A business owes me money and won't pay. How do I recover a commercial debt?

Short answer

If a business owes you money on a commercial contract and has not paid after the due date, you are entitled to statutory interest at 8% above the Bank of England base rate and a fixed debt recovery cost — without needing to go to court first. If they still do not pay after a formal demand, you can issue a County Court claim or, for debts over £750, a statutory demand as a precursor to winding-up proceedings.

The Late Payment of Commercial Debts (Interest) Act 1998 applies automatically to business-to-business contracts for the supply of goods or services where the contract does not specify a different rate. It does not apply to consumer debts.

1 The rule

The Late Payment of Commercial Debts (Interest) Act 1998 implies a right to statutory interest and debt recovery costs into every qualifying business-to-business contract. The creditor does not need to sue to earn the interest — it accrues automatically from the day after the payment due date.

The statutory rate is currently 13.5% per year (8% above the Bank of England base rate of 5.5%). Fixed debt recovery costs are £40 for debts under £1,000, £70 for £1,000–£9,999, and £100 for debts of £10,000 or more. These costs do not require court proceedings — they are an automatic entitlement.

2 What you can do now

1. 1
   Calculate the full amount owed

   Add up: (a) the principal invoice amount; (b) statutory interest from the day after the payment due date (or day 31 after delivery/invoice, whichever applies); (c) the fixed debt recovery cost; and optionally (d) any contractual interest rate if higher than the statutory rate. Use LawTheGuide's interest calculator on the tools page to compute the current interest. Keep a running total — interest accrues daily until payment.

2. 2
   Send a formal letter before action

   Write to the debtor company stating: the contract and invoice details; the principal amount; the interest calculation (rate, period, daily amount); the fixed recovery cost; a demand for payment of the total within 14 days; and a warning that court proceedings will follow. Send by email and recorded post to the registered office address (check Companies House). The <a href="/guides/debt/letter-before-action" class="body-link">letter before action guide</a> covers the full drafting process.

3. 3
   Chase the payment with escalating steps

   If the letter produces no response, consider: (a) a telephone call to the credit controller or finance director; (b) a second written demand reducing the payment deadline to 7 days; (c) offering a payment plan if cashflow is the debtor's stated problem (this does not waive your interest rights). Document every contact — the court will consider whether you made reasonable efforts to resolve the dispute before issuing.

4. 4
   Issue a County Court claim or statutory demand

   For debts up to £100,000, issue via Money Claim Online at gov.uk/make-court-claim-for-money. For debts over £750 owed by a company that is clearly solvent but refusing to pay, a statutory demand under the Insolvency Act 1986 can be a powerful pressure tool — it gives the company 21 days to pay or dispute before you can petition for winding up. Statutory demands should only be used if the debt is genuinely undisputed; using them for a disputed debt is an abuse of process.

5. 5
   Enforce a judgment if obtained

   Once you have a County Court judgment, enforce it if unpaid after 30 days. Options: warrant of control (enforcement agents attending the debtor's premises), charging order over property the debtor owns, or third-party debt order freezing the debtor's bank account. For a limited company with assets, a charging order over its property is often the most effective route. The <a href="/guides/debt/county-court-money-claim" class="body-link">county court money claim guide</a> covers enforcement in detail.

3 When this does not apply

• The contract is with a consumer (individual), not another business — the Late Payment of Commercial Debts Act does not apply. Consumer debts are governed by the Consumer Credit Act 1974 and different rules apply.
• The debt is genuinely disputed — the debtor claims the goods or services were defective, or that no contract was formed. A disputed debt requires a full court hearing; statutory demands are not appropriate.
• The debt is more than six years old — it may be statute-barred under the Limitation Act 1980 and unenforceable through the courts.
• The debtor company is in administration or liquidation — you must file a proof of debt with the insolvency practitioner rather than pursuing through court.

4 Common questions