What can I do if a UK customer won't pay my invoice?
You have five options: (1) charge statutory late payment interest at 11.75% APR plus £40-£100 fixed compensation under the Late Payment of Commercial Debts Act 1998; (2) send a letter before action giving 14 days to pay; (3) file a statutory demand if the debt is over £750 (limited companies; £5,000 for individuals); (4) take the matter to small claims court for under £10,000; (5) sell the invoice to a spot factoring provider for immediate cash within 24 hours.
What this means for your business
When a UK customer refuses to pay an invoice, you have escalating options rather than a single fix. Start with the least confrontational: statutory interest and compensation under the Late Payment of Commercial Debts Act 1998 signal you are serious without damaging the relationship irreparably.
If that does not prompt payment, a letter before action formalises your intent to pursue the debt through the courts. For debts over £750, a statutory demand puts pressure on the customer because ignoring it can support a winding-up petition. Small claims court suits debts under £10,000 and does not require a solicitor.
If cash flow cannot wait for any of this, selling the invoice to a spot factoring provider converts it to cash quickly, though you lose a percentage as a fee. Which route you choose depends on the debt size, urgency, and whether you want to keep the customer.
Key points
- You can charge statutory late payment interest at 11.75% APR (Bank of England base rate plus 8%) plus fixed compensation of £40 to £100 under the Late Payment of Commercial Debts Act 1998.
- A letter before action giving 14 days to pay is a standard pre-court step that courts expect to see evidenced before you sue.
- A statutory demand can be filed for debts over £750 and, if unanswered within 21 days, can support a winding-up petition against a limited company.
- Small claims court handles disputes under £10,000 in England and Wales without needing a solicitor, though fees and time investment still apply.
- Spot factoring lets you sell a single unpaid invoice to a finance provider for cash within 24 hours, at the cost of a discount fee.
Common pitfalls
A common mistake is jumping straight to legal threats before checking the invoice terms actually reference statutory interest rights, which can weaken your position if challenged. Businesses also under-document the chase (calls, emails, reminders), leaving a thin paper trail if the dispute reaches court.
Filing a statutory demand on a genuinely disputed invoice, rather than an undisputed debt, can be struck out and cost you legal fees. And relying on spot factoring for a customer who never pays is a short-term fix, not a solution, since the finance provider will still expect recovery or recourse from you if the customer defaults.
Related questions
Do I have to charge statutory interest, or is it optional?
It is your right under the Late Payment of Commercial Debts Act 1998, not an obligation, so you can choose whether to enforce it. Many UK SMEs waive it for good customers they want to keep, reserving it for persistent late payers.
What happens if the customer disputes the invoice rather than simply not paying?
A genuine dispute changes your options significantly, as statutory demands and winding-up petitions are for undisputed debts and can be struck out if the customer shows a real defence. In this case, resolving the dispute directly or through mediation is usually faster than court action.
Is spot factoring worth it for a single unpaid invoice?
It can be, if you need the cash urgently and are willing to pay the discount fee, but most spot factoring providers still require the debtor to be creditworthy, so a customer already refusing to pay may not qualify. Check the provider's terms on recourse if the invoice remains unpaid.
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