How to deal with clients who will not pay in the UK

You are not alone in this

Getting stiffed on a job is one of the worst feelings in the trades. You have given up your time, bought materials, done quality work, and someone just will not pay. According to the Federation of Small Businesses, one in three small business owners has considered giving up entirely because of chronic late payment. This isn't just a minor inconvenience; it's a significant issue that affects cash flow and can jeopardise the entire business operation.

In 2022, late payments were estimated to cost UK small businesses £22.5 billion in lost revenue. This staggering figure underscores the severity of the problem. It's not just about the inconvenience of chasing payments, but also the ripple effects that can impact supplier relationships, business growth, and even personal stress levels. Many tradespeople find themselves in a frustrating cycle of work, invoice, and chase, with no guarantee of resolution.

But you have more power than you think. UK law is firmly on the side of the creditor, and recovering money you are owed is more straightforward than most people realise. The Late Payment of Commercial Debts (Interest) Act 1998 provides a legal framework to help you recover your dues, including statutory interest and compensation for the cost of chasing late payments.

Step 1: the reminder sequence (days 1-14)

Before you escalate, make sure you have actually chased properly. It sounds obvious, but plenty of unpaid invoices are down to disorganisation rather than dishonesty. The client forgot, lost the email, or their accounts person is on holiday. Invoices can also slip through the cracks if the client has a high turnover of staff or lacks a structured accounts payable process.

Send a structured reminder sequence: one on the due date, one at 7 days overdue, one at 14 days. Each should include the invoice number, amount, and how to pay. Keep records of every communication. Using accounting software can automate this process, ensuring consistency and professionalism in your follow-ups. This step is not just about reminding the client, but also gathering evidence of your attempts to communicate, which can be useful if the situation escalates.

Step 2: the phone call (day 14-21)

If emails have gone unanswered, pick up the phone. A direct conversation achieves more in two minutes than a week of emails. You will quickly find out if this is a "forgot to pay" situation or a "refusing to pay" situation. Often, hearing a human voice can prompt quicker action than an impersonal email.

If the client raises a dispute about the quality of work, address it head-on. Offer to inspect and rectify any genuine issues. Document everything in writing afterwards. This not only demonstrates your professionalism but also creates a paper trail that can protect you legally. If the client simply can't pay due to financial difficulties, consider negotiating a payment plan that suits both parties.

Step 3: letter before action (day 21-28)

This is the formal legal step before court proceedings. A letter before action puts the debtor on notice that you intend to take legal action. It's often a wake-up call for the debtor, showing that you are serious about collecting the debt.

Your letter must include:

• The amount owed (original invoice total)
• Statutory interest accrued under the Late Payment of Commercial Debts (Interest) Act 1998
• Fixed compensation (£40 for debts under £1,000, £70 for £1,000-£9,999, £100 for £10,000+)
• A deadline of 14 days to pay in full
• A statement that court proceedings will follow

Use our late payment calculator to work out the exact interest and compensation amounts. This calculator helps you provide precise figures, reinforcing your claim's legitimacy. Send the letter by recorded delivery and keep the proof of posting. About 70% of cases settle at this stage. It's a crucial step where many debtors pay up to avoid further legal involvement.

Step 4: small claims court (day 42+)

If 14 days pass with no response, file a claim through Money Claims Online. For debts up to £10,000, this goes through the small claims track. This step involves some costs, but it might be necessary to recover what's rightfully yours.

When submitting a claim, detail all interactions and efforts made to collect the debt. This information strengthens your case. It usually takes 3-6 months for the court to handle small claims, but timelines can vary based on the court's workload. The court system is designed to be accessible even to those without legal representation. You can represent yourself, which saves costs, but ensure you understand the process and prepare thoroughly.

You claim the court fee back from the debtor if you win. The defendant has 14 days to respond. If they do not, you get a default judgement. This means you win the case by default because the other party failed to respond. However, winning doesn't mean you immediately receive payment.

Step 5: enforcing the judgement

Winning in court does not automatically put money in your bank. If the debtor still does not pay after a CCJ (County Court Judgement), your options include:

• Warrant of control: Bailiffs collect goods. Fee: £77. This involves court-appointed bailiffs visiting the debtor's premises to seize goods that can be sold to cover the debt.
• Attachment of earnings: Payments deducted from wages. This is useful if the debtor is employed and can have a portion of their salary deducted to pay off the debt.
• Third party debt order: Freezes money in their bank account. This can be effective if you know the debtor has funds available in their bank account.
• Charging order: Secures the debt against their property. This is suitable if the debtor owns property and can be used to secure the debt against it, though it doesn't guarantee immediate payment.

Each enforcement method has its own procedures and costs, which you can initially cover but add to the debtor's bill if successful. It's a matter of choosing what fits best with your situation and the debtor's assets.

Alternative: mediation

For disputes where the relationship matters, the Small Claims Mediation Service offers free telephone mediation for claims under £10,000. Mediation has a 65% success rate and is much faster than waiting for a hearing. It allows both parties to discuss the issue in a less formal setting and often leads to a mutually agreeable settlement without the need for court intervention.

Mediation is particularly useful if you wish to maintain a professional relationship with the client. By resolving the issue amicably, you might secure future work with them. Always approach mediation with an open mind and a willingness to compromise where reasonable.

Protecting yourself for next time

The tradespeople who rarely get stiffed tend to do a few things consistently:

• Written quotes with clear payment terms before starting. Use our quote generator. This ensures both parties understand what is expected and eliminates misunderstandings about payment terms.
• Deposits on jobs over £500, collected before ordering materials. This reduces the risk of non-payment and covers initial expenses.
• Progress photos and signed completion forms for larger jobs. These provide evidence of work completed to the client's satisfaction, which can be vital if disputes arise.
• Credit checks on new commercial clients through Companies House. This helps identify potential risks before entering into an agreement, allowing you to make informed decisions.
• Detailed invoices with clear descriptions of work completed. This transparency helps avoid disputes over what was agreed and what was delivered.

By employing these preventive strategies, you can significantly reduce the likelihood of encountering non-payment issues. It's about creating an environment where both you and the client are clear about expectations from the outset.

Frequently asked questions

Can I add interest to an unpaid invoice from a residential customer?

The Late Payment Act only covers B2B transactions. For residential customers, you can only charge interest if it was included in your original terms and conditions. It's essential to be upfront about such terms when agreeing to the work, ensuring the customer is aware from the start.

How long do I have to chase an unpaid invoice?

The limitation period is 6 years from the date the debt became due. After 6 years, you lose the right to recover through the courts. It's advisable to act promptly and not let debts linger, as the longer you wait, the less likely it is you'll recover the full amount.

Will a CCJ affect the client's credit rating?

Yes. A County Court Judgement stays on someone's credit record for 6 years, unless they pay the full amount within one calendar month of the judgement date. This can significantly impact their ability to secure credit in the future, often motivating them to settle the debt promptly.

Can I recover my legal costs from small claims court?

On the small claims track, each party generally bears their own costs. You can recover the court fee and limited expenses but not solicitor fees. It's designed to be a low-cost way of resolving disputes, but this means you may need to absorb some costs yourself.

What if the client has gone into liquidation?

Register your claim with the appointed insolvency practitioner. Recovery rates for unsecured creditors average around 5p in the pound. Unfortunately, this means you might only recoup a small fraction of what's owed, so time is of the essence when pursuing payment from a struggling business.