The government's late payment reforms are now a Bill before Parliament, and they change the terms on which buyers and suppliers deal with each other. A statutory cap on payment terms, mandatory interest and a regulator with the power to fine move late payment out of the relationship and into the compliance file. Buyers who can show how they actually pay will be in a stronger position than those who can only point to a policy.
Key takeaways
The Commercial Payments Bill is the legislation that turns the government's late payment package into law, and it is further along than many finance teams realise. It was introduced in the House of Lords on 19 May 2026 as a government Bill, completed its Lords report stage on 15 September, and is provisionally scheduled for third reading on 20 October 2026 before it moves to the Commons. None of it applies yet. What it signals, though, is already clear: payment behaviour is becoming regulated, measured and public, which is why payment behaviour intelligence is moving from a nice-to-have to a control that buyers will need.
What is in the Commercial Payments Bill?
The Commercial Payments Bill sets maximum payment terms, makes statutory interest mandatory, penalises late disputes, bans retentions in construction and gives the Small Business Commissioner (SBC) enforcement powers. Each measure matters for a different reason.
On payment terms, the Bill sets a maximum of 60 days where the purchaser is a business and 30 days where the purchaser is a public authority. There are exemptions. According to the explanatory notes published with the Bill, a contract can fall outside the cap where the purchaser is the smaller party and, once regulations set the criteria, where both parties are large undertakings. In each case the contract must be in writing and state which exemption it relies on. The measures apply to UK-to-UK transactions only. In practice, the cap is aimed squarely at larger buyers paying smaller suppliers.
On interest, the Bill keeps the statutory rate at 8% above the Bank of England base rate but removes the ability to exclude or vary it by contract. Today, many supplier agreements quietly substitute a weaker remedy. Under the Bill, those terms would be void.
On disputes, a purchaser that raises a dispute after the 'last dispute day' (the start of the eight-day window ending on the day payment falls due) or without sufficient detail would owe the supplier a fixed sum of £40 or 1% of the contract price, whichever is higher, or 1% of the disputed amount where only part of the invoice is challenged. The July 2025 consultation had floated a 30-day window; the Bill takes a different approach.
On enforcement, the SBC would gain powers to adjudicate payment disputes brought by small businesses, investigate larger businesses suspected of persistent poor payment practices, issue directions and impose financial penalties.
Is 60 days the final word?
No, and this is the most important change since the Bill was introduced. The government's July 2025 consultation proposed starting at 60 days and reducing to 45 after five years. Its March 2026 response dropped the automatic reduction. At report stage on 15 September, however, peers agreed a government amendment that lets the Secretary of State shorten both the 60-day and 30-day limits by regulations approved by Parliament, and requires a consultation on whether to do so within five years of the caps coming into force. The power can only reduce terms, never extend them.
In other words, the government chose a mechanism rather than a number. Peers who wanted 45 days written into the Bill did not get it, but the Bill now assumes that the cap will be reviewed and that shorter terms are a realistic outcome. For planning purposes, 60 days is the ceiling at commencement and the direction of travel is shorter. A buyer that redesigns its payment cycle to land on day 59 is building for a limit the legislation already expects to tighten.
Timing is the other thing to hold loosely. The government has said the cap will take effect no earlier than 2027, with a transition period, and the Bill does not apply to contracts entered into before the relevant provisions come into force. Most measures will be switched on by regulations after Royal Assent.
Why a statutory cap changes the supplier relationship
A cap turns payment terms from a negotiating position into a legal floor. For a decade, large buyers have extended terms to 75, 90 or 120 days because they could, and suppliers accepted them because the alternative was losing the contract. The Bill removes that option for most contracts with smaller suppliers, and the mandatory interest right means a supplier no longer has to choose between charging interest and keeping the relationship.
That is the point our earlier piece on the government's late payment crackdown made in March: late payment is shifting from a relationship issue to a regulatory one. The practical consequence for buyers is a renegotiation cycle. Any supplier contract on terms longer than 60 days, or with an interest clause that substitutes a lesser remedy, will need to be revisited before the relevant provisions commence. Finance teams that start that review now, supplier by supplier, will have a cleaner conversation than those who wait for the regulations.
It also exposes the gap between contractual terms and actual payment days. As we argued in the death of Net 30, a nominal payment term is a forecast disguised as a commitment. A 60-day cap tightens the forecast. It does not tell anyone whether you meet it.
Payment practices data is becoming public and enforceable
Payment performance is already reported, and the Bill gives that reporting teeth. Large companies and LLPs publish half-yearly data under the Reporting on Payment Practices and Performance Regulations 2017. The Bill would let the SBC penalise failures to meet those reporting requirements, with penalties capped at 1% of turnover. Amendments agreed at report stage removed the requirement that turnover be measured in the UK only: the definition will be consulted on and set in regulations, so that a narrow measure cannot be used to blunt the penalty. The government's overview of the Bill adds that secondary legislation will require disclosure of statutory interest paid and owed, and that the boards or audit committees of persistently late payers will have to publish commentary on their performance and what they are doing about it.
Put together, that makes payment behaviour a governance matter. It will sit next to the numbers a board already signs off, and it will be visible to every supplier deciding whether to work with you. This is why voluntary schemes on their own have struggled: as we set out in why fair payment codes without enforcement will fail, a commitment with no observable evidence behind it does not change behaviour. The Bill supplies the enforcement. Buyers still need the evidence.
Why observable payment behaviour data matters under the Commercial Payments Bill
Under the Commercial Payments Bill, the buyers best placed are those who can show, invoice by invoice, how they pay. Half-yearly averages are a lagging summary. An SBC investigation, a supplier dispute or an audit committee question will turn on specific invoices: when they were received, when they were approved, when a dispute was raised and when they were paid.
That record usually does not exist in one place. It is spread across the accounting system, email and a supplier's own ledger, and the two sides often disagree about the dates. A shared record, where buyer and supplier see the same invoice and payment status in real time, removes most of that ambiguity. It also gives finance a live view of payment behaviour benchmarking against peers, rather than discovering a problem when the half-yearly report is compiled.
This is how the accounts payable network works on Accounting Links. Buyers and suppliers share real-time invoice and payment status, every change is logged in an audit trail, and payment behaviour is benchmarked across the network, so your actual payment days sit alongside UK industry payment benchmarks. For teams signed up to the Fair Payment Code, the Fair Payment Code integration connects that commitment to observable data.
What buyers should do before the Bill becomes law
Buyers should use the window before commencement to find out how they pay today. Pull actual payment days by supplier, not averages. Identify contracts on terms over 60 days and clauses that exclude or vary statutory interest. Map where disputes are raised and how late in the cycle. Decide who owns payment performance at board level, because under the Bill someone will have to explain it. And plan for a shorter cap than 60 days, because the Bill now builds in a review that points that way.
None of this needs the regulations to be finalised, and all of it will be harder to do under time pressure. The Bill's text may still change at third reading and in the Commons, but the direction will not: payment behaviour is becoming something buyers are measured on.
To see how your payment behaviour looks from your suppliers' side, and how it compares with your sector, explore payment behaviour on Accounting Links.
Sources
FAQs
