How to Recover Unpaid Invoices in the UK: A Step-by-Step Guide
To recover an unpaid invoice in the UK, work up a ladder: confirm the payment terms, send a polite reminder, phone the client, add the statutory interest and fixed-sum compensation you are entitled to, send a formal letter before action, and only then consider court. Most invoices are paid at the first or second rung, provided you chase early, in writing, and with the right figures. This guide walks through each step, what the law lets you claim, and how to stop the same problem recurring.
TL;DR
- Check the payment date first. If none was agreed, an invoice is late 30 days after the customer receives it, or after the goods or service are delivered, whichever is later.
- Business customers owe statutory interest of 8% plus the Bank of England base rate, and a fixed sum of £40, £70 or £100 depending on the size of the debt.
- Escalate in order: reminder, phone call, final demand, letter before action, then court. Skipping steps can cost you legal costs.
- Chase on a schedule, not when you remember. Late chasing is the most common reason invoices stay unpaid.
- Keep a record of every invoice you send, so you can prove what was sent and when.
Table of Contents
- Start with the payment terms
- Chase early and in writing
- Charge the interest and compensation you are owed
- When reminders do not work
- The letter before action
- Going to court, and what comes after
- Is it illegal not to pay an invoice?
- Why invoices go unpaid, and how to prevent it
- Our perspective
- Put the chasing on autopilot with Execore
- FAQ
- Sources
Start with the payment terms
Before you send anything, look at what was agreed. The Small Business Commissioner puts this first: check the payment terms on your original invoice and contract. It decides whether the invoice is actually late and what you can charge.
The rules are simple. If you agree a payment date with another business, it must usually be within 60 days for business transactions (30 days for public authorities). If you agree nothing, GOV.UK says the customer must pay within 30 days of getting your invoice or the goods or service. You also have the right to charge interest, though you can choose not to.
Three quick checks save embarrassment later:
- Was the invoice sent to the right person and address? If the client says they never received it, resend it and note the date.
- Does it show the amount, the due date, what the work was, and how to pay?
- Is there a purchase order number or reference the client’s accounts team needs?
Many “unpaid” invoices are stuck on a missing PO number or an email that went to the wrong person. Fix that first and the money often arrives without a fight.
Chase early and in writing
The practical ladder from the Small Business Commissioner runs as follows: a polite reminder by email or message, then direct contact by phone or in person, then resending the invoice if needed, then late fees, then a payment plan if the client is short of cash, then a final demand, and last of all legal action or a collection agency.
A sensible rhythm for a 30-day invoice looks like this:
| When | What to send | Tone |
|---|---|---|
| A few days before the due date | Friendly heads-up with the invoice attached | Warm |
| The day after it falls due | Short reminder with amount, invoice number and bank details | Neutral |
| 7 days overdue | Second reminder and a phone call | Firm but friendly |
| 14 days overdue | Reminder that statutory interest and compensation apply | Firm |
| 21 to 30 days overdue | Final demand with a deadline | Formal |
These gaps are a suggested rhythm, not a legal requirement. Adjust them to your client and the size of the debt.
What a good reminder contains
Keep it short. Name the invoice number, the amount, the original due date and how many days overdue it is. Attach the invoice again. Ask a single clear question: when will payment be made? A vague “just checking in” invites a vague reply. “Can you confirm this will be paid by Friday?” invites a date.
Chasing freelance invoices
Freelancers often feel awkward chasing a client they want to work with again. Two habits help. First, state your terms before the work starts and repeat them on every invoice, so a reminder is simply the terms being applied. Second, send reminders from a fixed routine rather than a mood. A reminder that goes out on day one after the due date reads as admin. One that goes out after six weeks of silence reads as a confrontation.
If you work with a larger company, also ask who runs accounts payable. Your day-to-day contact may approve the work but have no say over when the money leaves.
Charge the interest and compensation you are owed
If the customer is another business, the law is on your side. Under the Late Payment of Commercial Debts (Interest) Act 1998, qualifying debts for goods or services between businesses carry simple interest. It applies where both buyer and supplier act in the course of business, with some excepted contracts. It does not cover consumers.
The interest rate
GOV.UK states that the statutory rate is 8% plus the Bank of England base rate. You cannot claim statutory interest if your contract sets a different rate. The Small Business Commissioner explains that the base rate used is the one in force on 31 December for interest starting between 1 January and 30 June, and on 30 June for interest starting between 1 July and 31 December. Interest can be collected for a maximum of six years from the day after the contracted payment terms end. That is the “six-year rule” people ask about.
GOV.UK’s own worked example uses £1,000 owed at a 0.5% base rate, which gives £85 a year, 23p a day, and £11.50 after 50 days. The base rate has moved a lot since, so use the current figure when you calculate yours.
Here is an illustration with made-up numbers. Say the all-in rate is 12% a year and a client owes £2,400:
- Daily interest: £2,400 × 12% ÷ 365 = about 79p a day.
- After 30 days late: about £23.67 in interest.
- Fixed compensation on top: £70, because the debt falls between £1,000 and £9,999.99.
Small sums, but they change the conversation. A client weighing whether to pay this week or next suddenly has a reason to pay this week.
The fixed sum for recovery costs
On top of interest, GOV.UK says you can charge a fixed sum for the cost of recovering a late payment: £40 for a debt up to £999.99, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. It is charged once per payment, and you can also claim reasonable costs each time you try to recover the debt. For a step-by-step explanation of adding this to an invoice, see our guide on how to charge interest on a late invoice.
You are not obliged to charge any of this. Many businesses hold it back for first reminders and bring it out at the final demand stage. If you do plan to rely on it, say so in your terms before the work starts.
When reminders do not work
If polite chasing fails, change the method rather than just the volume.
- Phone, and follow up in writing. Agree a date on the call, then email to confirm it. That email is evidence.
- Offer a payment plan. If the client is short of cash, instalments in writing beat nothing. Get the schedule agreed by email.
- Pause further work. Where you have an ongoing retainer, you can stop supplying until the account is settled, provided your terms allow it.
- Send a final demand. State the total owed including interest and compensation, the deadline (14 days is common) and what you will do next.
Try the free route before court
The Small Business Commissioner says that once legal action has started, the office cannot help with your complaint, so it is worth exploring their free intervention option first.
The letter before action
If the final demand is ignored, the Federation of Small Businesses advises sending a formal letter before action, notifying the client you intend to issue court proceedings. This improves your chances of recovering legal costs at the end.
Two details matter:
- Where the debtor is an individual, including a sole trader, the demand letter needs to give at least 30 days and follow a set format to comply with court rules. Get it wrong and you can end up responsible for your own legal costs and even the debtor’s, according to the same FSB guidance.
- Under the pre-action protocol for debt claims, as Business Debtline explains, you send a letter of claim first. The debtor should reply within 30 days, and you should not start a claim less than 30 days after receiving their reply form.
The protocol is written with individual debtors in mind. If you are unsure which route fits your client, a solicitor can confirm it for the price of a short consultation, which is cheap relative to a mistake.
Going to court, and what comes after
Court is a last resort, and the official advice is to weigh it up first. The FSB recommends a cost-benefit analysis and thought about whether you will ultimately secure payment before taking any “nuclear” step. The Small Business Commissioner adds that checking your customer’s financial status helps you decide if it is worth it.
What to expect
- Where to claim. You can file a money claim, including for compensation. The Small Business Commissioner says claims above £10,000 in England and Wales, £5,000 in Scotland or £3,000 in Northern Ireland should be reviewed with legal advice.
- Costs. The FSB says a claim under £10,000 is likely to go to the small claims track, where only court fees and limited fixed costs are likely to be recoverable even if you win.
- Time. The FSB puts it at a minimum of 6 to 18 months from issue to final hearing.
Enforcing a judgment
A judgment is not payment. GOV.UK explains you can ask the court to send bailiffs (a warrant of control). The bailiff asks for payment within 7 days, then visits the debtor’s home or business to see if anything can be sold. Bailiff fees in England and Wales start at £242, per the Small Business Commissioner.
Statutory demands
For a company debt above £750, you can petition for a statutory demand. The FSB notes the threat of insolvency often prompts payment, though if the company goes into liquidation you may only receive a dividend. The Small Business Commissioner says a statutory demand gives the debtor 21 days to pay or agree terms before you can apply to make them bankrupt or wind up the company. Take legal advice before using it.
Is it illegal not to pay an invoice?
Not paying a valid business invoice on time is a breach of contract rather than a crime, and it triggers the interest and compensation rights above. The remedy is civil: chase, claim, and if necessary sue. Disputed invoices are different. If the client says the work was faulty, the dispute needs resolving first, and it is better to record that in writing than to keep sending reminders.
Why invoices go unpaid, and how to prevent it
Most late payment is not malicious. It is forgotten emails, invoices sitting in the wrong inbox and chasers that never get sent because you are busy doing the work. Prevention is mostly about routine:
- Put payment terms and your late-payment charges in writing before work begins.
- Send invoices the day the work is done.
- Track what is outstanding in one place, weekly.
- Keep a copy of every invoice you send. Our guide on keeping a copy of every invoice shows how.
- Know your cash position for the next month so a late payer does not catch you out. See cash flow visibility.
If your invoicing software caps the number of reminders it sends, you may find yourself chasing manually from reminder four onwards. We cover that in our guides on getting past a five-reminder limit and sending more than three reminders.
Our perspective
Most small businesses do not lose money because clients refuse to pay. They lose it because nobody has the time to notice an invoice is overdue, work out what is owed with interest, and write a message that is firm without being rude.
That is why we built Execore around the email you already send. Bcc your Execore address on an invoice and we capture it. Forward the bills you receive and we track those too. You keep the invoicing tool you already use: no new system, no bank connection, no software to install.
When an invoice goes overdue, we draft the chase email for you, including the statutory late-payment interest and compensation calculation. Nothing is sent and nothing is paid until you approve it in the review queue. You stay in control, and the awkward writing is done.
We think the best way to recover unpaid invoices is to make chasing routine, so that it is a habit rather than a confrontation.
the author
Put the chasing on autopilot with Execore
If you would rather not write every reminder yourself, Execore tracks your outgoing invoices through a Bcc address, highlights what is overdue, shows your net cash position for the next 30 days, and drafts the chase email for you to approve. There is a Free plan, and the Business plan is £29 per month. Details are on the pricing page, or start from the Execore homepage.
For more on late payment law and getting paid, browse the Execore blog, or read our practical guide to invoice automation.
FAQ
What can I do if someone has not paid an invoice?
Check the payment terms, send a polite reminder, then phone the client. If that fails, add statutory interest and the fixed-sum compensation, send a final demand and then a letter before action. Court or a collection agency comes last.
How long do I have to recover an unpaid invoice?
The Small Business Commissioner says statutory interest can be collected for up to six years from the day after the contracted payment terms end. Do not wait that long: the older the debt, the harder it is to collect and the more likely the client has closed or changed address.
Can I charge interest on an overdue invoice to another business?
Yes, usually. GOV.UK sets the statutory rate at 8% plus the Bank of England base rate, plus a fixed sum of £40, £70 or £100 depending on the debt. You cannot claim statutory interest if your contract already sets a different rate of interest.
When should I take an unpaid invoice to court?
Only after reminders, a final demand and a letter before action have failed, and after weighing the costs. Small claims often recover only court fees and limited costs, and cases can take from 6 to 18 months. The Small Business Commissioner’s free intervention is worth trying first.
Sources
- Help with unpaid invoices, Small Business Commissioner
- Legal action for late payments, Small Business Commissioner
- Interest calculator guidance, Small Business Commissioner
- Late commercial payments: when a payment becomes late, GOV.UK
- Charging interest on commercial debt, GOV.UK
- Claim debt recovery costs, GOV.UK
- Invoicing and taking payment from customers, GOV.UK
- Enforce a judgment, GOV.UK
- Late Payment of Commercial Debts (Interest) Act 1998
- What legal action can I take to recover debt?, FSB
- Making a small claim, Business Debtline