Government’s Small Business Plan cracks down on late payments

On 30th July 2025, government published its new Small Business Plan. Designed to support SMEs, it introduces what will be the toughest late payments laws in the G7. In this article, we look at what’s contained in the Small Business Plan and what it means for your business.

What is the UK government’s Small Business Plan?

The Small Business Plan has been billed as the “most comprehensive support package in a generation” for SMEs. Government points out that SMEs employ 3 in 5 of the UK workforce, turning over a combined £2.8 trillion. Given these figures, accelerating SME growth by a single percentage point annually could result in adding an extra £320 billion to the economy by 2030.

What’s in the Small Business Plan?

The Small Business Plan introduces a series of measures to help SMEs. These include:

• A crackdown on late payments
• An extra £4 billion in growth finance
• Plans to revitalise high streets
• A new Business Growth Service
• A boost to workforce skills, particularly digital skills

Let’s take a look at each of these in more detail.

A crackdown on late payments

Government claims that late payments to businesses cost the UK economy £11 billion annually and result in 38 firms closing daily.

To counter this, new legislation will reduce the maximum payment terms from 60 days to 45 days. There will also be mandatory interest payable on all late invoices.

At the same time, the Small Business Commissioner will have stronger powers to impose fines against larger firms who pay suppliers late. The Commissioner will also be allowed to undertake spot checks and enforce a 30-day invoice verification period. This is designed to help process disputes more quickly.

The Small Business Plan proposals also require that larger firms use audit committees at board level to scrutinise payment practices. This puts the onus on them to prove they’re supporting smaller suppliers fairly.

Another benefit to SMEs is that these new rules should free up time that they currently spend in chasing up invoices.

An extra £4 billion in growth finance

Government says it will release an additional £4 billion of financial support to encourage SMEs to start up and to grow. There’ll be £1 billion for new businesses in the form of 69,000 Start-Up Loans, along with mentoring support. Additionally, £3 billion extra will go to the British Business Bank to offer more loans via its ENABLE programme.

Plans to revitalise high streets

High Street Rental Auctions will help to fill vacant high street premises. In addition new hospitality zones and licensing reforms will boost both hospitality and the arts. There will be permanently lower business rates for the retail, hospitality and leisure sector.

A new Business Growth Service

The Small Business Plan says that a new Business Growth Service will deliver key support to SMEs. For example, it will offer advice on starting, running and growing a business, plus help for those wanting to sell overseas.

A boost to workforce skills

There will be efforts to improve workforce skills, particularly digital skills. This will help SMEs adapt to a rapidly-changing economy.

What does the Small Business Plan mean for you?

If you have a small or medium sized business, the new rules on late payments will be very welcome to you. Many firms are hard hit by late payments, with some even being forced to close. We hope this will now change.

The Small Business Plan also has various welcome support packages for new, growing and expanding businesses. While lower rates, more opportunities and extra funding are all helpful, don’t forget that THP can also advise you. We’ve worked with thousands of businesses, helping them to grow and thrive. If you become one of our clients, we can share our business accounting services expertise with you and be there for you as your business develops. Talk to a member of our team today!