Chasing Unpaid Invoices & Debt Collection for UK Trade Businesses

1. Prevention: credit control before the job starts

The best debt collection happens before you start work. A few habits cut bad debt dramatically.

• Written quote or contract every time. State the scope, price, payment terms, and what happens if payment is late. Courts rely heavily on written agreements — without one, disputes become your word against theirs.
• Take a deposit. 25–50% upfront for larger jobs is standard and entirely reasonable. For smaller jobs, a materials-only deposit still reduces your exposure and filters out time-wasters.
• Stage payments on long jobs. Never rely on a single end payment for jobs that run more than a week. Bill by phase — first fix, second fix, completion. Each stage is a smaller, easier-to-dispute amount.
• Credit check commercial clients. For B2B work, run a quick check before you start. Companies House is free — look at filed accounts and whether the company is overdue on filings. Experian and Creditsafe both offer free basic searches. A company already in financial difficulty is a bad client to take on.

2. Invoicing correctly from day one

Invoice immediately on completion — not a week later. Time gives clients room to raise disputes that didn't exist on the day you finished.

Every invoice must state your payment terms explicitly: “Payment due within 14 days” or “Payment due on receipt”. If your invoice says nothing, courts may default to a 30-day implied term under UK law — which means you lose two weeks before the clock even starts. Include your bank details, invoice number, and a clear description of the work done. If you're VAT-registered, your VAT number must appear on the invoice.

3. The escalating chase sequence

Don't jump straight to legal threats — it damages relationships and courts expect you to have tried to resolve things first. Use a stepped approach.

• Day 1 overdue — friendly reminder. A quick text or phone call: “Just checking invoice [number] arrived safely — it was due today. Let me know if there are any issues.” Keep it light. Most late payments at this stage are genuine oversights.
• Day 7 overdue — formal email. Attach the invoice again. “Our records show invoice [X] for £[Y] remains unpaid. Please confirm payment date by return.” Tone is professional, not aggressive.
• Day 14 overdue — overdue notice. Written letter or email: “This invoice is now 14 days overdue. If payment is not received within 7 days, we will add statutory interest under the Late Payment of Commercial Debts Act and pursue recovery through the courts.”
• Day 21+ — Letter Before Action (LBA). This is the formal final warning required before you can issue a court claim (see section 5).

4. The Late Payment of Commercial Debts Act

The Late Payment of Commercial Debts (Interest) Act 1998 gives you automatic rights when a B2B (business-to-business) invoice goes unpaid. It does not apply to domestic homeowners — for those clients, you need interest charges written into your original contract.

For B2B debts, you're entitled to:

• Statutory interest at 8% above the Bank of England base rate. With base rate around 4.5% in mid-2026, that's roughly 12.5% per year on the overdue amount.
• Fixed late payment compensation: £40 for debts up to £999; £70 for debts between £1,000 and £9,999; £100 for debts over £10,000. This is payable per invoice, automatically, from the day payment was due.
• Reasonable debt recovery costs on top of the above — for example, agency fees or solicitor costs if you had to instruct them.

Add these amounts to your LBA and any court claim. It also signals to the debtor that you know your rights, which often prompts payment.

5. Letter Before Action (LBA)

Before filing any court claim, you must send an LBA. Courts take a dim view of claimants who skip this step. Your LBA should include:

• The amount owed (original invoice total)
• Statutory interest accrued to date (calculated at 8% above base rate)
• Fixed compensation amount under the Late Payment Act (B2B only)
• A payment deadline — 14 days is standard
• A clear statement that court proceedings will follow if payment is not received

Send by email and recorded post. Keep copies of everything. If the debtor is a limited company, address the letter to the registered office (found on Companies House).

6. Small Claims Court: how it works

For debts under £10,000, use Money Claim Online (MCOL) at gov.uk. You don't need a solicitor — the process is designed to be accessible. Court fees are 4% of the claim value, with a minimum of £35. For a £3,000 debt, that's £120 — recoverable from the debtor if you win.

Once you file, the defendant has 14 days to respond. If they ignore it, you get judgment in default — an automatic win without a hearing. Most trade debtors who receive court papers either pay up immediately or fail to respond, giving you judgment by default. Actually going to a hearing is relatively rare for straightforward invoice disputes, especially where you have a signed quote and clear invoices.

7. Enforcing a judgment

Winning a judgment is one thing. Collecting the money is another. Once you have a County Court Judgment (CCJ) registered against the debtor, you have several enforcement options:

• Attachment of earnings — the court orders the debtor's employer to deduct payments directly from their wages (individuals only).
• Charging order — secures the debt against the debtor's property. When they sell or remortgage, you get paid. Slower, but effective for larger amounts.
• County Court bailiffs — can seize goods. Success rate is variable. For larger debts (over £600), consider transferring to the High Court and using High Court Enforcement Officers (HCEOs), who have wider powers and tend to act faster.
• Statutory demand — for debts over £750 owed by a limited company, a statutory demand that goes unpaid for 21 days gives you grounds to petition for winding up. Rarely needed for typical trade debts, but it is a powerful lever for larger commercial debts.

8. Debt collection agencies

If you've exhausted your own chase process and want to hand the debt off, a debt collection agency can pursue it for you in exchange for 15–25% of whatever they recover. You get less, but you get your time back. Look for agencies that are members of the Credit Services Association (CSA) — it means they operate under a code of practice.

Agencies work best on debts that are clearly owed but where the debtor is unresponsive to you personally. They won't work miracles on genuinely disputed debts or insolvent debtors.

9. Writing it off: when to cut your losses

Not every debt is worth pursuing. Court fees, your time, and the stress of the process all have a cost. For debts under £500 that are genuinely contested — where the client has raised some kind of dispute, however weak — writing it off and moving on is often the rational call.

If you do write a debt off, do it properly:

• Write it off in your accounts as a bad debt. This reduces your taxable profit for the year.
• VAT bad debt relief — if you're VAT-registered and you've already paid HMRC the VAT on that invoice, you can reclaim it back once the debt is more than 6 months overdue from the payment due date. Claim it on your next VAT return. This applies to both B2B and consumer debts. For a £1,200 invoice including 20% VAT, that's £200 back in your pocket.

Keep records of the original invoice, your chase attempts, and the decision to write it off. HMRC can ask for these if they query the bad debt relief claim.