Payment terms: what to put on invoices and what is legal

You can set almost any payment terms you like, as long as you and your customer agree them and they are fair. If nothing is agreed, the law says a business customer must pay within 30 days. Between businesses, agreed terms should usually be no more than 60 days, and public authorities should pay within 30 days.

What payment terms are legal in the UK?

Legal payment terms are the ones both parties agree to, within limits set by the Late Payment of Commercial Debts (Interest) Act 1998 and the regulations made under it. GOV.UK’s late payment guidance sets out the defaults.

Business terms can run beyond 60 days only if both businesses consider them fair. A term that is grossly unfair to the supplier can be challenged. In practice, most small firms use 7, 14 or 30 days.

What should you put on an invoice?

Your invoice should say exactly when payment is due. A due date (“Payment due by 6 December 2026”) is clearer than a period (“30 days”), because it removes any argument about when the clock started.

GOV.UK lists what every invoice must include:

• a unique invoice number
• your business name, address and contact details
• the customer’s name and address
• a clear description of what you are charging for
• the supply date and the invoice date
• the amounts charged, any VAT, and the total owed

Limited companies must also show the full registered company name. If you list any directors’ names, you must list all of them. VAT-registered businesses selling to other VAT-registered businesses must issue a full VAT invoice. Our guide to invoice requirements in the UK covers VAT invoices in detail.

Wording that works

Add one or two lines under the total. For example:

• “Payment due within 14 days of the invoice date, by 20 November 2026.”
• “We charge statutory interest and compensation on late payments under the Late Payment of Commercial Debts (Interest) Act 1998.”
• Your bank details: account name, sort code and account number.

What can you charge if a customer pays late?

You can charge statutory interest at 8% plus the Bank of England base rate, plus a fixed sum for each late invoice. This applies to business customers only, not consumers.

The base rate used is a fixed “reference rate”. Article 4 of the 2002 rate order says you use the rate in force on 30 June for debts that become late between 1 July and 31 December, and the rate on 31 December for debts that become late between 1 January and 30 June.

The Bank of England raised Bank Rate to 4% on 5 November 2026, from 3.75%. That gives:

The fixed compensation, set by the same legislation, is:

You can claim the fixed sum once per invoice, on top of interest, and also claim reasonable recovery costs. Use our late payment interest calculator to work out a claim, and see late payment interest and compensation for how to add it to a fresh invoice.

Is a 60-day cap on payment terms coming?

Yes, probably, but it is not law yet. The government introduced the Commercial Payments Bill (also called the Small Business Protections Bill) to Parliament on 19 May 2026.

The Department for Business and Trade’s overview says the Bill would bring in:

• maximum payment terms of 60 days, with strictly limited exemptions
• mandatory late payment interest at 8% above base rate
• a fixed sum for suppliers when a customer raises a dispute late or without enough information
• a ban on withholding retention payments in construction contracts (see the construction retentions ban)
• new powers for the Small Business Commissioner to investigate, adjudicate and fine persistent late payers

The overview gives no start date. It promises a lead-in time and a transition period, and says the rules will not apply retrospectively. The Office of the Small Business Commissioner expects the Bill to pass both Houses by the end of 2026 or early 2027, with secondary legislation to follow.

Which terms suit your business?

The right terms depend on who you sell to and how much cash you can tie up.

• If you sell to consumers, ask for payment upfront or on completion. The late payment legislation does not cover them.
• If you are a freelancer or small supplier, 7 to 14 days is common and reasonable.
• If you sell to large companies, expect 30 to 60 days. Check their supplier terms before you sign.
• If you sell to the public sector, you can expect payment within 30 days.
• If you take on large projects, ask for a deposit or stage payments.

What to do now

1. Put a clear due date on every invoice, not just a number of days.
2. Add a line saying you charge statutory interest and compensation.
3. Check your largest customers’ standard terms against the 60-day guideline.
4. Chase on the due date, not weeks after. Our guide on how to chase an unpaid invoice has template wording.

Frequently asked questions

What are standard payment terms in the UK?

There is no single standard. If no date is agreed, the law gives business customers 30 days, and many firms use 14 or 30 days.

Is it legal to have 90-day payment terms?

Between businesses, terms over 60 days are allowed only if both sides consider them fair. The Commercial Payments Bill would cap terms at 60 days, with limited exemptions, once it becomes law and comes into force.

Do I have to state payment terms on an invoice?

GOV.UK says an invoice must include certain information, such as how much the customer owes and when they must pay. Stating a due date also fixes when statutory interest starts.

What is the late payment interest rate in November 2026?

For business debts that became late between 1 July and 31 December 2026, statutory interest is 11.75% a year: 8% plus the 3.75% Bank Rate in force on 30 June 2026.

Can I charge late payment interest to consumers?

Not under the 1998 Act, which covers business-to-business debts only. You can charge interest to consumers only if your contract with them says so and the term is fair.