UK, the Late Payment of Commercial Debts (Interest) Act 1998 can benefit your business in a number of ways. 

From ensuring timely payments to outlining interest rates, we’ve broken down the main features of the Act below. 

Encourages timely payment

The Act stipulates that debtors must pay their invoices within 30 days unless there’s a dispute or the two parties have agreed on a different payment date. Under the legislation, you can charge interest and claim compensation if the debtor doesn’t pay your business within this timeframe.

By knowing this legislation and your rights as a business owner, you can protect yourself from the impact of late payments. In turn, this enables you to manage cash flow better and minimise the risk of insolvency.

Additionally, once public sector organisations know you are aware of your rights, they’re less likely to pay you late in the future.

Statutory right to compensation

Following on from our previous point, the Act gives your business a statutory right to claim compensation and interest for all late payments.  It includes payment terms and compensation rates, making it easier for your business to enforce your rights.

What’s more, these clearly outlined details mean you don’t need to negotiate with contracting authorities regarding late invoice payments. It’s all laid out clearly in the legislation. For instance, the Act outlines the following fixed rates for late payment compensation:

  • Debts up to £1,000 → £40
  • Debts between £1,000 and £10,000 → £70
  • Debts over £10,000→ £100

In addition, it sets a statutory interest rate of 8% plus the Bank of England base rate for late payments. Knowing these figures allows your business to understand what money you are entitled to claim in compensation.

Nb: The interest rate starts from the day after the payment due debt and applies to all outstanding debt until the full amount is paid.

Want to know how much you can claim in late payment compensation? Try our free Claim Calculator today.

Settles disputes

If you receive a late payment from the public sector, this could end up in a dispute. Disputes can negatively impact your working relationship with a client and cost you time and money.

The Act, however, can help to avoid potential disputes. Since it sets out clear payment terms, it’s much harder for a client to argue over payment terms.

Furthermore, if your business works with public sector late payment specialists, they can handle this process for you. That way, you can focus on business operations while your late payment compensation is recovered.

Discover the benefits of using specialist late payment services.

Improves financial management

Receiving late payments can make it difficult for your business to manage your finances and plan ahead. This can hinder business growth. Fortunately, the Late Payment of Commercial Debts (Interest) Act 1998 mitigates some of the damage this can cause your company.

For example, you can use the compensation you receive to cover any costs associated with late payments, including admin and legal fees.

What To Do If You Receive Late Payments in the UK

Many UK businesses look into the late payment compensation claims process but think it’s too complex to navigate. As a result, they’re losing out on thousands of pounds of compensation.

Don’t let the red tape put you off.

At, we handle the full claims process for you. That way, you can get the money you deserve without allocating time or resources to making a claim. We came up with a simple, four-step claims process to help you get what’s yours:

  • Step 1: Check you’re entitled to compensation with our free Eligibility Checker
  • Step 2: Start the claims process by filling in a quick questionnaire 
  • Step 3: Complete our bespoke Claim Pack (sent to you by email)
  • Step 4: Sit back and let our team work on your behalf

 With our no-win, no-fee approach, you can claim late payment compensation with total peace of mind.

Next Steps

The Late Payment of Commercial Debts (Interest) Act 1998 protects your business from late payments in the UK. Not only does it set our clear compensation and interest rates, but it encourages public sector organisations to pay providers promptly.

By understanding this important legislation and its impact on your business, you can avoid potential payment disputes and better manage your company’s finances. If you think your business is entitled to make a late payment compensation claim, we can help.

With years of industry experience, we’ll navigate the full process on your behalf and ensure you get the best possible outcome.

Start the claims process with us today.

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