Quick Answer
UK trades have a legal right to clear payment terms and statutory interest on late invoices. The Late Payment of Commercial Debts (Interest) Act 1998 lets you charge 8% above the Bank of England base rate, plus a fixed fee of £40 to £100 per overdue invoice, and reasonable recovery costs on top. The template below gives you the exact wording for your quotes, your invoices and your final notice before court action. Bolt it onto your job pack and you'll cut the back and forth in half.
Table of Contents
- Why this template matters in 2026
- The template, section by section
- Statutory interest, fees and the law
- Late payment notice and Letter Before Action
- AI fraud checks and smart payment reminders
- How to use the template in your day to day
- What tradespeople are saying
- Recommended videos
- Frequently asked questions
- My verdict
Why this template matters in 2026
I ran Elite Heating and Plumbing for years before I started building software. The single biggest cause of stress in those early years was not difficult boilers or awkward installs. It was customers who took their time paying. You finish the job on a Friday, you send the invoice on Saturday, and three weeks later you're still waiting while the merchant bill drops onto your van seat.
The data backs that up. The Federation of Small Businesses reported that 70% of small firms experienced late payments in the first quarter of 2025, and the average small business now loses around £5,200 a year just to the time and admin cost of chasing money it has already earned. According to the government's own figures, 38 businesses close every single day because they did not get paid on time.
None of that is going away. What you can change is the paperwork between you and your customer. A good payment terms document, attached to every quote and every invoice, does three things. It tells the customer when you expect to be paid. It tells them what happens if they don't. And, when push comes to shove, it gives a county court judge a clean piece of evidence to act on. That is what this template does.
One overdue invoice on a £4,800 boiler swap, recovered cleanly with statutory interest and fees, brings in roughly £130 to £180 on top of the original bill. Two of those a year more than pays for your accounting software.
The template, section by section
You don't need a 12 page contract. You need a one page set of terms and a clear late payment notice that you can fire out without thinking. Here's what we give you in the download.
Section 1: Payment terms (sits on the back of every quote)
Short, plain, no legal waffle. It covers the price agreed, what's included, the deposit you require, when stage payments fall due, the final payment date after completion, and the consequences of non-payment. Use this language verbatim, or tailor the fields in square brackets:
1. Quote validity: This quote is valid for 30 days from the date issued.
2. Deposit: A deposit of [25–50%] is payable on acceptance and is non-refundable once materials are ordered.
3. Stage payments: For works over [£5,000], payment is due at the end of each working week against signed work-completed sheets.
4. Final payment: The balance is due within 7 calendar days of the final invoice date, unless otherwise agreed in writing.
5. Late payment: We reserve the right to charge statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 and applicable fixed compensation on any sum overdue, in line with the rates published by GOV.UK at the time the debt becomes late.
6. Disputes: Any concerns regarding the works must be raised within 14 days of completion. Outside this window, the invoice stands as accepted.
Section 2: The first reminder (day 1 to day 7 after due date)
Polite, friendly, no threats. A short email, by name, referencing the job and the invoice number. Most invoices that go late, go late by accident. Bank holiday weekends, lost emails, holiday cover. Don't burn the relationship on day one.
Section 3: The firm reminder (day 14)
Now the tone shifts. Still professional, but you reference your terms, you state the new total including statutory interest and fixed compensation, and you give a specific date by which you expect payment.
Section 4: The Letter Before Action (day 28 to day 30)
This is the final, formal notice. Civil Procedure Rules require you to send one before issuing a county court claim. The template includes the exact wording courts expect: amount owed, breakdown of interest and fees, work completed, final date for payment, and a clear statement of the next step.
Statutory interest, fees and the law
Three things you are legally allowed to add to any overdue B2B invoice in the UK. Memorise them. Bake them into your accounting software.
1. Statutory interest at 8% above the Bank of England base rate. The reference base rate is fixed for six month periods (the rate set on 31 December applies for January to June, the rate set on 30 June applies for July to December). With the base rate at 4.5% in early 2026, that gives you a 12.5% annual rate, calculated daily.
2. Fixed compensation per invoice: £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for anything £10,000 and over.
3. Reasonable recovery costs on top, if your costs of chasing the debt exceed the fixed compensation. That includes debt collector fees, solicitor letters and reasonable admin time.
That framework comes from the Late Payment of Commercial Debts (Interest) Act 1998, refreshed by subsequent regulations. It applies to B2B work and work done for public authorities. Domestic consumers are covered by the Consumer Rights Act 2015 instead, which gives you the same 30 day default payment window but a different interest mechanism, usually a contractual late fee written into your terms.
The numbers add up faster than people think. A £3,200 invoice, 45 days overdue at 12.5% works out at £49.32 in statutory interest, plus the £70 fixed fee. That's £119.32 on top of the original bill. The customer who was going to pay you in week ten now has a reason to pay you in week five.
Late payment notice and Letter Before Action
The Letter Before Action is the line in the sand. Once you send it, you have done what the court expects of you. If the customer still does not pay within the period you set (14 days is standard), you can issue a claim through Money Claim Online for any sum up to £10,000.
Courts under the Civil Procedure Rules expect to see a record of earlier, lighter contact. If the Letter Before Action is your first ever communication about the unpaid invoice, you can be penalised on costs even if you win.
Our template includes the full LBA wording with placeholders. The structure is fixed: invoice details, amount due, interest and fees breakdown, work completed reference, attempts at earlier resolution, final 14 day deadline, and a clear note that court proceedings will follow if no payment is received.
What goes in the Letter Before Action
- Your business name, address and contact details
- The customer name and the address the works were carried out at
- Original invoice number, date and amount
- Date the invoice became overdue
- Statutory interest accrued (with the calculation shown)
- Fixed compensation claimed under the Act
- Reasonable recovery costs, itemised
- A 14 day deadline for payment in full
- A clear statement that proceedings will be issued in the county court if payment is not received
AI fraud checks and smart payment reminders
This is where the template shifts from paperwork into a system. The wording above is what stands up in court. Modern accounting tools and AI now do the chasing on your behalf so the wording is in front of the customer at the exact right moment.
1. AI-driven fraud and credit checks before you accept the job
The biggest mistake we made in the early Elite days was taking on commercial work for a company without doing thirty seconds of due diligence. A quick Companies House check on the customer name, a look at any County Court Judgments against them, and an AI-driven credit score now takes about a minute. Companies House is free. Most modern CRM tools (Xero, QuickBooks, ServiceM8) plug into Experian or Equifax B2B checks for under £5 a report. Spend the five quid before you start a £6,000 job for a builder you've never worked with.
2. Smart payment reminders inside your accounting software
Xero, QuickBooks and Sage all now do automated, branded reminder emails. Set them to fire on day 3, day 7 and day 14 after due date with the wording from the template above. The customer never feels chased because there's no awkward phone call, just a calm reminder with the invoice attached and a one click pay link.
3. AI-written follow ups, in your tone
The newer add ons (and the workflow you can build inside Make.com) can draft personalised follow up emails that match your writing style. The customer who told you to "just pop in next time you're nearby" gets a different note to the commercial property manager who pays in 60 days. Same result, less time, fewer "did you get my last email" conversations.
In Xero or QuickBooks, switch on automated invoice reminders. Set them to fire 3 days before due date (polite nudge), 1 day after due date (friendly reminder) and 14 days after due date (firm notice). Paste the template wording into each. From here, the software does the work. You handle the LBA stage only on the small minority of customers who genuinely won't pay.
How to use the template in your day to day
It is not enough to download a template, save it to Google Drive and forget about it. The whole point is that it sits inside your workflow so that every quote and every invoice it goes out with the right terms attached.
- Quote stage: Paste the Section 1 terms onto the back of every quote you send. Customers see them before they sign anything.
- Invoice stage: Add a single line to the footer of every invoice referencing your published terms. "Subject to our standard payment terms, available on request."
- Day 3 before due: Friendly automated nudge from your accounting software.
- Day 1 overdue: Automated reminder, same software, friendlier tone.
- Day 14 overdue: Firm reminder. Statutory interest now starts accruing. Mention it.
- Day 28 overdue: Letter Before Action by recorded delivery and email.
- Day 42 overdue: County court claim via Money Claim Online if no resolution.
Most invoices never make it past day 14. The customer pays, the system resets, the relationship stays clean. The handful that do drag on are exactly the kind of customers a written, dated paper trail will save you on.
If you also work with consumers under the Consumer Rights Act, swap the statutory interest clause for a contractual late fee (commonly 4% over base, stated in the terms). Everything else stays the same.
For more on getting your job pack right end to end, take a look at our VAT-ready invoice template and the job report form template. The three together make a complete paper trail from quote to completion.
What tradespeople are saying
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Frequently asked questions
For domestic work, payment on completion is still the cleanest. For larger or commercial jobs, a deposit of 25 to 50% on acceptance, stage payments on signed completion sheets, and a final invoice due within 7 to 14 days. Whatever you choose, write it down and put it on the back of every quote.
The Late Payment of Commercial Debts Act only applies to B2B and public sector work. For domestic customers you charge a contractual late fee instead, which must be agreed in writing before the job starts. A common rate is 4% over the Bank of England base rate, but you must state it in your terms.
Yes. The Civil Procedure Rules require a Letter Before Action that gives the debtor a final, written opportunity to pay before you issue a court claim. If you skip this step the judge can penalise you on costs, even if you win the case.
Simple, not compound. The rate is the Bank of England base rate plus 8%, fixed in six-month blocks. With the base rate at 4.5% in early 2026, that's 12.5% per year. On a £3,200 invoice 45 days late, that's about £49.32, plus the £70 fixed fee. You can claim both.
The government announced the toughest crackdown on late payment in 25 years in 2025, including a hard 60-day maximum payment term between businesses and new fining powers for the Small Business Commissioner. The statutory interest and fixed compensation framework still applies in the meantime. The template covers both.
Take card on the day. The plumbers and electricians I know who never chase a single invoice all take card on completion. A handheld reader from Stripe or your accounting software clears the money inside two working days. Then your written terms are there for the few jobs that genuinely need stage billing.
My verdict
This template is not really about the Letter Before Action. It's about the day one paperwork that means you almost never have to send one. Bolt the payment terms onto every quote, switch on the automated reminders, take card on completion where you can, and you'll get rid of 90% of the chasing inside a quarter. The court wording is there for the last 10% of customers who would always have been the awkward ones. Either way, you stop carrying their cash flow problem on your back.
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