The Commercial Payments Bill was introduced in the House of Lords in May 2026, following the government’s response to a public consultation on late payment. Once in force, likely no earlier than 2027, it will impose a maximum 60-day payment term on larger firms paying smaller suppliers, add statutory interest on overdue invoices at 8% above the Bank of England base rate, ban the withholding of retention sums in construction contracts, and give the Small Business Commissioner stronger powers to investigate and fine persistent late payers. Boards and audit committees of large companies will also need to publish and account for their payment performance.
This is one of the few items in this pipeline that works directly in SME owners’ favour rather than adding a new obligation. The Federation of Small Businesses, which worked closely with government on the reforms, described it as a step toward changing a culture in which large firms have used smaller suppliers as a source of free credit. The British Chambers of Commerce welcomed the measures as a genuine boost to cashflow and confidence.
The Bill is still progressing through Parliament and is not yet law, so nothing changes for existing contracts today. It is worth watching for royal assent and the transition period that follows, since that is when the 60-day cap and the new powers actually take effect.