New UK law cracks down on late payments to small businesses by 2027

The government has announced plans to tackle late payments to small businesses. The Small Business Protections (Late Payments) Bill was introduced in the King’s Speech on 13 May 2026. It targets poor payment practices that contribute to business failures, particularly among SMEs supplying larger firms. The new legislation focuses on payments from large businesses to their smaller suppliers. It proposes a 60-day cap on payment terms and sets a mandatory late payment interest rate at the Bank of England base rate plus 8%. The Bill also strengthens the Small Business Commissioner’s powers, allowing investigations and fines for persistent late payers.

Large businesses, defined as those meeting at least two of three criteria—turnover over £54m, balance sheet over £27m, or more than 250 employees—will face increased reporting requirements. The Bill is set for debate in both the House of Commons and House of Lords throughout 2026. If passed, it will become law by early 2027.

Affected organisations are advised to assess their payment practices and prepare for the changes. Specialists in turnaround and working capital can assist by reviewing current systems, calculating financial impacts, and identifying ways to manage new cash flow demands. The Bill aims to reduce business failures caused by late payments. It will regulate payment practices between large and small businesses within the next 12 months. Companies are encouraged to act now to ensure compliance and minimise disruption.