The UK Commercial Payments Bill

The biggest overhaul of UK payment law in a generation makes 60-day terms and 8% statutory interest impossible to contract around, and bans retention in construction.

What happened

• The Commercial Payments Bill, introduced to Parliament on 19 May 2026, is the biggest overhaul of UK payment law in a generation. It targets late payment, which the government estimates costs the economy around £11 billion a year and forces roughly 38 businesses to close every day.
• At its heart are two rules businesses will no longer be able to contract around. First, a contract generally cannot set payment later than 60 days for ordinary commercial transactions, and public authorities usually have to pay within 30 days.
• Second, where payment is late the supplier has a built-in right to interest at 8% above the Bank of England base rate, and the contract cannot take that right away.
• It also turns the Small Business Commissioner from a largely passive body into an active enforcer, with powers to investigate payment practices, adjudicate disputes, and fine persistent late payers up to 1% of annual UK turnover.
• The standout measure is a ban on retention clauses in construction contracts, ending the long-standing practice of holding back a slice of payment — typically 3 to 5% — as security. An estimated £4 to 6 billion is tied up across the industry at any one time.

How to use this in applications and interviews

• Frame it as three kinds of work: contract, compliance and construction.
• Contract work is the big one. Because the new terms cannot be contracted around, firms will audit and repaper clients' standard terms and supply contracts to strip out payment terms longer than 60 days and any clause that waters down the 8% statutory interest.
• Compliance work means redesigning how clients handle disputed invoices, because a dispute now has to be raised at least eight days before payment falls due or an automatic penalty applies. Large businesses also face wider reporting duties, including board-level commentary explaining poor payment performance.
• Construction work means redrafting standard-form contracts built around retention and helping clients replace it with alternatives such as retention bonds or project bank accounts.
• There is a judgement call worth flagging in an interview: which deferred payments the ban actually catches, and which arrangements are disguised retention by another name. That is the advice clients will pay for, and it is where the litigation will start.

Key terms

• Retention is a percentage of payment held back by an employer until defects are made good, historically a major source of cash-flow pressure down a construction supply chain.
• Repapering is the mass review and amendment of a client's existing contracts to bring them into line with a new legal requirement.
• Statutory interest is interest a supplier is entitled to by law on a late payment, independent of what the contract says.