A customer won't pay an invoice — what are my legal options?
By SuLe · Updated 27 May 2026
Start by chasing with a clear statement of account, then send a formal letter before claim, then issue a County Court money claim if it stays unpaid. For business debts you can add statutory interest at 8% above the Bank of England base rate, plus fixed compensation. Reserve insolvency threats for debts that are genuinely undisputed.
Key facts
- The escalation ladder runs: chase → letter before claim → County Court money claim → enforcement.
- Business creditors can claim statutory interest at 8% above the Bank of England base rate under the Late Payment of Commercial Debts (Interest) Act 1998.
- Fixed compensation is £40 for invoices under £1,000, £70 up to £10,000, and £100 above — plus reasonable recovery costs.
- Most business debts up to £10,000 go to the small claims track, where costs recovery is limited.
- A statutory demand or winding-up petition is only for an undisputed company debt of £750 or more.
What is the first thing I should do?
Chase properly and in writing before you reach for the law. Send a clear statement of the account showing the invoice, the due date and the amount outstanding, and ask for payment by a specific date.
Many late payments are administrative, not hostile — a lost invoice, a changed contact, a purchase-order mismatch. A firm but professional chase resolves a large share of them without cost.
Keep records of every chase. If the matter does escalate, a documented trail of reasonable requests strengthens your position and looks good to a court.
What is a letter before claim?
It is the formal written demand you must send before issuing court proceedings, under the Pre-Action Protocol for debt claims. It sets out exactly what is owed and why, encloses or references the invoice, and gives a clear deadline to pay or respond.
This is not just etiquette. Courts expect parties to try to resolve disputes before litigating, and skipping this step can affect the costs you recover even if you win.
The letter should also flag that you intend to claim statutory interest and compensation, and that you will issue a claim if the deadline passes. For many debtors, a properly worded letter before claim is the moment they finally pay.
How much extra can I claim in interest and costs?
For business-to-business debts, the Late Payment of Commercial Debts (Interest) Act 1998 gives you statutory interest at 8% above the Bank of England base rate — so check the current base rate to work out the total rate.
On top of interest, you can claim fixed compensation per unpaid invoice: £40 where the debt is under £1,000, £70 where it is £1,000 to £10,000, and £100 where it exceeds £10,000. You can also recover your reasonable costs of chasing the debt.
You are entitled to these by statute even if your contract is silent, provided the debt is a commercial one. They make late payment materially more expensive for the customer — which is often the point.
When should I go to court — and which track?
If the letter before claim deadline passes with no payment or genuine dispute, you can issue a County Court money claim, often online. Winning gives you a judgment (a CCJ) that you can then enforce.
The claim is allocated to a track by value and complexity. Most straightforward business debts up to £10,000 go to the small claims track, where the process is simpler but recoverable legal costs are limited — worth weighing before you instruct lawyers on a modest sum. Larger or more complex claims go to the fast or intermediate tracks.
One caution: a statutory demand or winding-up petition, available for company debts of £750 or more, is only appropriate for an undisputed debt. Aim insolvency pressure at a genuinely disputed invoice and it can rebound on you.
| Stage | What you do | Notes |
|---|---|---|
| Chase | Statement of account + payment deadline | Written, dated, kept on file |
| Letter before claim | Pre-Action Protocol demand | Courts expect this first |
| Add statutory sums | 8% over base interest + £40/£70/£100 fixed | B2B debts, by statute |
| County Court money claim | Issue claim, usually online | Small claims track ≤ £10,000 |
| Enforce the judgment | Bailiffs, charging orders, etc. | Only after you have a CCJ |
Worked example
Sam runs a two-person design studio and delivers a £6,000 brand project to a client who then goes quiet for two months. Sam first sends a clear statement and a payment deadline; nothing.
Sam then sends a Pre-Action Protocol letter before claim, adding statutory interest at 8% over base rate running from the due date and the £70 fixed compensation (the invoice sits in the £1,000–£10,000 band), plus reasonable recovery costs. The letter's specifics — and the prospect of a CCJ on the client's record — prompt payment within a fortnight. Because the debt was undisputed, Sam never needs the small claims track, but was ready to issue there given the £6,000 value.
Where founders go wrong
Jumping to a winding-up petition on a disputed debt
— insolvency threats are for undisputed debts only, and misusing them can be restrained and cost you.Not sending a letter before claim
— skipping the Pre-Action Protocol can dent your costs recovery even when you win.Forgetting the statutory interest and compensation
— you are entitled to them on B2B debts by law, so leaving them off the demand undersells your claim.Instructing expensive lawyers for a small claim
— on the small claims track, recoverable costs are limited, so weigh the spend against the sum.
Related questions
How much interest can I charge on a late invoice?
For business-to-business debts, the Late Payment of Commercial Debts (Interest) Act 1998 lets you claim statutory interest at 8% above the Bank of England base rate, plus fixed compensation of £40, £70 or £100 depending on the invoice size, plus reasonable recovery costs.
What is a letter before claim?
It's the formal written demand you send before going to court, following the Pre-Action Protocol. It sets out what's owed, why, and a deadline to pay, and warns that you'll issue a claim if they don't. Courts expect you to send one first.
Can I use a winding-up petition to make them pay?
Only for an undisputed debt. A statutory demand and winding-up petition (available for company debts of £750 or more) are insolvency tools, not debt-collection levers. Use them on a genuinely disputed invoice and it can backfire badly.
Which court track will my claim go to?
Most straightforward business debts up to £10,000 go to the small claims track, where costs recovery is limited. Larger claims go to the fast or intermediate tracks. The track affects how much of your legal costs you can recover if you win.
Chasing a debt yourself works until the customer disputes it or ignores a judgment — then the process, the interest calculation and the enforcement route all matter. A SuLe solicitor can send a letter before claim that lands, and advise whether court or negotiation recovers more, faster. Book a free consultation about your situation to get the debt moving.
Keep reading: How should I handle a legal letter or threat against my startup? · Can an investor back out after signing a term sheet? · What happens if we breach an investment warranty? · What should a UK employment contract include? · What should B2B SaaS terms of service include?
Primary sources: GOV.UK — Late commercial payments: charging interest and debt recovery · GOV.UK — Make a court claim for money
