---
title: "What to Do When a Company Won't Pay Your Invoice (UK)"
date: 2026-06-06T19:51:57.786+00:00
url: https://paymentcheck.co.uk/blog/debt-collection/what-to-do-when-a-company-wont-pay-your-invoice
description: "A company not paying your invoice? Follow this UK step-by-step guide: chase, add statutory interest, send a letter before action and claim via Money Claim Online."
category: "Debt Collection"
---

# What to Do When a Company Won't Pay Your Invoice (UK)

An unpaid invoice is more than an inconvenience. For small businesses and freelancers, a single late or unpaid payment can squeeze cash flow, delay your own bills and put real pressure on the work you do every day. The good news is that UK law is firmly on the side of the supplier who has done the work and issued a valid invoice.

This guide sets out a clear escalation path, from the first polite chase right through to a small claims action, so you can recover what you are owed without burning the relationship or wasting money on legal fees you do not need.

## Can a company legally refuse to pay an invoice?

A company cannot lawfully refuse to pay for goods or services it has genuinely received and agreed to buy. Once you have delivered the work and issued a valid invoice, a legally enforceable debt exists.

There are, however, legitimate reasons a payment might be withheld or disputed:

- The work or goods were not delivered, or were defective.
- The amount invoiced does not match what was agreed.
- The invoice is incorrect (wrong details, missing PO number, sent to the wrong entity).
- Payment terms have not yet fallen due.

If none of these apply and the company is simply not paying, you are dealing with a late or bad payer, not a genuine dispute. For more detail on the legal position, see our guide on whether it is illegal to not pay an invoice: [/blog/invoice-advice/is-it-illegal-to-not-pay-an-invoice](/blog/invoice-advice/is-it-illegal-to-not-pay-an-invoice).

## Step 1: Check the facts and your contract

Before you escalate, make sure your own paperwork is watertight. A debtor will look for any reason to delay, so close the gaps first.

- **Confirm the invoice is correct.** Check the company name, address, amount, dates, VAT and any purchase order reference.
- **Check your payment terms.** When was the invoice due? If you did not specify terms, the statutory default for business-to-business transactions is 30 days from delivery or from receipt of the invoice, whichever is later.
- **Gather your evidence.** Keep the signed contract or accepted quote, emails confirming the work, delivery notes and any sign-off. This is what wins a small claims case.
- **Check who you are actually billing.** Is it a limited company, a sole trader or a partnership? This affects who is liable and how you pursue the debt.

It is also worth checking how the company pays its other suppliers. A poor track record tells you whether you are dealing with an isolated oversight or a habitual late payer. You can [check the company's payment record](/company-search) on PaymentCheck using free UK government payment-practice data.

## Step 2: Chase the invoice and send a warning

Most overdue invoices are resolved with a firm, professional reminder. Start with a friendly email or phone call, then escalate in writing if there is no response.

A clear chasing sequence usually looks like this:

1. A polite reminder a few days after the due date.
2. A firmer follow-up at 7–14 days overdue.
3. A formal overdue notice that flags your intention to add interest and, if necessary, take further action.

Keep everything in writing and keep copies. Our step-by-step guide on [how to chase an unpaid invoice](/blog/debt-collection/how-to-chase-an-unpaid-invoice-uk) covers the wording and timing in detail.

If you want to send a professional, legally-worded overdue notice without drafting it yourself, you can [generate a free late payment notice](/#send-notice) using our notice tool.

### How long can a company withhold payment?

A company can only withhold payment until the agreed due date. After that, the debt is overdue and you are entitled to chase it and add statutory interest and compensation. There is no rule that lets a solvent business sit on a valid invoice indefinitely. If there is a genuine dispute, the company should raise it promptly and in writing, not simply go quiet.

## Step 3: Add statutory interest and compensation

This is the step most suppliers overlook, and it is one of your strongest tools. Under the **Late Payment of Commercial Debts (Interest) Act 1998**, businesses have a statutory right to charge interest and compensation on overdue commercial invoices, even if your contract says nothing about it.

**Statutory interest** is charged at **8% plus the Bank of England base rate**. With the base rate currently at 3.75%, that means you can charge **11.75% per year** on the outstanding amount, calculated daily from the day after payment was due.

You can also add **fixed compensation** for the cost and inconvenience of chasing the debt, based on the size of the invoice:

| Invoice value | Fixed compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |

Adding interest and compensation does two things: it increases what you are owed, and it signals to the debtor that you know your rights and intend to enforce them. Often that alone prompts payment.

To work out the exact figure to add to your demand, use our free [late payment interest calculator](/free-late-invoice-calculator). It applies the current base rate and the correct compensation band automatically.

### Can I charge interest if it wasn't in my contract?

Yes. The right to statutory interest and compensation comes from the Late Payment of Commercial Debts (Interest) Act 1998 and applies to business-to-business transactions automatically. You do not need a late-payment clause in your contract to claim it, although a contract can set a different (commercially reasonable) rate if both parties agreed one.

## Step 4: Send a letter before action

If chasing and adding interest have not worked, the next step is a **letter before action** (also called a letter before claim). This is a formal final demand that warns the debtor you will start court proceedings if they do not pay within a set deadline, usually **14 days**.

Sending this letter is not just a threat, it is part of the **Pre-Action Protocol** that the courts expect you to follow before issuing a claim. Skipping it can count against you later.

Your letter before action should clearly state:

- Who you are and the debt owed (the original invoice plus interest and compensation).
- A breakdown of how the total is calculated.
- A firm deadline to pay (typically 14 days).
- That you will issue a county court claim if payment is not received.
- How they can pay or, if relevant, dispute the debt.

Send it by email and by post, and keep proof of delivery. A well-drafted letter before action settles a large share of disputes because it shows you are serious and ready to go to court.

## Step 5: Make a small claim, use mediation or a debt collector

If the deadline passes with no payment, you have three main routes. They are not mutually exclusive, but most suppliers start with one.

### Claiming through Money Claim Online (small claims)

For most unpaid invoices, the cheapest and simplest route is the small claims track via **Money Claim Online (MCOL)**, the government's online county court claim service. You can use it to claim debts up to £100,000 against a single party (£10,000 keeps you on the simpler small claims track).

The process is straightforward: you complete the online claim, pay a court fee based on the amount owed, and the court issues the claim to the debtor. If they do not respond, you can request a **default judgment**. A County Court Judgment (CCJ) is a serious matter for a company and frequently prompts payment, because an unpaid CCJ damages its credit profile.

Court fees can be added to your claim and recovered if you win.

### Should I use a debt collection agency?

A debt collection agency can be worth it when you do not have time to chase the debt yourself, or when previous demands have been ignored. Agencies typically work on a percentage of what they recover ("no win, no fee") or charge a flat fee. The trade-off is cost: you may lose a meaningful slice of the debt. For larger or stubborn debts, a reputable agency can be effective, especially before resorting to court.

### What about mediation?

The court will often offer free **mediation** through the Small Claims Mediation Service once a defence is filed. Mediation is quicker and cheaper than a hearing, keeps the relationship more intact, and resolves many cases without a judge. It is worth taking seriously, particularly if the debtor is raising a partial dispute rather than refusing outright.

## Step 6: Enforcing a judgment

Winning a CCJ is not the end if the company still does not pay. You can then enforce the judgment, for example by instructing **High Court Enforcement Officers** (for debts over £600), applying for a **third-party debt order** against the company's bank account, or seeking a **charging order** against company assets. Each has a cost, so weigh it against the size of the debt and the company's ability to pay.

## When should I write off an unpaid invoice?

Sometimes the realistic answer is to stop. Consider writing the debt off if:

- The company has become **insolvent or dissolved**, leaving little prospect of recovery.
- The cost of enforcement would exceed the amount owed.
- The debt is genuinely disputed and your evidence is weak.

A written-off bad debt can usually be reclaimed against your tax, and if you accounted for VAT on the invoice you may be able to claim **bad debt relief** once the debt is more than six months overdue. Speak to your accountant about the specifics.

Before you write anything off, check the company's status and payment history first. If it is trading normally and simply stalling, it is almost always worth pursuing.

## How long do I have to chase an unpaid invoice?

In England and Wales you generally have **six years** from the date the debt became due to start court action (the limitation period under the Limitation Act 1980). That is a long window, but the longer you wait, the harder recovery becomes and the more the company's finances can deteriorate, so act early.

## The bottom line

A company that will not pay a valid invoice is rarely entitled to refuse, and you have a clear, escalating set of tools to recover what you are owed: tidy paperwork, firm chasing, statutory interest and compensation, a letter before action and, if needed, a small claim through Money Claim Online.

Start by getting the facts straight, then escalate steadily. Most debts are paid long before a judge is ever involved.

**Next steps:**

- [Check the company's payment record](/company-search) before you decide how hard to push.
- [Calculate the interest and compensation](/free-late-invoice-calculator) you are owed.
- [Send a free late payment notice](/#send-notice) to start the formal process.