What do the new late payment rules mean for small businesses

What’s changing?

Expected from 2026, large companies in the UK would be required to disclose how long they take to pay their suppliers as part of their annual Directors’ Reports. This forms part of a new government initiative to improve transparency and address late payment culture in business supply chains.

The proposed legislation (the Companies (Directors’ Report) (Payment Reporting) Regulations 2025) will apply to companies with more than 250 employees. Businesses will need to report:

• Average number of days taken to pay supplier invoices

• The proportion of invoices paid within 30 days, 31–60 days, and over 60 days

• The percentage of payments not made within the agreed terms

This will be in addition to the existing Payment Practices Reporting regime that already requires large businesses to publish payment data on a central government portal.

Why the government is acting

According to the UK government, late payments are a key contributor to small business failure. Research cited by GOV.UK suggests they cost UK SMEs an average of £22,000 per year, contributing to an estimated 50,000 business closures annually.

By bringing this information into companies’ annual reports, ministers hope to raise the profile of supplier payment performance and ensure it is taken seriously at board level.

Business Secretary Jonathan Reynolds called late payments “unacceptable,” noting that the new rules are about levelling the playing field so that “small businesses get paid on time.” Prime Minister Keir Starmer has also committed to stamping out the practice as part of a wider Small Business Strategy expected later in 2025.

Reaction from small business groups

The Federation of Small Businesses (FSB) has welcomed the move. In a statement, Policy Chair Tina McKenzie said:

“This is what real change looks like. Listening to small firms and prioritising action to tear down each and every barrier to growth.”

She added that requiring disclosure in annual reports will help push the issue into the spotlight (where executive teams and shareholders are more likely to take action).

Campaigners like Good Business Pays also support the move, noting that reputational pressure is often the most effective lever to encourage large companies to pay on time.

What it means for small business suppliers

For small businesses, especially those working with large corporates, this legislation has a number of practical implications:

1. Increased transparency

Knowing a customer’s average payment times and track record gives small businesses clearer expectations around cash flow.

2. Improved financial planning

Businesses can use this information to better anticipate when cash will arrive, and adjust forecasts accordingly.

3. More informed business relationships

With payment data in the public domain, small businesses can use it as one more factor in assessing whether to work with a new customer — or to revisit terms with existing ones.

4. Pressure on slow payers

Public reporting may incentivise large companies to improve payment behaviour. It also empowers small businesses to ask tougher questions of slow-paying customers and seek resolution earlier.

Other changes on the way

The new reporting rules are part of a broader set of reforms. Additional measures include:

• A revamped Fair Payment Code, offering gold/silver/bronze ratings for prompt-paying businesses

• A more proactive role for the Small Business Commissioner

• Consultations on further legal obligations to address habitual late payment

Where to find the data

Once in effect, payment data will be available in two places:

• The Payment Practices Reporting portal (existing)

• Company annual reports (new requirement starting 2026)

Small businesses may wish to check these reports regularly when assessing current or prospective clients. The figures can help spot trends or flag risks before they impact cash flow.

Looking ahead

Payment terms themselves won’t be regulated under this legislation, but having to publish data could shift behaviour in the right direction.

As Emma Jones, the incoming Small Business Commissioner, put it:

“Small businesses deserve to be paid on time, it’s as simple as that.”

While the final regulations are still subject to parliamentary approval this autumn, businesses of all sizes can begin preparing now, whether by reviewing their reporting obligations or checking the payment records of the firms they work with.

For small business owners, this is an opportunity to build relationships with partners who value timely, transparent business and to feel more confident in forecasting what’s ahead.