For a sole trader, late payment is not an irritation. It is your money funding somebody else's cashflow, on terms you never agreed to, while you carry the cost of the work you already did. There is no HR department to escalate to and no credit controller to hand it over to. It is you, at nine o'clock at night, writing the "just chasing" email.

The useful news is that getting paid on time is mostly mechanics, not nerve. Below is the sequence that works, and — the part most sole traders have never used — the money the law says you can add on top when a business customer pays you late.

The number that changes the conversation

Under the Late Payment of Commercial Debts (Interest) Act 1998, when one business pays another business late, the unpaid invoice earns statutory interest at 8% above the Bank of England base rate, and you can also claim a fixed sum for debt recovery costs on top. This is a statutory right. It applies whether or not your contract mentions it, and a customer cannot simply refuse it.

The reference base rate is fixed in six-month blocks, which is what stops the sum moving every time the Bank meets. The base rate in force on 31 December applies to debts that become late between 1 January and 30 June; the rate in force on 30 June applies to debts becoming late between 1 July and 31 December. Bank Rate was 3.75% on 31 December 2025 and still 3.75% on 30 June 2026 — the Monetary Policy Committee held it there again on 30 July 2026 — so the statutory rate is 11.75% for any commercial debt that falls late at any point during 2026.

The fixed compensation is a flat amount set by the legislation, and it is per invoice, not per customer:

  • Debt up to £999.99 — £40
  • Debt of £1,000 to £9,999.99 — £70
  • Debt of £10,000 or more — £100

Two limits worth knowing. This applies to business-to-business invoices, so a consumer customer having their kitchen done is outside it. And interest runs on the full amount owed, VAT included, from the day after payment was due until the day it is paid.

Worked example: what a late invoice is actually worth

Illustrative figures. A sole trader landscaper invoices a letting agency £2,400 on 14-day terms. It is paid 47 days after the due date, in September 2026.
Statutory interest: £2,400 × 11.75% = £282 a year, which is £0.7726 a day. Over 47 days that is £36.31.
Fixed compensation: the debt sits in the £1,000–£9,999.99 band, so £70.
Total claimable: £106.31 on top of the £2,400.

Now change one thing. Suppose the same £2,400 had been billed as three separate £800 invoices for three jobs, all 47 days late. The interest is identical at £36.31 in total — but the fixed compensation is £40 per invoice, so £120 rather than £70. Total: £156.31.

That second figure is the point of the example. On small invoices the fixed sum is worth far more than the interest, and it multiplies with the number of unpaid invoices. A customer sitting on six £600 invoices is exposed to £240 of fixed compensation before a penny of interest is counted. It is the part that makes a chaser something other than a polite request.

Before the work: set the terms

Payment terms belong in the agreement, before anyone picks up a tool, because by invoice time the negotiating leverage has gone. Fourteen days is entirely professional. Seven is fine for small jobs. Thirty days is not a law of nature — it is the habit of large companies, and you are not obliged to inherit it.

Three lines are worth having in whatever you send out, even if that is a one-page quote:

  • The due date, in days from invoice. "Payment due 14 days from invoice date."
  • A deposit for anything beyond a quick job. 25–50% up front is normal, funds the materials, and quietly filters out customers who were never going to pay well.
  • A note that you may charge statutory interest and compensation on late payment. You do not have to charge it. Saying that you may focuses minds remarkably well, and on a repeat offender, actually applying it is entirely legitimate.

For jobs running over several weeks, bill in stages tied to milestones rather than everything on completion. A sole trader carrying eight weeks of labour and materials on their own account is lending the customer money, unsecured and interest-free.

The invoice itself

Send it the day the work finishes. Every day of delay signals that the invoice is not urgent, and the person paying it takes the hint. Beyond that, the details that actually move the payment date:

  • Address it to whoever pays. Ask at the start of the job who handles invoices and get their email. An invoice sitting in the site manager's inbox is not in the payment run.
  • Give a due date, not a duration. "Due 21 September 2026" is a deadline; "14 days" is a puzzle.
  • Make paying take one tap. A card or open-banking pay link on the invoice removes the "I'll do it when I'm at the laptop" delay, which is where a large share of lateness is actually created.
  • Include the PO or job reference if the customer uses one. Missing references are the most common reason a large customer's system quietly rejects an invoice without telling anyone.

FreeAgent, which comes with every one of our packages, does all of this and the part sole traders postpone most: automatic payment reminders that go out before and after the due date without you writing them. The reminders are the feature. Chasing feels rude, so it gets delayed, and the delay is what teaches a customer that your invoices can wait. Software doing it on a schedule removes both the awkwardness and the lag. More on getting the underlying records straight is in our guide to sole trader bookkeeping.

The escalation ladder, and what each rung costs

  1. Due date: automatic reminder. Software's job, not yours.
  2. +7 days: a short personal email, invoice attached again, asking a specific question — "can you confirm this is in the next payment run?" A question needs answering; a statement does not.
  3. +14 days: phone the person who pays. This works far better than it should, precisely because almost nobody does it.
  4. +21 days: pause any ongoing work until the account is current. For a sole trader this is the single most persuasive move available, and it is more effective than any letter.
  5. +30 days: a letter before action setting out the invoice, the statutory interest and the fixed sum, with a deadline of 14 days.
  6. Then: Money Claim Online. The court fee is £70 for a claim of £500.01–£1,000, £80 up to £1,500, £115 up to £3,000, £205 up to £5,000 and £455 up to £10,000. Above £10,000 the fee is 5% of the claim. You can add the fee and the statutory interest to what you are claiming, and the small claims track rarely requires a solicitor.

Do the arithmetic before rung six. On a £2,400 debt the fee is £205, recoverable if you win, but the real cost is your time and the certainty that the customer is finished. That is often the right trade — just make it deliberately rather than in temper. And keep an eye on the other direction: if a customer suddenly changes their bank details before paying, read our post on invoice and mandate fraud before you touch the payment.

What is changing, and what has not yet

The Government introduced the Commercial Payments Bill to Parliament in May 2026, describing it as the largest crackdown on late payment in over 25 years, and putting the cost of late payment to the UK economy at £11 billion a year. The headline measures are a statutory maximum payment term of 60 days between businesses, falling to 45 days after five years, and 30 days for public authorities; new powers for the Small Business Commissioner to investigate poor payers, adjudicate disputes outside court and impose fines; and a requirement for the boards of persistently late large companies to publish an explanation.

None of that is in force. The Bill is still moving through Parliament, the Government has said it will allow a lead-in period before the powers commence, and the measures will not apply retrospectively. So for the invoice you are chasing this month, the tool is the 1998 Act and the 11.75% — not the Bill. Worth knowing it is coming; not worth waiting for.

The pattern behind the problem

Chronic late payment clusters. It is usually a handful of customers, one type of job, and one habit — no deposit, vague scope, an invoice sent a fortnight after completion. Your own records show the pattern within a couple of hours if anyone actually looks at the debtor report, and the fix is almost always terms or pricing rather than more persistence. A customer who reliably pays at 60 days is charging you for credit. Reprice them or release them.

Setting up invoicing that gets you paid is part of every package we sell, from £19 + VAT a month — including FreeAgent, the automatic chasing, and someone who will tell you which customer is the actual problem. Our sole trader tax guide covers the rest of the money side. Get started.