Late payment guide: legal rights and process for claiming a late payment

Note: New legislation is set to significantly strengthen the rights of the self-employed when it comes to late payment. Read more here.

In an ideal world, every invoice will be settled as soon as it’s received, or at least within the agreed payment terms. But sadly, chasing missed or late payments is almost inevitable at some point in the life of any freelancer or self-employed professional. Following this guide should help make it an inconvenience, rather than a major headache, when it happens to you.

Cash flow is important for any business. But if you’re a solo entrepreneur or freelancer, it can be the difference between not only keeping your company afloat, but being able to pay rent and bills. Even a small delay can cause major problems, regardless of the amount of money involved.

The longer you let these issues go unresolved, the bigger they tend to get. Forget to chase an unpaid invoice when it’s due, and you’ll find it harder to ask a client to pay six or twelve months later. Your original contacts may have moved on, or the company may have ceased trading, making it very difficult to recover money for work you’ve already delivered.

When setting out a payment date, the default is 30 days for public authorities and 60 days for private business transactions. While you can agree longer periods if both parties consent, by default a payment is late 30 days after either the invoice is received or the goods and services have been delivered (whichever is later).

If a payment has been missed, you can claim interest and debt recovery costs under the Late Payment of Commercial Debts (Interest) Act 1998. You are entitled to this compensation even if your invoice or payment terms did not mention it. By law, you can claim statutory interest for late payments up to six years in the past in England, Wales and Northern Ireland, and five years in Scotland. 

Unless otherwise agreed, you can currently claim up to 8% statutory interest plus the Bank of England Base Rate, along with a fixed recovery fee based on the amount owed:

Under the current rules, claiming interest is optional, which means many freelancers never do it, often for fear of damaging the client relationship. The Bill would make interest on late payments mandatory. If a client misses the payment deadline, they would be automatically required to pay interest at 8% above the Bank of England base rate. The obligation shifts firmly onto the late payer, where it belongs.

The Bill would also introduce a statutory 30-day time limit for raising invoice disputes. If a client fails to flag a dispute within 30 days, they would be required to pay compensation. This directly tackles the all-too-common tactic of last-minute or fabricated disputes raised only when payment becomes due.

The Bill had its first reading in the House of Lords on 19 May 2026. It must still pass through all parliamentary stages before it becomes law. 

Find out more about the proposed changes and timeline. 

A common approach for many freelancers is to require a partial deposit, or to set out stepped payments at agreed project stages, or to withhold the final deliverable until payment has been received. Always have a clear agreement in place, even when working for friends or family.

If you’re sending recurring invoices, services that allow for regular direct debit payments, or instant settlement via PayPal, Stripe or similar platforms, can be a good option. While these normally involve percentage-based fees, there is significant potential to save time and effort spent chasing invoices.

When entering into a new agreement, make sure you know who will be responsible for processing payments. In larger companies, the person hiring you probably won’t be the one settling your invoice. Including the accounts department when you send your invoice will prevent it sitting unread in your contact’s inbox.

Also check your contracts and invoices to make sure you are not copying incorrect information from a previous agreement. There’s nothing worse than chasing a late payment only to realise you listed the wrong bank account number, or agreed to longer terms than you intended.

Schedule time each week to go through your invoices: check you have sent everything due, reminded anyone approaching a missed payment deadline, and chased any unsettled bills. While it is legally possible to claim a payment with interest for up to six years, waiting that long is not recommended and can complicate your taxable income calculations.

It is always beneficial to have a good relationship with your clients, especially if referrals are part of how you win work. That can make it feel uncomfortable to send reminders and demands for late payments. But being too accommodating can bury the important part of your message underneath pleasantries.

When it comes to payments, be clear, concise, and professional. Clients will understand and respect that you are running a business.

If a client asks for more time or a change to the agreed payment terms, always get any such agreement in writing. Never rely on a verbal conversation alone, as you may need to refer back to it later.

If you have reached the stage where late payment fees are applicable, you may decide to try one last time to prompt the client to pay up. Often the prospect of additional costs spurs them into action. Under the proposed Commercial Payments Bill, interest would be applied automatically, removing the awkwardness of having to raise it yourself. In the meantime, it is worth knowing that you already have the right to charge interest under current law, even if you choose not to exercise it.

If a client still refuses to pay or has gone silent, for debts under £10,000 you can apply to the Small Claims process, handled within the County Court. You generally won’t need a lawyer unless the case becomes complex. You can apply through the Government portal.

But before this stage, you will need to send a Notice of Intention to go to court, known as a Letter Before Claim. This must be:

• In writing
• On paper
• Sent via Recorded Delivery
• A summary of what has happened and the nature of the claim
• A statement of the remedy you are seeking (i.e. payment)
• A set deadline for response or settlement
• A statement that you will issue court proceedings in the event of no response

If the client does not respond or pay, you can proceed via Form N1, either on paper or online (online is £10 cheaper). 

Be aware that applying to court is a last resort. Mediation should be considered where possible, and the court can also order this as part of the process. There is no guarantee of success; if you lose, you may be ordered to pay the defendant’s costs, although these are usually limited in small claims. 

You will need to set out your claim in the application form as a chronological account of what happened, including all relevant information. These are known as ‘particulars of claim’. Back these up with evidence such as your contract, statement of work, emails, letters, and records of phone calls, and include the names of any witnesses.

The court will serve the application on the defendant. If the claim is undefended, you will be awarded what you sought plus any costs the judge sees fit. If it is defended, the judge will issue a Notice of Allocation and order additional evidence from both sides ahead of a Final Hearing.

You are likely to be required to attend the hearing in person unless it is conducted virtually. Read all evidence prior to the Final Hearing so it is fresh in your mind. Civil court hearings are less formal than criminal cases and there is no jury, so stay calm and present your case clearly.

If you are successful, the defendant will be ordered to pay within a set time. If they do not pay, enforcement options include:

• Instructing court bailiffs to recover the debt
• Having the sum deducted from PAYE wages
• Putting a charge on property
• Freezing assets or bank accounts

If you are unsuccessful, you can consider an appeal, but grounds are limited and you should seek legal advice first. Further costs will apply.

Even when there is a relatively quick and successful outcome, the effort of chasing missed payments can take a toll. Recognising the effects will help you manage them and prevent the stress spilling over into other areas of your life.

It’s easy to let your confidence slip and feel that clients are persecuting you personally. Remind yourself that you are not responsible for their behaviour, and that it is rarely personal. The fight-or-flight response to financial stress can lead to overreacting to what may simply be an administrative error on their part.

Worrying about a particular client can also sap your motivation and concentration for other work. Automate as much of the process as possible and try to treat it as a business matter that will be resolved. IPSE has shared a range of tips for dealing with stress when self-employed, other mental wellbeing issues, and managing personal debt.

If you’re facing financial difficulty as a result of late payments, you can also get expert advice from dedicated organisations such as StepChange or MoneyHelper.