The payment rules are set to change. Here's what it would mean for your firm.

Two changes matter most: a 60-day cap on payment terms, and a ban on retentions.

If you run a small construction or trades business, the way you get paid is set to change more than at any point in the last twenty-five years. The Commercial Payments Bill was introduced to Parliament in May 2026 and is working its way through the House of Lords.

Where it stands: the House of Lords finished committee stage on 21 July 2026, making 30 government amendments, and amended the Bill again at report stage on 15 September 2026. Third reading in the Lords is listed for 20 October 2026, after which the Bill goes to the House of Commons. Checked 18 September 2026.

The Bill is the Government's answer to a late-payment culture that, by the Government's own consultation figures, closes 38 UK businesses a day and costs the economy around £11 billion a year. Construction has led the insolvency tables for England and Wales for four years running, and small firms - the ones effectively lending money to larger ones for nothing - have carried most of the pain.

To be clear at the start: this is still a Bill, not yet law, and details could change before Royal Assent. What follows describes what it would do as drafted.

1. A 60-day cap on payment terms

Business-to-business payment terms would be capped at 60 days (30 for public bodies). The days of 90- and 120-day terms buried in the small print are ending. If your terms - or your main contractor's - are longer than 60 days, they'll need to change. For construction contracts the cap runs from the payment due date to the final date for payment - the two dates your contract already has to state.

2. Retentions are to be banned

The Bill would ban retention clauses in construction contracts, with a transition period of around two years and any sums still held at the end of it due by a fixed date. On the figures the Minister gave the House of Lords (Construction Leadership Council estimates), between £4 billion and £6 billion of retention money is held across the industry at any one time, earned by contractors and held by others. Around £223 million of it is lost every year when firms up the chain go bust.

The ban is good news long-term. Short-term, it creates a job that will not wait: money you're owed under the old rules needs finding, documenting and chasing now, before the transition complicates it. If you don't have a complete list of every retention you're owed, with amounts and release dates, then for many small contractors it is the most valuable piece of admin in the quarter.

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What to do about it - three moves:

1. 01A list of every retention you are owed, with release dates. Every completed job from the last few years: retention held, release dates, chased or not. For a small contractor with a few completed jobs behind it, that list can easily run to five figures.
2. 02Applications that carry what gets them certified. On-time, substantiated, variations captured. Under the new rules, clean paperwork isn't just good practice - it is what sets the sum the 60-day cap attaches to.
3. 03Payment terms reviewed against the 60-day cap. Your own terms and the ones you sign up to. Anything beyond 60 days is set to become non-compliant once the cap takes effect.

The caveat from the start bears repeating: details may change before the Bill becomes law. The direction of travel has cross-party support, but the detail is not settled until Royal Assent.