Government propose new late payment terms to help SMEs

As part of its Small Business Plan, the government is proposing new plans to tackle late payments.

This is an issue that costs the UK economy £11bn a year and is the cause of 38 businesses shutting down every day.

The government is calling the Small Business Plan the most significant legislative reforms in 25 years.

The proposals include a maximum 60-day payment term – set to fall to 45 days – and mandatory interest on overdue invoices.

The new laws are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, worth potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.

Prime Minister Keir Starmer said, “From builders and electricians to freelance designers and manufacturers—too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses.

“It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up.

“Through our Small Business Plan, we’re not only tackling the scourge of late payments once and for all, but we’re giving small business owners the backing and stability they need for their business to thrive, driving growth across the country through our Plan for Change.”

This news has been very much welcomed by the IPSE, which has previously called for a statutory ceiling on payment terms to freelancers.

Vicks Rodwell, Managing Director at IPSE – The Self-Employed Association, commented, “We’ve long called for a legal payment deadline, so this is a landmark moment that could help level the playing field for freelancers.”

“Late payments can force freelancers out of business, but obscenely long payment terms for work can put just as much of a strain on the self-employed.”

“It’s not right that freelancers can fall behind on their own bills – or even into debt – while their clients sit on money for months at a time.

“By clamping down on late invoices and limiting long payment terms, the government can tear down one of the biggest barriers to growth for freelancers and sole traders.”

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