Key takeaways
- The Commercial Payments Bill completed its House of Lords stages on 20 October 2026 and was presented to the Commons on 21 October. A second reading date is to be confirmed.
- Its long title covers payment terms in commercial contracts, interest on late payment, a ban on retention clauses in construction and wider Small Business Commissioner powers.
- The government calls it the most significant late payment legislation in over 25 years.
- The government says late payments cost the UK economy £11 billion a year and close 38 businesses every day.
- The bill is not law yet, so no new payment term limits or interest rules apply.
The Commercial Payments Bill has cleared the House of Lords and now moves to the Commons. It covers payment terms in commercial contracts, interest on late payment, a ban on retention clauses in construction and expanded powers for the Small Business Commissioner. It is not law yet. This post sets out where the bill stands and what its long title says it will do. We could not access the full bill text for this update, so detailed terms such as payment limits are not covered.
What the bill is for
The bill’s long title describes it as a bill to:
- make provision about payment terms in commercial contracts
- make provision about interest on late payment of commercial debts
- ban retention clauses in the construction sector
- expand the powers of the Small Business Commissioner in relation to payment disputes and poor payment practices
- amend the Enterprise Act 2016 in connection with other functions of the Small Business Commissioner
The government describes the bill as the most significant legislation to tackle late payments in over 25 years. It says it will give the UK the strongest legal framework on late payments in the G7.
Where the bill stands
| Stage | Date |
|---|---|
| Lords first reading | 19 May 2026 |
| Lords second reading | 9 June 2026 |
| Lords committee | 21 July 2026 |
| Lords report | 15 September 2026 |
| Lords third reading | 20 October 2026 |
| Commons first reading | 21 October 2026 |
| Commons second reading | To be confirmed |
Parliament’s bill page notes that the bill completed its Lords stages on Tuesday 20 October and was presented to the Commons on Wednesday 21 October. The first reading in the Commons has no debate. The second reading debate date has not been announced.
Why the government is acting
The government’s e-invoicing roadmap sets out the case. Late payments cost the UK economy £11 billion every year and close 38 UK businesses every day. On average, small businesses spend 86 hours a year chasing late payments, which the roadmap equates to 133 million hours across the economy.
The government says combining the bill with mandatory VAT e-invoicing from April 2029 will help more businesses get paid on time. See our post on the e-invoicing roadmap.
The Small Business Commissioner
The bill expands the Commissioner’s powers on payment disputes and poor payment practices. It sits alongside the government’s wider package to cut administrative burdens on small firms, which includes its response to the Small Business Regulatory Taskforce. See the 25% admin burden cut.
What applies today
Until the bill becomes law, existing rules apply. We have not set out those rules here, because they are not part of the sources reviewed for this update. Check the current statutory interest and compensation position on GOV.UK before charging late payment interest.
What advisers can do now
- Review clients’ payment terms. Know the terms in customer and supplier contracts before the bill changes them.
- Tighten credit control. Aged debtor reports and chasing routines help whatever the final rules say.
- Look at the construction contracts. Clients that rely on retentions should watch the bill’s progress.
- Check invoicing software. E-invoicing arrives in April 2029 and the two reforms are linked.
- Track the Commons stages. The second reading date has not been set.
Our guide to invoice finance covers one option for clients who need to bridge slow-paying customers.
Frequently asked questions
Is the Commercial Payments Bill law yet?
No. It completed its Lords stages on 20 October 2026 and is awaiting a second reading in the Commons.
What does the Commercial Payments Bill cover?
Its long title covers payment terms in commercial contracts, interest on late payment, a ban on construction retention clauses and expanded Small Business Commissioner powers.
When will the bill become law?
The timetable is not set. The Commons second reading date is to be confirmed, and further stages follow.
How big is the late payment problem?
The government says late payments cost the UK economy £11 billion a year and close 38 businesses every day.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 1 November 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.