Is There a Time Limit for Claiming Late Payment Compensation in the UK?
If your business has received late payments from the public sector, you have a legal right to compensation under the Late Payment of Commercial Debts (Interest) Act 1998. But that right is not open-ended. There is a time limit on claims, and once it passes, your entitlement is extinguished.
A 2025 study commissioned by the Department for Business and Trade found that 14,000 UK businesses close every year as a direct result of late payments. Many of those businesses had a statutory compensation entitlement they never acted on, and some simply ran out of time to claim it.
Source: Department for Business and Trade / London Economics, July 2025
This guide explains the time limits that apply across the UK, what you are entitled to claim, and how to act before the window closes.
Late Payment Compensation: Rights and Regulations
The primary legislation governing late payment compensation in the UK is the Late Payment of Commercial Debts (Interest) Act 1998. The Act requires public bodies and contracting authorities to pay undisputed invoices within 30 days. Where they fail to do so, suppliers are entitled to statutory interest and fixed compensation per overdue invoice.
It is important to note that the Act applies to the commercial supply of goods and services. It does not cover personal debt. It also applies where your terms of business do not already contain a provision for interest.
The fixed compensation rates are:
- £40 per invoice for debts under £1,000
- £70 per invoice for debts between £1,000 and £9,999.99
- £100 per invoice for debts of £10,000 or more
In addition, statutory interest accrues daily at 8% above the Bank of England base rate from the day after payment was due to the date it was actually received.
For a full breakdown of how the legislation protects your business, see our guide on legal protection against late payments in the UK.
What Is the Time Limit for Claiming Late Payment Compensation?
The time limit for claiming late payment compensation varies depending on where in the UK your business is based.
In England, Wales, and Northern Ireland, suppliers have six years to make a claim. In Scotland, the prescription period is five years.
These time periods are established by case law and the Limitation Act 1980 in England, Wales, and Northern Ireland, and the Prescription and Limitation (Scotland) Act 1973 in Scotland.
The clock runs from the date payment was actually received, not from the date the invoice was issued or the date it became overdue. This means a payment made late but eventually settled several years ago may still be within the limitation window.
How to Know If a Payment Is Late
As a general rule, compensation becomes payable from the end of the agreed credit period. When supplying a public authority, statutory interest is payable after a 30-day window, even if you have agreed to a longer payment date contractually.
The 30-day period begins from whichever is later: the date of delivery of the goods or services, or the date the contracting authority receives an undisputed invoice.
For more detail, see our guide on how the Late Payment Act protects your business.
How to Act Before the Limitation Period Expires
LPA buys statutory late payment rights outright from businesses that have supplied the public sector. We assess your entitlement using our own records, make you a fixed guaranteed offer, and pay you within 24 hours of receiving signed documents. You do not need to produce invoices or manage any ongoing process.
Check your eligibility in minutes.
Step 1: Tell us your company details. That's all we need to get started. (Takes minutes)
Step 2: We check our records to assess whether you have a claim. (No input required from you)
Step 3: If you have a claim, we offer you a fixed, guaranteed purchase price. (Fixed amount, agreed upfront)
Step 4: We send our standard-form assignment documents for signature and ask you to confirm your bank details. (Straightforward documentation)
Step 5: Once in receipt of the signed documents and bank details, we make payment within 24 hours and your involvement is over. We then take full responsibility for the claims. (Immediate payment, zero ongoing obligations)
This right applies even if the invoices have already been settled. Find out more about claiming on paid invoices
Am I eligible to claim?Frequently Asked Questions
What is a late payment compensation claim?
A late payment compensation claim is a legal right that allows UK businesses to obtain compensation when they do not receive timely payments from public sector clients. The right is established by the Late Payment of Commercial Debts (Interest) Act 1998.
What types of businesses can make a late payment compensation claim?
All UK businesses, from sole traders to limited companies, can claim compensation in the event of late payment from a public sector client. The legislation does not cover personal debt.
What if a client has more than one overdue invoice?
Your business can claim compensation for every invoice that has been paid late, provided each relates to a separate order of goods or services. LPA assesses each invoice individually and combines them into a single purchase price.
Can I claim late payment compensation if I don't have a formal contract?
Yes, a formal contract is not required. However, the process is more straightforward where payment terms have been agreed in writing. We recommend ensuring payment terms are documented in all future supplier agreements with public sector clients.
When is a payment considered late under UK law?
A payment is generally considered late when it exceeds the 30-day period from receipt of an undisputed invoice. There are exceptions where a longer payment window has been contractually agreed, though for public sector contracts the 30-day statutory period takes precedence regardless.
How can I calculate how much late payment compensation I am owed?
Use our free claim calculator to get an indicative figure.
What's my claim worth? Am I eligible to claim?
