Payment terms clause (UK): when and how you actually get paid
Also known as: payment clause, payment provisions, invoicing terms.
- Late Payment of Commercial Debts (Interest) Act 1998
Last reviewed 23 Jul 2026
A payment terms clause sets when, how and how much you get paid, and what happens if a client pays late. The key thing UK freelancers often miss is that a statutory backstop sits behind it. Even if the contract is silent or unfair on late payment, the Late Payment of Commercial Debts (Interest) Act 1998 gives you a right to interest and compensation.
So the clause is worth reading closely, but you are not entirely at its mercy if it is thin.
Key Takeaways
- The clause sets your payment amount, schedule, invoicing and what happens on late payment.
- For business-to-business debts, the Late Payment Act gives statutory interest at 8% above the Bank of England base rate if the contract is silent or unfair.
- It also gives fixed compensation of £40, £70 or £100 depending on the size of the debt, and treats payment as due 30 days after invoice if no date is agreed.
- A contract can set its own terms, but cannot remove the statutory right unless it offers a substantial remedy.
What does a payment terms clause do?
A payment terms clause sets out the money side of a service agreement. You find it under headings like "Fees", "Payment" or "Invoicing", and it is one of the first clauses worth reading in any freelance contract.
It normally covers:
- How much and how: the fee, whether it is fixed, hourly or by milestone, and how you invoice.
- When: the payment window, such as within 14 or 30 days of invoice.
- Late payment: what happens if the client pays late, including any interest.
Because getting paid interacts with how a contract can end and what happens when things go wrong, payment terms are worth reading next to the termination clause and any force majeure clause that might let a client suspend obligations.
What a payment terms clause means for you
For a freelancer, this clause is your cash flow. Read it for the payment window, the invoicing conditions, and anything that could delay or block payment. A short, clear window with a deposit or milestones is healthy. A long window with vague conditions is a cash-flow risk.
Two things to watch. First, "pay-when-paid" wording, where you only get paid once the client's own customer pays them, which pushes their risk onto you. Second, very long payment windows that stretch your finances.
Take a hypothetical. Your contract sets 60-day payment terms with a pay-when-paid clause, so a slow end client could leave you waiting months with no recourse. That is exactly the kind of term to flag and negotiate, and it is one of several we cover in our guide to payment terms in freelance contracts.
What does UK law give you on late payment?
More than most freelancers realise. For business-to-business debts, which covers freelancer-to-client work, the Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right, where the contract is silent or unfair, to:
- Interest at 8% above the Bank of England base rate on the overdue amount.
- Fixed compensation for the cost of chasing: £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99, and £100 for debts of £10,000 or more.
- A 30-day default: if no payment date is agreed, payment is due 30 days after the invoice or the delivery of the work, whichever is later.
A contract can set its own payment and interest terms. What it cannot do is simply remove this statutory right unless it provides what the law calls a "substantial remedy" for late payment. So a clause that leaves you with no meaningful remedy at all can be challenged rather than accepted as final.
Payment terms clause: a fair version vs an aggressive one
| A fair version | A red-flag version | |
|---|---|---|
| Payment window | 14 to 30 days from invoice | 60 to 90 days, or longer |
| Structure | A deposit or staged milestone payments | Everything due only on final completion |
| Late payment | Keeps or improves on the statutory interest | Tries to remove interest with no real remedy |
| Conditions | Clear triggers for invoicing | Pay-when-paid, so you carry the client's risk |
What to push back on before you sign
- Shorten the window. Ask for payment within 14 to 30 days rather than 60 or 90.
- Ask for a deposit or milestones. Staged payments reduce the amount you are ever exposed to.
- Keep the statutory interest. Push back on any attempt to remove your right to late-payment interest.
- Resist pay-when-paid. Your payment should not depend on whether the client's own customer has paid them.
If you are unsure whether a payment terms clause is standard or stacked against your cash flow, upload the service agreement to Ookulli and it will flag which terms are normal and which are aggressive, with each point traced back to the UK law behind it.
This page is general information about UK law, not legal advice. For a high-value or complex situation, speak to a qualified solicitor.
Frequently asked questions
What are standard payment terms for UK freelancers?
There is no single legal standard, but 14 to 30 days from invoice is common and reasonable. If your contract says nothing about when payment is due, the Late Payment of Commercial Debts (Interest) Act 1998 treats it as due 30 days after the invoice or delivery. Anything much longer than 30 days is worth negotiating.
Can I charge interest on a late invoice in the UK?
Yes. For business-to-business debts, which covers freelancer-to-client work, the Late Payment of Commercial Debts (Interest) Act 1998 gives you a statutory right to interest at 8% above the Bank of England base rate if the contract is silent or unfair, plus fixed compensation of £40, £70 or £100 depending on the size of the debt.
When is payment due if my contract does not say?
If no payment date is agreed, the Late Payment of Commercial Debts (Interest) Act 1998 makes payment due 30 days after you invoice or deliver the work, whichever is later. That is a backstop, not a target. It is still much better to agree a clear payment date in the contract so there is no argument.
Can a contract remove my right to late-payment interest?
Not easily. A contract can set its own payment and interest terms, but it cannot simply strip out the statutory right unless it provides what the law calls a substantial remedy for late payment. A clause that leaves you with no meaningful remedy for late payment can be challenged.