Summary

Getting paid on time is one of the biggest challenges facing UK tradespeople, with late payment affecting cash flow, supplier relationships, and your ability to take on new work. The good news is that UK law gives you strong rights when business customers pay late -- including the right to charge statutory interest and fixed compensation on top of the original invoice. This guide provides a clear four-stage escalation process with ready-to-use templates for each step, from a friendly text message through to a formal letter before action that satisfies the court's pre-action protocol. Whether you are chasing a homeowner or a commercial client, these templates are designed to be professional, firm, and effective -- helping you get paid without burning bridges.

Key Facts

  • Statutory interest rate: 8% above the Bank of England base rate. With the current base rate at 3.75%, that is 11.75% per annum on late B2B invoices.
  • Fixed compensation: You can also claim a fixed sum per invoice -- £40 (debts under £1,000), £70 (£1,000 to £9,999.99), or £100 (£10,000+).
  • B2B only: Statutory interest and fixed compensation under the Act only apply to business-to-business (and business-to-public authority) transactions -- not work for domestic homeowner customers.
  • Default payment terms: If your quote or contract does not specify payment terms, the law assumes payment is due 30 days after the invoice date or delivery of goods/services (whichever is later).
  • Reference rate timing: The base rate used is fixed for six-month periods -- for debts due 1 Jan to 30 Jun, use the base rate as at 31 Dec of the previous year; for 1 Jul to 31 Dec, use the rate as at 30 Jun.
  • Pre-action protocol: Before issuing a court claim, you must send a Letter Before Action and give the debtor 30 days to respond.
  • Small claims limit: Claims up to £10,000 are handled on the small claims track, where you typically represent yourself without needing a solicitor.
  • Court fees are recoverable: If you win, the court will order the defendant to pay your court fees on top of the debt.

Escalation Timeline

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Stage Timing Action Tone
Friendly reminder 7 days overdue SMS/email Friendly, assume oversight
Firm reminder 14 days overdue Email/letter Professional, reference terms
Final notice 21 days overdue Letter/email Formal, mention consequences
Letter before action 30 days overdue Letter (recorded delivery) Legal, pre-court
Small claims 30+ days after LBA Online claim Formal legal process

Ready-to-Use Templates

Template 1: Friendly Reminder (7 Days) -- SMS

Hi [Name], hope you're happy with the [work description] at [address]. Just a reminder that invoice [number] for £[amount] was due on [date]. Would you be able to settle this when you get a chance? Happy to send the details again if needed. Thanks, [Your name]

Template 2: Firm Reminder (14 Days) -- Email

Subject: Payment overdue -- Invoice [number] for £[amount]

Dear [Name],

I hope this finds you well. I'm writing to follow up on invoice [number] for
£[amount], which was due for payment on [due date] -- now [X] days overdue.

For reference, the invoice covers [brief description of work] carried out at
[address] on [dates of work].

As per the payment terms on the original quote, payment was due within [X]
days of the invoice date. I'd appreciate it if you could arrange payment at
your earliest convenience.

Payment details:
  Bank: [bank name]
  Sort code: [XX-XX-XX]
  Account: [XXXXXXXX]
  Reference: [invoice number]

If there's an issue with the invoice or you'd like to discuss anything, please
don't hesitate to get in touch. I'm happy to work with you to resolve this.

Kind regards,
[Your name]
[Your business name]
[Phone number]
[Email]

Template 3: Final Notice (21 Days) -- Email/Letter

Subject: FINAL NOTICE -- Invoice [number] now [X] days overdue

Dear [Name],

I am writing regarding the outstanding balance of £[amount] on invoice
[number], which was due on [due date] and is now [X] days overdue. I have
previously contacted you about this on [date of first reminder] and [date of
second reminder] but have not yet received payment or a response.

The invoice relates to [description of work] completed at [address] on
[completion date].

I would like to resolve this matter amicably. However, I must make you aware
that if payment is not received within 7 days of this notice, I will have no
choice but to take formal steps to recover the debt.

[FOR B2B CUSTOMERS ONLY -- include this paragraph:]
Under the Late Payment of Commercial Debts (Interest) Act 1998, I am entitled
to charge statutory interest at 8% above the Bank of England base rate
(currently 11.75% per annum) on the outstanding amount, plus fixed
compensation of £[40/70/100]. I would prefer not to apply these charges and
hope we can settle this promptly.

Please arrange payment by [date -- 7 days from now] using the details below:

  Bank: [bank name]
  Sort code: [XX-XX-XX]
  Account: [XXXXXXXX]
  Reference: [invoice number]

If you are experiencing financial difficulties, please contact me so we can
discuss a payment plan.

Yours sincerely,
[Your name]
[Your business name]
[Phone number]
[Email]

Template 4: Letter Before Action (30 Days) -- Formal Letter

Important: This letter satisfies the Pre-Action Protocol for Debt Claims. Send it by Royal Mail Signed For (recorded delivery) so you have proof of delivery. Keep a copy. You must allow 30 days from the date of this letter before issuing a court claim.

[Your business name]
[Your address]
[Your phone number]
[Your email]

[Date]

SENT BY ROYAL MAIL SIGNED FOR

[Debtor's name]
[Debtor's address]

Dear [Name],

RE: LETTER BEFORE ACTION -- OUTSTANDING DEBT OF £[total amount including
interest and compensation if applicable]

I am writing to formally notify you that unless the outstanding sum detailed
below is paid within 30 days of the date of this letter, I intend to issue
court proceedings against you to recover the debt, without further notice.

DETAILS OF THE DEBT

  Original invoice amount:     £[amount]
  Invoice number:              [number]
  Invoice date:                [date]
  Payment due date:            [due date]
  Description of work:         [brief description of work carried out]
  Date work completed:         [date]
  Location:                    [address where work was done]
  Agreement:                   [e.g., "Written quote ref [X] dated [date],
                                accepted by you on [date]" OR "Verbal
                                agreement made on [date]"]

[FOR B2B CUSTOMERS -- include this section:]
STATUTORY INTEREST AND COMPENSATION

Under the Late Payment of Commercial Debts (Interest) Act 1998, I am
entitled to:

  Statutory interest:          £[calculated amount] (8% + Bank of England
                               base rate of [X]% = [X]% per annum, accruing
                               at £[daily rate] per day from [due date])
  Fixed compensation:          £[40/70/100]
  Reasonable recovery costs:   £[amount, if applicable]

  TOTAL NOW DUE:               £[total]

Interest will continue to accrue at £[daily rate] per day until payment is
received in full.

[FOR ALL CUSTOMERS:]
HOW TO PAY

Please make payment by bank transfer to:

  Bank: [bank name]
  Sort code: [XX-XX-XX]
  Account number: [XXXXXXXX]
  Reference: [invoice number]

HOW TO RESPOND

You have 30 days from the date of this letter to:
  (a) Pay the outstanding amount in full; or
  (b) Contact me to propose a reasonable repayment plan; or
  (c) Set out in writing why you dispute the debt, with supporting evidence.

If you believe you do not owe this money, please reply in writing within 30
days, explaining clearly why you dispute the debt and enclosing any documents
that support your position.

WHAT HAPPENS NEXT

If I do not receive payment, a reasonable repayment proposal, or a written
response disputing the debt within 30 days, I will issue a claim through the
County Court (Money Claim Online) without further notice. If I obtain a
County Court Judgment (CCJ), this may affect your credit rating and I will
be entitled to recover court fees in addition to the debt.

ALTERNATIVE DISPUTE RESOLUTION

I am willing to consider alternative dispute resolution (such as mediation)
to settle this matter without going to court. If you would like to explore
this option, please contact me within 30 days.

I trust this matter can be resolved without the need for court proceedings.

Yours sincerely,


[Your signature]
[Your printed name]
[Your business name]
[Company registration number, if applicable]

Detailed Guidance

What statutory interest can I charge on late payments?

Under the Late Payment of Commercial Debts (Interest) Act 1998, you can charge 8% above the Bank of England base rate on any B2B invoice that is paid late. With the current base rate at 3.75% (as of April 2026), that means 11.75% per annum.

How to calculate it:

  1. Work out the daily rate: £[invoice amount] x 11.75% / 365
  2. Multiply by the number of days overdue

Example: A £3,000 invoice that is 45 days late:

  • Daily rate: £3,000 x 0.1175 / 365 = £0.97 per day
  • Interest: £0.97 x 45 = £43.52

On top of interest, you can claim fixed compensation per overdue invoice:

Debt amount Fixed compensation
Up to £999.99 £40
£1,000 -- £9,999.99 £70
£10,000 or more £100

If your actual costs of recovering the debt exceed the fixed compensation amount (for example, you have had to pay a debt recovery agency), you can claim the difference as reasonable recovery costs.

Important: The reference base rate is not necessarily today's rate. For debts becoming overdue between 1 January and 30 June, use the base rate as at 31 December of the previous year. For debts becoming overdue between 1 July and 31 December, use the rate as at 30 June.

How do I file a small claims court claim?

If your Letter Before Action does not result in payment after 30 days, you can issue a court claim. For debts up to £10,000, this is handled on the small claims track.

Step-by-step process:

  1. Go to Money Claim Online (MCOL): www.moneyclaims.service.gov.uk. Register for an account if you do not already have one.

  2. Enter the claim details: You will need the defendant's full name and address, the amount owed (including any statutory interest and compensation), and a brief description of why the money is owed (you have 1,080 characters).

  3. Pay the court fee online. MCOL fees are 10% cheaper than paper claims:

Claim amount Online fee (MCOL) Paper fee
Up to £300 £35 £35
£300.01 -- £500 £50 £55
£500.01 -- £1,000 £70 £80
£1,000.01 -- £1,500 £80 £90
£1,500.01 -- £3,000 £115 £130
£3,000.01 -- £5,000 £205 £230
£5,000.01 -- £10,000 £455 £510

  1. The court serves the claim. The defendant receives the claim by post and has 14 days to acknowledge it, then 28 days from service to file a defence.

  2. If they do not respond: You can apply for default judgment online -- you win automatically without a hearing.

  3. If they dispute it: The case proceeds to a small claims hearing (typically 2-3 months later). No hearing fee applies for small claims. You attend in person or by phone/video and present your evidence. Solicitors are not usually needed.

  4. If you win: The court orders the defendant to pay the debt, your court fees, and any statutory interest. If they still do not pay, you can apply for enforcement (bailiff visit, attachment of earnings, etc.).

Tip: Keep all documentation -- your quote, any written acceptance, invoices, emails, text messages, photos of the completed work, and proof of posting your Letter Before Action. Courts love a paper trail.

Using squote: Every quote sent through squote creates a timestamped email record automatically -- the quote PDF, the customer's email address, and the date sent are all stored, giving you a ready-made paper trail if you ever need to chase payment through the courts.

What is the difference between B2B and B2C late payment rights?

Business-to-business (B2B):

  • The Late Payment of Commercial Debts Act 1998 applies in full.
  • You can charge statutory interest (8% + base rate) and fixed compensation (£40/£70/£100).
  • This covers work for other businesses, contractors, landlords acting commercially, and public authorities (councils, NHS trusts, etc.).

Business-to-consumer (B2C) -- domestic homeowner customers:

  • The Act does not apply. You cannot charge statutory interest or claim fixed compensation.
  • You can charge interest only if your contract (quote/terms and conditions) explicitly includes a late payment clause. If it does, you can charge the rate stated in the contract.
  • If your contract is silent on interest, you can claim interest at 8% per annum (not 8% + base rate) only once you have obtained a County Court Judgment.
  • Your main remedy is the same County Court (small claims) process described above.
  • The Consumer Rights Act 2015 applies -- any late payment terms in your contract must be fair and transparent, or they can be struck out.

Practical advice: Even for domestic customers, always include clear payment terms on your quotes. Something like "Payment due within 14 days of invoice. Late payments may incur interest at 4% per annum" is reasonable and enforceable.

When should I cut my losses?

Not every debt is worth chasing through the courts. Consider these factors:

Chase it if:

  • The amount is significant relative to the cost of claiming (court fees start at £35)
  • You have clear documentation -- a written quote, acceptance, invoice, and records of the work completed
  • The debtor has the means to pay (they are a trading business, not insolvent)
  • You have followed the escalation process and have proof of your communications

Consider writing it off if:

  • The amount is very small (under £100-200) and the debtor is unresponsive -- your time may be worth more
  • The debtor is genuinely insolvent or going through bankruptcy/liquidation (you are unlikely to recover anything)
  • The work is genuinely disputed and you have poor documentation -- a court hearing could go either way
  • The debtor is overseas or has no fixed address -- enforcement becomes difficult

Middle ground -- debt recovery agencies:

  • If you do not want to handle court yourself, a debt recovery agency will chase for you, typically charging 10-15% of the amount recovered
  • A solicitor's letter can sometimes prompt payment where your own letters have not -- expect to pay £100-300 for this

The real lesson: The best way to handle late payment is to prevent it. Take deposits before starting work, set clear payment terms on every quote, invoice promptly on completion, and consider stage payments on larger jobs. squote lets you include payment terms directly in every quote you send — so the customer sees them before they agree to the job.

Frequently Asked Questions

Can I charge statutory interest on a domestic homeowner's unpaid invoice?

No. The Late Payment of Commercial Debts Act 1998 only applies to B2B transactions. For domestic customers, you can only charge interest if your contract explicitly states a rate, or once you have a County Court Judgment (at which point the court awards 8% simple interest). Always include a late payment clause in your terms and conditions.

Do I need a solicitor for small claims court?

No. The small claims track (claims up to £10,000) is specifically designed for people to represent themselves. The process is informal, and judges are used to dealing with litigants in person. Even if the other side brings a solicitor, you can still represent yourself and the court will make sure you are treated fairly. Solicitors' costs are generally not recoverable on the small claims track, so there is no financial penalty for representing yourself.

What if the customer disputes the quality of my work?

If the customer raises a genuine dispute about the quality of work, the court will consider this as a potential defence or counterclaim. This is why documentation is critical -- keep photos of the completed work, any sign-off or snagging lists, communications about the job, and evidence that you offered to remedy any genuine defects. If the customer only raises quality issues after you start chasing payment (and never mentioned them before), courts tend to view this sceptically.

Can I still chase a debt after 6 years?

In England and Wales, the limitation period for most contract debts is 6 years from when the debt became due (under the Limitation Act 1980). After 6 years, you lose the right to bring a court claim. The clock resets if the debtor makes a part payment or acknowledges the debt in writing. Do not let debts go stale -- chase them promptly.

Will a CCJ affect my customer's credit rating?

Yes. A County Court Judgment stays on the Register of Judgments for 6 years and will appear on credit checks. Many debtors pay up as soon as they receive the court paperwork, specifically to avoid a CCJ on their record. The debtor can have the CCJ removed if they pay in full within 30 days of the judgment.

Regulations & Standards