Chasing Late Payments in the UK: The Complete Process, With Templates

• The three-step process for chasing an unpaid invoice
• How long should you wait before chasing an unpaid invoice?
• First chase: email
• Second chase: a firmer tone
• What is a letter before action?
• Letter before action: template and what it must contain
• What UK law actually says: payment terms, interest, and compensation
• The Small Business Commissioner: free help if chasing doesn't work
• What's changing: the Small Business Protections Bill
• Mistakes that cost you money
• Keeping track of deadlines without thinking about it every week

Chasing a late payment costs the average affected UK business 86 hours a year, according to research by London Economics, commissioned by the Department for Business and Trade and the Office of the Small Business Commissioner (2025) — 133 million hours across the country, spent writing reminders, making calls, and waiting for money already owed under contract.

This guide covers the full amicable recovery process used in England and Wales: three chase letters, each with a copyable template, what the law actually entitles you to at every stage, and what's changing under the incoming Small Business Protections Bill.

The three-step process for chasing an unpaid invoice¶

Three steps cover the vast majority of cases, in this order. A first chase, neutral in tone, sent a few days after the due date. A second chase, firmer, if the first goes unanswered. Then, if nothing moves, a letter before action — the formal step required before starting court proceedings, if the client still doesn't pay.

Each step has its own template further down this guide, ready to copy. What ties them together: escalate gradually, always in writing, always dated — the detail that matters most if the matter ever reaches a judge.

How long should you wait before chasing an unpaid invoice?¶

Nothing forces you to wait. The moment the payment date on the invoice passes, the debt is legally overdue — statutory interest already starts accruing at that point, automatically, without any chase needed to trigger it (more on this in the legal section below).

In practice, most freelancers and small businesses wait 3 to 7 working days after the due date before sending a first chase — enough time for a simple oversight to correct itself. Beyond 15 days of silence after that first chase, moving to the second becomes reasonable. Beyond 30 days of total unanswered delay, a letter before action is no longer premature.

These aren't legal deadlines — they're common-sense benchmarks, not a rule to follow to the day. What matters more is never letting silence sit without a written follow-up, and keeping a dated record of every step.

First chase: email¶

The tone stays neutral and assumes good faith — a reminder, not an accusation. The goal is simple: put the invoice back in front of the client, with everything they need to pay quickly, without having to look anything up.

CopierSubject: Reminder — Invoice [INVOICE NUMBER] dated [INVOICE DATE]

Hi [CLIENT NAME],

Unless we've missed something, invoice [INVOICE NUMBER] for [AMOUNT], issued on [INVOICE DATE] and due on [DUE DATE], doesn't appear to have been settled yet.

This is probably a simple oversight. Could you arrange payment at your earliest convenience, or let us know if something's holding it up?

The invoice is attached again for reference.

Best regards,
[YOUR NAME]

Second chase: a firmer tone¶

If the first chase goes unanswered after around ten days, the second one changes register. It's no longer a reminder that assumes good faith — it states the delay plainly, along with what it already costs: statutory interest and fixed compensation, which the first chase deliberately left out, so as not to put off a client who may simply have forgotten.

The right time to send it: between 10 and 15 days after the first chase, never sooner — that gap is what separates a still-courteous reminder from premature pressure. Beyond 15 days of complete silence, though, there's no reason to wait any longer: every extra day delays the next step just as much, if the client ultimately doesn't respond.

CopierSubject: Second reminder — Invoice [INVOICE NUMBER] still unpaid

Hi [CLIENT NAME],

Despite our reminder on [DATE OF FIRST CHASE], invoice [INVOICE NUMBER] for [AMOUNT], due since [DUE DATE], remains unpaid.

Under the Late Payment of Commercial Debts (Interest) Act 1998, statutory interest is already accruing on this debt, along with fixed compensation for recovery costs. Both apply automatically and are calculated from the day after the due date.

Please could you settle this within 7 days. If we don't hear from you, we'll need to send a formal letter before action.

Best regards,
[YOUR NAME]

What is a letter before action?¶

A letter before action is the formal step a business must take before it can start court proceedings against another business over an unpaid debt. It sets out the claim in full, states what's owed and how it's calculated, and gives the debtor a defined window to respond or pay before a claim is issued.

Sending one isn't optional if the matter might end up in court: a claimant who skips this step, or who doesn't give the debtor a fair chance to respond, risks cost penalties later — even if they go on to win the case.

Letter before action: template and what it must contain¶

The Practice Direction on Pre-Action Conduct and Protocols sets out what a letter before action needs to cover for a court to consider it adequate: the full details of the debt and how it arose, a clear statement of any interest and compensation already accruing, the evidence supporting the claim, and a reasonable period — usually 14 days — for the debtor to respond before proceedings start.

Copier[YOUR NAME AND ADDRESS]
[CLIENT COMPANY NAME]
[CLIENT ADDRESS]

[DATE]

LETTER BEFORE ACTION

Re: Invoice [INVOICE NUMBER] — [AMOUNT] due since [DUE DATE]

Dear Sirs,

Despite our reminders of [DATE OF FIRST CHASE] and [DATE OF SECOND CHASE], invoice [INVOICE NUMBER], issued on [INVOICE DATE] for [AMOUNT], due since [DUE DATE], remains unpaid.

Under the Late Payment of Commercial Debts (Interest) Act 1998, statutory interest has been accruing on this debt since [DUE DATE], at 8% above the Bank of England base rate. Fixed compensation of [£40 / £70 / £100, per the applicable tier] is also due, in addition to the principal sum.

As of the date of this letter, the total amount owed, including interest and compensation, is [TOTAL AMOUNT] — see the enclosed statement of account for the full calculation.

We require payment in full within 14 days of the date of this letter. If payment, or a proposal to settle, is not received within that time, we intend to issue court proceedings to recover this debt, together with interest, compensation, and costs, without further notice.

Yours faithfully,
[YOUR NAME]

What UK law actually says: payment terms, interest, and compensation¶

Three rules matter here, and all three apply automatically — none of them require a chase to be sent first.

Statutory interest is set by the Late Payment of Commercial Debts (Interest) Act 1998, at 8 percentage points above the Bank of England's official dealing rate — but not necessarily today's rate. Under Article 4 of the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002, the reference rate is fixed twice a year: the rate in force on 30 June applies to any debt that falls overdue between 1 July and 31 December, and the rate in force on 31 December applies to debts overdue between 1 January and 30 June. For a debt overdue in the second half of 2026, for instance, the applicable base rate is the one in force on 30 June 2026 — 3.75%, unchanged through both the 17 June and 30 July 2026 decisions — making the statutory rate 11.75% for that period. A debt overdue in the first half of the year instead uses the rate in force on the previous 31 December — a different figure, not automatically 11.75%. Check the Bank of England's own rate history for the reference date that matches when your invoice became overdue, rather than assuming today's rate applies.

Fixed compensation for the cost of recovery, set by the Late Payment of Commercial Debts Regulations 2002 (as amended in 2013), is tiered by the value of the debt — not a flat amount:

• £40 for a debt under £1,000
• £70 for a debt of £1,000 or more but under £10,000
• £100 for a debt of £10,000 or more

Both interest and compensation apply the moment a qualifying business-to-business debt becomes overdue — they aren't alternatives to each other, and a creditor doesn't have to choose between them.

Payment terms themselves aren't capped by general law today in the way they will be if the Small Business Protections Bill passes (see below) — parties are free to agree their own terms, though anything the courts consider grossly unfair to a small supplier can be challenged.

The Small Business Commissioner: free help if chasing doesn't work¶

If a letter before action still doesn't produce a result, the Office of the Small Business Commissioner offers a free enquiry and dispute-resolution service for small businesses chasing payment from larger ones. It isn't a court and it can't force payment, but it recovered £1.5 million for small businesses in the 2025–2026 financial year — the highest figure in over five years.

Alongside the Commissioner's own service, the Fair Payment Code — a voluntary scheme run by the Commissioner's office on behalf of the Department for Business and Trade, replacing the earlier Prompt Payment Code — publicly rates large businesses on how quickly they pay, on a Gold, Silver, or Bronze scale. It's worth checking whether a persistently late-paying client holds an award before escalating further; a poor public rating is sometimes leverage in itself.

What's changing: the Small Business Protections Bill¶

A bill that would tighten these rules considerably is currently making its way through Parliament. Known publicly as the Small Business Protections Bill, and listed formally as the Commercial Payments Bill [HL], it was introduced in the House of Lords on 19 May 2026 and was at Committee stage in the Lords as of July 2026 — it would still need to complete the remaining Lords stages, all Commons stages, and receive Royal Assent, so it isn't expected to come into force before 2027.

If passed as introduced, it would cap payment terms at 60 days for large firms paying smaller suppliers, make the 8%-above-base-rate interest compulsory rather than merely available, ban retention-of-payment practices in construction contracts, and hand the Small Business Commissioner considerably wider powers — including the ability to investigate poor payment practices, adjudicate disputes directly, and fine persistently late-paying firms sums that could run into tens of millions of pounds. None of this applies yet — but it's worth knowing it's coming when planning how much to invest in chasing a given client relationship.

Mistakes that cost you money¶

Not charging statutory interest and compensation because it feels aggressive is the most common one. It shouldn't — both are your legal right, due automatically, whether you mention them or not. Leaving them off a chase just means the client never finds out what the delay is actually costing them.

Chasing only by phone, with nothing written afterwards, is another. A call can unstick a situation, but it leaves no dated record. If the matter ever needs to go further, only the written trail counts.

Not knowing which formal letter applies — letter before action versus letter of claim — can undermine an otherwise solid case if it ever reaches court. The distinction above covers the case that matters for most B2B invoicing: a company or partnership debtor gets a letter before action, not a letter of claim.

And the costliest: letting several unpaid invoices from the same client pile up before acting on any of them. Each invoice has its own due date and its own chase timeline — letting them blur together makes the whole situation harder to track, and a larger total amount harder to get a client to accept all at once.

Keeping track of deadlines without thinking about it every week¶

Everything above works, but it demands one simple thing that's easy to let slip in practice: following up on every due date, every time, without exception, until it's settled. That's precisely the kind of task an AI agent takes on once it's set up — watching dates, drafting the right chase at the right tone, and showing you each message before it goes out.