Why the New Commercial Payments Bill Will Change the Way You Manage Cash (Advice from a Business Accountant UK)

If you’ve been running a small business in the UK for any length of time, you’ve probably felt the "late payment squeeze." It’s that frustrating period where you’ve finished the work, sent the invoice, and then… nothing. You wait 30 days, then 60, then 90. Meanwhile, your own bills: rent, payroll, and the taxman: don’t wait for anyone.

For years, the advice from any business accountant UK wide has been the same: "Keep a healthy cash reserve" or "Chase your debts harder." But in mid-2026, the game is finally changing. The UK government’s new Commercial Payments Bill is stepping in to give SMEs the upper hand.

As your dedicated accountants for small business, we’re here to break down exactly what this legislation means for your bank balance and how you can prepare for a future where "the cheque is in the post" is no longer a valid excuse for late payment.

What is the New Commercial Payments Bill?

The Commercial Payments Bill (often referred to as the Late Payments Regime overhaul) is the biggest shake-up to business-to-business (B2B) payments in over 25 years. Following a major consultation in March 2026, the government has moved to tackle the "scourge" of late payments that forces thousands of viable SMEs into insolvency every year.

Essentially, the government is moving from "suggesting" that big companies pay on time to "forcing" them to do so. This isn't just a voluntary code of conduct anymore; it’s becoming law with real financial consequences for those who ignore it.

The 60-Day Cap: No More Waiting Months for Your Money

The headline change is a statutory 60-day cap on B2B payment terms. Currently, many large corporations use their market power to squeeze small suppliers, often pushing payment terms out to 90 or even 120 days. This essentially turns the SME into a "free bank" for the larger company.

Under the new bill, most B2B contracts between UK firms will have a hard limit of 60 days. While there are a few exceptions: such as when two large companies deal with each other: if you are an SME supplying a larger firm, they must pay you within two months. This change alone will free up billions of pounds in working capital across the UK economy.

Mandatory Interest: Your Late Fees Just Got Teeth

Historically, you’ve always had the right to charge interest on late payments. But let’s be honest: very few small business owners actually do it. Why? Because they’re afraid of upsetting a big client and losing future work.

The new bill changes the dynamic by making interest on late payments mandatory. You won’t have to "ask" for it or "contract in" to it; it will be a statutory requirement built into every commercial contract.

• The Rate: Interest will be set at 8% above the Bank of England base rate.

• No Opt-Out: Businesses will no longer be able to "contract out" of these rules or agree to lower, alternative interest rates in their fine print.

• The Burden Shifts: Because the interest is mandatory, it removes the awkwardness of you having to demand it. The large company simply owes it as soon as the clock hits day 61.

As corporation tax accountants, we often see businesses struggling to pay their tax bills because their cash is tied up in unpaid invoices. This mandatory interest won't just act as a deterrent; it will provide you with much-needed compensation for the cost of borrowing or the lost interest you could have earned on that cash.

The 30-Day Dispute Window: Closing the Loophole

One of the oldest tricks in the book for delaying payment is the "phantom dispute." A customer waits until the day the payment is due, then suddenly "discovers" a minor issue with the invoice, resetting the clock for another 30 days while they "investigate."

The Commercial Payments Bill introduces a 30-day window for disputes. Customers will have a fixed time limit (expected to be 30 days from receipt) to either confirm or formally dispute an invoice. If they don’t raise a query within that month, they lose the right to use a dispute as a reason to delay payment. If they haven't disputed it and they don't pay, the statutory interest starts ticking immediately.

Construction SMEs: A Special Win on Retentions

If you’re in the construction sector, you know the pain of "retentions": where a percentage of your payment is held back for months (or even years) to cover potential defects. This cash is often vital for a small trade business's survival.

The 2026 bill includes specific measures to prohibit or protect retention payments. The goal is to stop cash being locked away in someone else's bank account for indefinite periods. Whether through an outright ban or a requirement to hold the funds in a protected trust, this is a massive win for construction SMEs across the UK.

The Role of the Small Business Commissioner (SBC)

The bill isn't just about new rules; it’s about enforcement. The Small Business Commissioner (SBC) is being given a massive power boost. They will move from being an advisory body to a genuine enforcement agency with the power to:

1. Investigate: They can compel companies to disclose their payment records.

2. Arbitrate: They can provide binding arbitration for payment disputes, saving you the cost and stress of going to court.

3. Fine: Most importantly, they will have the power to levy significant financial penalties on companies that are "serial offenders" when it comes to late payments.

Large companies will also be required to report their payment performance at the board level. If they are consistently paying late, they’ll have to explain why in their annual reports, creating a huge reputational risk for non-compliance.

How to Prepare Your Business for the Change

While this legislation is designed to help you, it also comes with responsibilities. Remember, these rules apply to everyone. If you are an SME buying from another SME, you also have to follow the 60-day rule and the mandatory interest laws.

Here is how Sam, Jessica, and Richard: our resident experts: recommend you prepare:

1. Update Your Terms and Conditions

Now is the time to review your contracts. Make sure they reflect the new 60-day maximum and the statutory interest rates. Even though the law overrules your contracts, having clear, compliant T&Cs makes the conversation with your customers much easier.

2. Tighten Your Invoicing Process

Since the 30-day dispute window starts from the moment the invoice is received, you need to be able to prove when it was sent and received. Transitioning to online accounting and digital invoicing is no longer just "nice to have": it's a business necessity.

3. Review Your Cash Flow Forecast

If you know your large customers must pay you within 60 days, your cash flow forecast will look very different. Work with a business accountant UK professional to model how this influx of cash can be used for growth, hiring, or reducing debt. For a broader look at fees and budgeting, see How Much Do Accounting Services Cost in the UK? A Complete Pricing Guide for 2026.

4. Be Ready to Pay on Time

Check your own payment cycles. If you’ve been relying on paying your suppliers late to manage your own cash, you’ll need a new strategy. You don't want to be the one paying 8% above base rate because you were a few days late with a bill.

Why You Need a Business Accountant UK to Help

Navigating new legislation can be a headache, but you don't have to do it alone. A qualified accountant can help you:

• Automate Invoicing: Set up systems that track the 30-day dispute window and calculate interest automatically.

• Strategic Tax Planning: As corporation tax accountants, we can help you manage the tax implications of improved cash flow and higher interest income.

• Financial Health Checks: Ensure your business is compliant with both the new payments bill and Making Tax Digital (MTD).

At Accountant Search, we make it easy for you to find an accountant who understands your specific industry and the challenges of the 2026 economic landscape. If you want a more detailed walkthrough, read How to Find an Accountant in the UK: A Step-by-Step Guide for Business Owners. Whether you need a local expert in Surrey or West London, or a specialist in bookkeeping services, we match you with the right pro.

Summary: A New Era for SME Cash Flow

The New Commercial Payments Bill is more than just another piece of red tape. It is a fundamental shift in the power dynamic between small businesses and large corporations. By capping payment terms at 60 days, making interest mandatory, and empowering the Small Business Commissioner, the UK government is finally putting SMEs first.

Don't wait for the law to fully kick in before you take action. Start reviewing your processes today, talk to a professional, and get ready for a more predictable, healthier cash flow in 2026 and beyond. If you're reviewing your options, our Accounting Services UK: The Complete Guide to Finding the Right Accountant for Your Business is a useful next step.

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Author: Sam Sam is a senior writer at Accountant Search with a background in SME financial policy. He specialises in helping small business owners understand complex legislation in plain English.