B2B vs B2C: Late Payment Rights Explained | UK Guide 2026

Getting paid late is frustrating. But did you know your rights are completely different depending on whether you're working with businesses or individuals?

This guide explains exactly what you can (and can't) do when clients pay late.

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The Key Difference: Who Is Your Client?

Before you can understand your rights, you need to know who you're dealing with:

Why does this matter? The Late Payment of Commercial Debts Act gives you powerful statutory rights — but ONLY for business-to-business transactions. Using it incorrectly for consumer clients could land you in legal trouble.

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Your Rights with Business Clients (B2B)

When a business pays you late, the Late Payment of Commercial Debts (Interest) Act 1998 gives you automatic rights to:

1. Statutory Interest

You can charge interest at 8% above the Bank of England base rate on the overdue amount.

Current calculation (January 2026):

• Bank of England base rate: Check current rate
• Statutory rate: Base rate + 8%
• Example: If base rate is 5.25%, you can charge 13.25% annual interest

Calculate your late payment interest with our free tool →

2. Compensation for Recovery Costs

On top of interest, you can claim fixed compensation:

Source: Gov.uk - Late commercial payments

3. Reasonable Recovery Costs

If the fixed compensation doesn't cover your actual costs (e.g., legal fees, debt collection), you can claim additional "reasonable costs."

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Your Rights with Individual Clients (B2C)

Important: The Late Payment of Commercial Debts Act does NOT apply to consumers.

When working with individuals (parents paying for tutoring, personal training clients, etc.), your rights are more limited:

What You CAN Do

1. Include late payment fees in your terms — but they must be:

   • Clearly communicated BEFORE the client books
   • A "genuine pre-estimate of loss" (typically your admin time)
   • Not excessive (courts can strike down unfair terms)

2. Charge reasonable admin fees — typically 5-10% to cover:

   • Time spent chasing payment
   • Additional administration
   • Bank charges for failed payments

What You CAN'T Do

• ❌ Claim statutory interest at 8% above base rate
• ❌ Claim £40-£100 fixed compensation
• ❌ Reference the Late Payment Act in your terms
• ❌ Apply excessive or punitive fees

Legal Note: Under the Consumer Rights Act 2015, contract terms that create a "significant imbalance" against the consumer can be deemed unfair and unenforceable.

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Mixed Clients: What If You Work with Both?

Many tutors, PTs, and music teachers work with both:

• Individual parents paying privately
• Schools or businesses paying for group sessions

Best practice: Create two versions of your payment terms.

Generate Payment Terms for Your Client Type →

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Practical Examples

Example 1: Tutor Working with a Parent (B2C)

Sarah tutors GCSE Maths. A parent owes her £200 for 4 sessions.

What Sarah CAN do:

• Send polite reminders
• Apply her stated late fee (e.g., 10% admin charge = £20) if it was in her terms
• Withhold future sessions until paid

What Sarah CANNOT do:

• Charge 8% statutory interest
• Claim £40 compensation
• Reference the Late Payment Act

Example 2: PT Working with a Gym (B2B)

Marcus is a personal trainer. A gym owes him £500 for contracted sessions.

What Marcus CAN do:

• Charge interest at 8% + base rate (approximately 13.25%)
• Claim £40 fixed compensation
• Reference the Late Payment Act in his invoice

Calculation:

• £500 overdue for 30 days
• Interest: £500 × 13.25% × (30/365) = £5.44
• Plus compensation: £40
• Total claim: £545.44

Calculate your exact amount →

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How to Protect Yourself

For All Clients

1. Clear terms upfront — Always share payment terms before providing services
2. Written agreements — Email confirmation at minimum
3. Invoice promptly — Don't delay sending invoices
4. Polite reminders — Most late payments are oversight, not malice

For Business Clients

1. Include statutory rights in your terms — Reference the Act explicitly
2. Keep records — Document payment due dates and reminder dates
3. Don't be afraid to claim — It's your legal right

For Individual Clients

1. Keep fees reasonable — 5-10% admin fee is defensible
2. Communicate clearly — Late fees must be explained before booking
3. Consider relationships — Small claims court may not be worth it for small amounts

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Quick Reference: B2B vs B2C

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Free Tools to Help

• Late Payment Calculator — Calculate interest and compensation for B2B debts
• Payment Terms Generator — Create professional terms for B2B or B2C clients
• Invoice Generator — Include payment terms on your invoices

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Disclaimer

This article provides general information about late payment rights in the UK. It is not legal advice. For specific situations, especially disputes or debt recovery, consult a qualified legal professional.

Sources:

• Late Payment of Commercial Debts (Interest) Act 1998
• Consumer Rights Act 2015
• Gov.uk - Late commercial payments
• Bank of England base rate

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