What should a letter before action for an unpaid invoice include?
Date, your business and the debtor's registered address, full amount owed, invoice numbers and dates, statutory late payment interest claimed (11.75% APR), fixed compensation under the 1998 Act (£40/£70/£100 by debt size), the deadline for payment (14 days standard, 30 days for larger commercial disputes), a clear statement that you will issue court proceedings if no payment is received, and your contact details. Required by the Pre-Action Conduct Practice Direction.
What this means for your business
A letter before action is the formal warning you send before starting court proceedings against a customer who has not paid an invoice. Under the Pre-Action Conduct Practice Direction, courts expect this step before a claim is issued, and judges can penalise you on costs if you skip it.
For a UK SME, it needs your business name and address, the debtor's registered address, the exact amount owed with invoice numbers and dates, the statutory interest you are claiming at 11.75% APR under the Late Payment of Commercial Debts (Interest) Act 1998, and the fixed compensation charge that applies by debt size, either £40, £70 or £100.
It must set a clear deadline, usually 14 days, or 30 days where the dispute involves a larger commercial debt, and state plainly that you will issue court proceedings if payment is not received. Include your contact details so the debtor can respond or arrange payment.
Key points
- The letter must state the total amount owed, including invoice numbers and dates for each unpaid invoice.
- Statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 is currently 11.75% APR and should be calculated and shown separately from the principal debt.
- Fixed compensation of £40, £70 or £100 applies depending on the size of the debt and can be added on top of interest.
- The standard deadline for payment is 14 days, extending to 30 days for larger or more complex commercial disputes.
- The letter must clearly warn that court proceedings will follow if payment is not made by the deadline, as required by the Pre-Action Conduct Practice Direction.
Common pitfalls
A common mistake is sending a vague chaser email instead of a properly formatted letter before action, which weakens your position if the matter reaches court. Businesses also forget to include the statutory interest and compensation figures, or miscalculate them, which can undermine the claim's credibility.
Sending the letter to the wrong registered address, especially for limited companies that have moved or changed structure, is another frequent issue. Failing to give a clear deadline, or giving too short a period, can also count against you under the Pre-Action Conduct Practice Direction if the case later goes to court.
Related questions
Do I have to send a letter before action before I can go to court?
Yes, the Pre-Action Conduct Practice Direction expects it as a standard step before issuing a claim in England and Wales. Skipping it can lead to cost penalties even if you win the case, so it is worth sending even for smaller debts.
Can I claim interest and compensation even if my invoice or contract does not mention it?
Yes, the Late Payment of Commercial Debts (Interest) Act 1998 implies a statutory right to claim interest and fixed compensation on qualifying commercial debts, regardless of whether your terms mention it. This only applies to business-to-business debts, not consumer transactions.
What happens if the debtor ignores the letter before action?
If the deadline passes with no payment or response, you can proceed to issue a claim through the County Court, typically via the Money Claim Online service for straightforward debts. Keep a copy of the letter and proof of postage or delivery, as you may need to show the court you followed the correct process.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind Market Invoice. He spent over three years as managing director of Penny, a UK invoice finance business, and his career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library.
Last reviewed: 24 July 2026