Time to pay up: Toughest crackdown on late payments in a generation unveiled in plan to back small businesses
Source: gov.uk (2025-07-30)

UK Government unveils its Small Business Plan to support SMEs across the country

- Government to tackle late payments with the most significant legislative reforms in 25 years - an issue that costs the UK economy £11bn a year and shuts down 38 businesses every day
- UK set to have the toughest late payments laws in the G7 as part of reforms to back small businesses and unlock growth as part of the Plan for Change
- New £4bn finance boost including 69,000 Start-Up Loans to inspire the next generation of entrepreneurs and small business owners
Small businesses across the UK will benefit from the most comprehensive support package in a generation, as the government launches a bold new plan to give small businesses the tools to thrive and drive economic growth as part of its Plan for Change.

Small and medium sized firms employ 60% of the country’s workforce and generate £2.8 trillion in turnover. However, for too long, the odds have been stacked against small businesses.

From tradespeople and shopkeepers to start-up founders and family-run firms, too many work hard but don’t get the backing they deserve - held back by late payments and not getting the financial backing they need within a wider system that hasn’t worked in their favour.

That’s why the Government is taking serious action to back small businesses and give them the tools they need to grow. This builds on the solid foundation of certainty and stability this government has already delivered—through the trade deals we’ve secured, four interest rate cuts, and a long-term industrial and trade strategy that’s helping businesses plan ahead with confidence.

At the heart of the plan is a the most significant package of reforms in a generation to tackle late payments, with plans to introduce the toughest laws on late payments in the G7.

Late payments are one of the biggest barriers to small business growth —causing cashflow problems that stop firms from scaling up and investing in their future. Every day, hardworking businesses close their doors because they aren’t paid on time.

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.

The Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The upcoming legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they’ll be paid on time.

Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly backed by mandatory interest charges for those who pay late.

These changes will also save small businesses valuable time, freeing up hours currently spent chasing overdue invoices so they can focus on growing their business instead. Taken together, this will help ensure businesses are paid on time and end the scourge of late payments which costs the UK economy £11bn per year and closes down 38 UK businesses every day.

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.”

Business and Trade Secretary Jonathan Reynolds said:

“This country is home to some of the brightest entrepreneurs and innovative businesses in the world, and we want to unleash their full potential by giving them back time and money to do what they do best - growing our local economies.

“Our Small Business plan – the first in over a decade – is slashing unnecessary admin costs, making it easier for businesses to set up shop and giving SMEs the financial backing they need.

“This is our Plan for Change in action, putting more money in people’s pockets, boosting local communities and ensuring Britain is a great place to do business and thrive.”

Small Business Minister Gareth Thomas said:

“I want the UK to be the best place in the world to start a business, grow and succeed - and that’s why we’ve taken bold steps today.

“Too many small firms go under each year because they aren’t paid on time - that is completely unacceptable.

“I hear all too often about businesses who just don’t have the cash needed to start up or grow. Today, we’ve announced measures as part of our Plan for Change to tackle all of those issues and beyond. This is the government listening to businesses, working with them, and delivering real change.”

Policy Chair of the Federation of Small Businesses (FSB), Tina McKenzie, said:

“Making sure businesses are paid on time, that our high streets thrive, and creating conditions in which everyone can start and succeed in business are crucial priorities for small businesses, communities and the economy. It’s very welcome that the Prime Minister has today made them his Government’s priorities.

“I’m pleased that FSB and the Government have been able to work in lockstep on the bold and ambitious measures needed to tackle the scourge of late payment through legislation, and other pro-growth, pro-small business measures.

“Today’s plan is an encouraging commitment from the Government to take the side of small businesses in the great growth challenge ahead.”

Charlie Shaw, owner of Flock and Herd butchers in Peckham said:

“We’re proud to pay every supplier on time and once we receive an invoice, so it’s fantastic to see the government put the Small Business Plan into place tackling the big issue of late payments.

“We believe this is a fair and honest way to conduct business. It gives us a clear and current understanding of how our business is performing. Our relationships with our suppliers have been amazing and truly beneficial to all parties.”

As part of the plan, the government is also tackling another major barrier for small businesses – access to finance. Despite the UK’s world-leading financial services sector, many small firms struggle to secure the funding they need to invest, expand, or even survive.

To address this, the Government is launching a new £4 billion wave of financial support aimed at boosting growth and supporting more small businesses to start up and grow. This includes a £1bn boost for new businesses, with 69,000 Start-Up Loans and mentoring support to inspire the next generation of entrepreneurs and small business owners.

The Government is also going further by delivering a new £3 billion boost to the British Business Bank - raising the total guarantee to £5 billion - to help lenders offer more small business loans through the ‘ENABLE programme’. Under the scheme, the BBB provides a government-backed guarantee to help lenders feel safer when lending to smaller or newer businesses, enabling them to offer better loan terms including with lower interest.

These measures aim to break down long-standing barriers that have made it harder for small businesses to access the funding they need to get off the ground by making finance and loans more accessible, affordable, and fair.

Accelerating SME growth by just 1 percentage point per year, could deliver £320bn to the UK economy by 2030. All of these measures announced today back small businesses to the hilt and build on action already taken by this government to create the conditions for businesses to thrive:
- Slashing of red tape to boost the hospitality and arts sector through hospitality zones and licensing reforms following the Licensing Taskforce co-chaired with Nick Mackenzie, Greene King CEO
- High Street Rental Auctions to fill vacant high street premises
- A revamped Board of Trade to get more small firms exporting around the world
- The new Business Growth Service to ensure SMEs have access to key support
- We’ve set out that we intend to introduce permanently lower business rates multipliers for the hard-hit retail, hospitality and leisure sector.
Notes to editors

Michelle Ovens CBE, Founder, Small Business Britain, said:

“I am thrilled to see the Small Business Plan launched today, putting the nation’s smallest businesses at the heart of Government strategy where it should be. These job creators and economy builders will benefit from a huge boost to funding through the British Business Bank, a boost to skills, support for high streets and a long hoped for legislative backing for getting paid on time. We will not see economic growth without small business growth, so I am eager to get on and help the Government deliver on this agenda - and help small businesses regardless of their background start, grow and thrive.”

Simon Groom, CEO of MagnifyB, said:

“MagnifyB welcomes the UK Government’s action to tackle late payments, which will give small businesses the cash flow stability they need to thrive. Alongside this, there is a clear need to provide micro and small businesses with far more than just a repository of information, including a practical digital toolset to strengthen their operations and improve their chances of long-term success. We hope that the new Small Business Commissioner can be instrumental in bringing together ideas and championing the initiatives needed to make this support a reality.”

Julianne Ponan MBE, Founder of Creative Nature, a small business that exports top 14 Allergen Free Baking Mixes and Snacks to 16 countries, said:

“I’m delighted to see the government’s new SME Strategy recognising the critical role small businesses play both at home and globally. From tackling late payments to simplifying access to growth advice and support, these measures are a lifeline for SMEs like mine who often face disproportionate challenges with limited resources. I’m especially encouraged by the commitment to reduce administrative burdens by 25% and improve access to finance both are major barriers to growth for underrepresented founders, including women and ethnic minority entrepreneurs. The focus on revitalising the high street, digital skills, and exporting support shows that the government is listening to the needs of small businesses.”
- The full plan will be published later this morning on Gov.uk We have launched a public consultation to seek views on our proposed legislative measures to ensure companies pay their suppliers quickly and on time. Please go to GOV.UK (https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.gov.uk%2Fgovernment%2Fconsultations%2Flate-payments-tackling-poor-payment-practices&data=05%7C02%7CJordan.Bhatt%40businessandtrade.gov.uk%7Ce6f6d212cda84938c96f08ddcf6d32f1%7C8fa217ec33aa46fbad96dfe68006bb86%7C0%7C0%7C638894790106575435%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=23JB4eIYk1j9AzH8eHslpjLTkaAPwk%2BUtwQw99HPGrM%3D&reserved=0) for details of the proposed measures.
- Today’s announcement builds on the foundation of the government putting the public finances on a sustainable path - providing long-term direction, stability, and confidence for small businesses to thrive. This has paid off - interest rates have been cut four times in the last 12 months and in the first three months of 2025, Britain was the fastest growing economy in the G7.
- The Government has also extended 40% business rates relief for 250,000 firms until April 2026 protected bills from inflation, and ensured over 700,000 properties pay no rates at all. This is creating a fairer business rates system to protect the high street, support investment, and level the playing field as we intend to introduce permanently lower tax rates for retail, hospitality, and leisure properties from next year.
- This has included 865,000 small businesses being protected from the NICs rise because of the Employment Allowance increase to £10500, whilst 700,000 small business properties do not pay business rates at all because of Small Business Rates Relief. Corporation tax has been capped at 25% - the lowest headline rate of Corporate Tax in the G7 - for the duration of parliament.