The Ultimate Guide to Debt Collection in the UK for Businesses (2026)

In this guide:

• 1. Understand the UK Legal Landscape (Including Post-Brexit Changes)
• 2. Start With Structured Amicable Debt Collection
• 3. Statutory Late Payment Interest and Compensation
• 4. Pre-Action Steps and New Debt Collection Laws UK Businesses Must Follow
• 5. Court Proceedings: Track Allocation and Fixed Recoverable Costs
• 6. Enforcing a UK Judgment
• 7. Statutory Demands and Insolvency Pressure
• 8. Retention of Title (RoT): Reclaiming Goods
• 9. Limitation Periods (Time Limits)
• 10. Typical Timeline and Cost Drivers
• 11. International Debt Collection UK: Cross-Border Recovery After Brexit
• 12. How a Debt Collection Agency in the UK Can Help
• 13. Frequently Asked Questions
• 14. References and Further Reading

Your company has shipped £50,000 of goods to a buyer in Manchester. The invoice is now 90 days overdue. Emails go unanswered and calls reach voicemail. You are confident the debt is valid, but pursuing it - especially from abroad - can feel like a maze of unfamiliar procedures and costs.

The good news: the UK provides strong creditor protections, but the process is structured and evidence‑driven. Most successful recoveries follow a clear escalation path: (1) disciplined amicable collection, (2) a robust pre‑action letter, (3) a court claim (often online), (4) enforcement, and (where appropriate) insolvency pressure. This guide covers how debt collection works in the UK for B2B commercial debts, written for both UK trading partners and international exporters.

At a Glance: What to Do When a UK Invoice Is Overdue 

• Confirm the contract terms, delivery/performance evidence, and the exact amount due (principal, VAT, credits).
• Send a written reminder and then a formal final demand with a clear deadline and payment details.
• Add statutory late payment interest and fixed compensation (where eligible) to increase leverage.
• If no payment, issue a well-structured Letter of Claim and follow the correct pre-action steps.
• Escalate to a court claim (often via online services) and seek default judgment if the debtor does not respond.
• Enforce the judgment quickly (HCEOs, third-party debt order, charging order, etc.).
• Use statutory demands/insolvency tools only for clearly undisputed debts and with professional advice.

1. Understand the UK Legal Landscape

The UK is not a single court system. England & Wales, Scotland, and Northern Ireland each have distinct civil procedures, time limits, and enforcement routes. In cross‑border B2B disputes, jurisdiction and governing law clauses in your contract (and any agreed dispute resolution method, such as arbitration) can be decisive.

This article concentrates on common commercial debt recovery routes and the new debt collection laws UK businesses and exporters should be aware of in 2026.

Important for international exporters: Since the end of the Brexit transition period, the UK is no longer party to the European Order for Payment (EOP), the European Enforcement Order (EEO), or the Brussels Recast Regulation. EU‑based creditors must now either issue full local proceedings within UK courts or navigate the common law framework to have a foreign judgment recognised—a significantly more complex, costly, and time‑consuming process. See Section 11 for full details.

Start With Structured Amicable Debt Collection

For many B2B debts, a professional and persistent amicable approach is the fastest and most cost-effective route. The aim is to secure payment (or a realistic payment plan) while preserving the commercial relationship—and building a clean evidence trail in case you need to litigate. Working with experienced debt collection agencies in the UK can significantly improve results at this stage.

Evidence Checklist (Build This From Day One)

• Signed contract/terms & conditions (including jurisdiction and governing law).
• Purchase order(s) and order confirmations.
• Proof of delivery or performance (POD, CMR, acceptance emails, service reports).
• Invoice(s), reminders, and account statements showing the balance.
• Any dispute communications (quality complaints, returns, credits, set-off claims).
• Your interest/compensation calculation (if claiming statutory late payment charges).

Payment Culture and Common Terms

Bank transfers (BACS/Faster Payments) are standard in UK B2B transactions. Payment terms commonly range from 30 to 60 days. Where the Late Payment regime applies, payments are generally considered late after 30 days for public authorities and after 60 days for business transactions unless a different term is expressly agreed and is not grossly unfair to the supplier.

2) Start With Structured Amicable Debt Collection

For many B2B debts, a professional and persistent amicable approach is the fastest and most cost-effective route. The aim is to secure payment (or a realistic payment plan) while preserving the commercial relationship—and building a clean evidence trail in case you need to litigate. Working with experienced debt collection agencies in the UK can significantly improve results at this stage.

Evidence Checklist (Build This From Day One)

• Signed contract/terms & conditions (including jurisdiction and governing law).
• Purchase order(s) and order confirmations.
• Proof of delivery or performance (POD, CMR, acceptance emails, service reports).
• Invoice(s), reminders, and account statements showing the balance.
• Any dispute communications (quality complaints, returns, credits, set-off claims).
• Your interest/compensation calculation (if claiming statutory late payment charges).

Payment Culture and Common Terms

Bank transfers (BACS/Faster Payments) are standard in UK B2B transactions. Payment terms commonly range from 30 to 60 days. Where the Late Payment regime applies, payments are generally considered late after 30 days for public authorities and after 60 days for business transactions unless a different term is expressly agreed and is not grossly unfair to the supplier.

3) Add Statutory Late Payment Interest and Compensation

If your debt is a qualifying commercial debt, UK law can give you additional leverage through statutory interest and fixed compensation. In many cases, simply showing that you will add statutory charges and escalate to court can unlock payment.

When the Late Payment Regime Applies

The Late Payment of Commercial Debts (Interest) Act 1998, as supplemented by the Late Payment of Commercial Debts Regulations 2013, generally applies to B2B and business-to-public-authority contracts for the supply of goods and services. There are exceptions, so always check the contract and the nature of the debt.

Key rule on payment terms: Under the 2013 Regulations, if an agreed payment date exceeds 60 days after delivery or invoicing in a B2B transaction, and this term is deemed “grossly unfair” to the supplier, statutory interest automatically begins to run from the end of that 60-day period—regardless of the contract. For public authorities, the cap is strictly 30 days.

Statutory Interest Rate (Worked Example)

Statutory late payment interest is set at 8% above the Bank of England base rate, accruing daily.

Example using a Bank Rate of 3.75% (as published by the Bank of England on 19 Feb 2026):

Statutory interest rate: 8% + 3.75% = 11.75% per annum.

On a £50,000 debt: £50,000 × 11.75% ÷ 365 = £16.10 per day (rounded).

Always recalculate using the current Bank Rate on the day you issue your demand or claim.

Fixed Compensation and Recovery Costs

In addition to interest, creditors may claim fixed compensation per unpaid invoice:

Critical nuance: Compensation applies per individual unpaid invoice, not per aggregate balance. Fifty unpaid £500 invoices = fifty × £40 = £2,000 in immediate penalties before interest. Where reasonable recovery costs exceed the fixed amount, additional costs may also be claimable—potentially covering third-party debt collection agency fees or legal counsel costs.

4) Pre-Action Steps and New Debt Collection Laws UK Businesses Must Follow

Courts expect parties to act reasonably, exchange information, and try to settle before issuing proceedings. Non-compliance can result in cost penalties, even if you win.

Which Pre-Action Rules Apply?

Important distinction under current debt collection laws in the UK: The formal Pre-Action Protocol for Debt Claims applies specifically to businesses claiming debts from individuals (including sole traders). It mandates a structured Letter of Claim, a standardised Information Sheet and Reply Form, and a minimum 30-day response window.

For B2B debts (limited company vs. limited company), this specific Protocol does not apply. Instead, the general Practice Direction – Pre-Action Conduct and Protocols governs. It requires information exchange and ADR exploration, but typically allows a much shorter “reasonable” response time—often as little as 14 days.

Strategic implication: B2B creditors can pursue a significantly more aggressive pre-action timeline against corporate debtors. However, courts retain broad discretion under CPR Part 44 to penalise parties who fail to engage constructively.

Letter of Claim: What to Include

• The amount owed (principal, VAT, credits) and how it is calculated.
• The contractual basis, due date, and what was supplied/delivered.
• Your statutory interest/compensation calculation (if applicable).
• Copies of key documents (invoice, contract/terms, POD/performance evidence).
• A clear payment deadline and bank details; propose settlement/payment plan options.
• A statement that you will issue proceedings and seek costs if payment is not made.

5) Court Proceedings: Track Allocation and Fixed Recoverable Costs

If amicable recovery fails, most commercial debt claims start in the County Court. Higher-value or complex matters can be managed in the High Court. Many straightforward claims can be issued online via Money Claim Online (MCOL).

Issuing a Claim and Default Judgment

After service, a defendant typically has 14 days to respond; if they acknowledge, up to 28 days to file a defence. If no defence is filed, you can apply for default judgment—potentially within four to six weeks.

Defended Claims: The Four-Track System (October 2023 Reform)

Since October 2023, the civil litigation system in England & Wales expanded from three tracks to four—the most significant structural reform in a decade. This also introduced Fixed Recoverable Costs (FRC) across a much wider range of claims.

The Strategic Impact of Fixed Recoverable Costs (FRC)

Critical for cost-benefit analysis: Under the FRC regime, recoverable costs are capped by a grid based on settlement stage and complexity band (1–4). Before October 2023, creditors could use the threat of uncapped costs as settlement leverage. The FRC expansion removes this for Fast and Intermediate Track claims. A creditor’s actual legal spend may exceed what can be recovered, even after total victory. Always conduct a rigorous cost-benefit analysis—and consider whether appointing a specialist debt collection agency in the UK may be more cost-effective than litigation.

Scotland and Northern Ireland

These jurisdictions have different courts and procedures. If the debtor is in Scotland or the contract specifies Scottish/NI jurisdiction, obtain local advice early—time limits, forms, and enforcement routes differ significantly.

6) Enforcing a UK Judgment

A judgment is only valuable if you convert it into payment. Enforcement strategy depends on what the debtor owns: cash, stock, receivables, property, or salary.

Common Enforcement Options

• High Court Enforcement Officers (HCEOs): For judgments over £600, transfer up via a Writ of Control. HCEOs are privately employed and incentivised by success—significantly faster than County Court bailiffs. Their fees are added to the debtor’s liability.
• Third-Party Debt Order: Freeze and seize funds held by a third party (typically a bank). Requires intelligence on the debtor’s banking relationships.
• Charging Order: Secures debt against property. Good long-term security but slow—may require a contested Order for Sale.
• Attachment of Earnings: For individuals only. Intercepts wages at source via employer.
• Order to Obtain Information: Compels the debtor to disclose assets and financial position under oath.

7) Statutory Demands and Insolvency Pressure (Use Carefully)

For genuinely undisputed debts, insolvency tools can create powerful commercial pressure. However, they must never be used as a substitute for litigating a disputed claim.

Statutory Demand Basics

A statutory demand requires payment within 21 days. If unpaid, it can support insolvency proceedings.

Key thresholds: £750+ for company winding-up (Insolvency Act 1986, s.123(1)(a)); £5,000+ for individual bankruptcy (s.268(1)(a)) in England & Wales. Always confirm current thresholds.

Winding-Up Petitions and Practical Impact

After 21 days unpaid, a statutory presumption of insolvency arises. Advertisement in the London Gazette can trigger banks to freeze accounts—because post-petition dispositions are void unless court-ordered.

Critical Warning: Disputed Debts

Courts are hostile to insolvency proceedings used as a debt collection tool for disputed debts. Per BNY Corporate Trustee Services Ltd v Eurosail [2013] UKSC 28, courts require a high evidence threshold. If the debt is genuinely disputed, the debtor can obtain an injunction—and the creditor typically pays indemnity costs.

8) Retention of Title (RoT): Reclaiming Goods

A Retention of Title clause (Romalpa clause, after the landmark 1976 case) lets a supplier retain legal ownership until paid. It can improve your insolvency position—but only with the right type of clause.

Practical RoT Requirements

• The RoT clause must be incorporated into the contract before delivery.
• Goods must be identifiable and not irreversibly mixed or processed.
• You need a practical tracing process (batch/serial numbers) to assert claims quickly.

The Registration Trap: Simple vs. Complex RoT Clauses

Critical distinction: A simple RoT clause (title to specific goods under a specific invoice) is generally enforceable without registration. But complex clauses require careful analysis:

• All-Monies Clause: Reserves title in all goods until all invoices across the entire account are settled.
• Proceeds of Sale Clause: Claims ownership over cash proceeds when the buyer resells goods.
• Mixed Goods Clause: Attempts to retain title when goods are merged into a manufactured product.

Warning: Under English law, complex clauses are frequently construed as floating charges requiring Companies House registration within 21 days (Companies Act 2006). Unregistered clauses are void against a liquidator—reducing the supplier to unsecured creditor status where recovery rates often approach zero. Seek specialist legal advice before relying on any complex RoT clause.

9) Limitation Periods (Time Limits)

Do not delay action. Limitation periods impose strict deadlines for bringing a claim, and the rules differ significantly between jurisdictions.

England & Wales: Limitation Act 1980

Most simple contract debts must be claimed within 6 years. Limitation is a procedural bar: if the debtor specifically pleads it, the claim cannot proceed. However, the underlying debt does not technically cease to exist.

Scotland: Prescription and Limitation (Scotland) Act 1973

Scotland applies a shorter 5-year prescriptive period. Crucially, negative prescription wholly extinguishes the obligation. The debt ceases to exist—court proceedings cannot revive it, even if the debtor fails to raise the defence.

2025 Scottish Prescription Reform (Prescription (Scotland) Act 2018)

Brought fully into force on 28 February 2025, this reformed the “discoverability” test. The five-year period now only starts when the creditor is actually aware (or ought reasonably to be aware) that loss occurred, that it was caused by a person, and the identity of that person. For creditors with old or complex debts in 2026, this may provide a crucial lifeline.

10) Typical Timeline and Cost Drivers

Actual timings vary by court workload, debtor response, and complexity. Use this as a planning guide for steps in legal debt collection in the UK:

11) International Debt Collection UK: Cross-Border Recovery After Brexit

If you are an international creditor—particularly an EU-based exporter—pursuing a UK debtor, the post-Brexit reality has fundamentally changed the landscape for foreign debt collection in the UK.

What Changed After Brexit

• The UK is no longer party to the EOP, EEO, or Brussels Recast Regulation.
• EU exporters cannot obtain a home-jurisdiction judgment and seamlessly enforce it in the UK.
• You must either issue full local UK proceedings or pursue common law recognition of a foreign judgment—a complex, costly process.
• Cross-border enforcement timelines have increased from months to potentially years with substantially higher legal costs.

Practical Advice for International Exporters

• Factor post-Brexit enforcement friction into credit risk assessments and pricing.
• Review jurisdiction and governing law clauses in contracts—the right clause determines whether you litigate at home or in the UK.
• Consider appointing a UK-based debt collection agency at the earliest stage of default to run amicable collection and, if needed, coordinate local counsel.
• Atradius Collections has an established international debt collection UK network that can manage the entire process from your home jurisdiction.

12) How a Debt Collection Agency in the UK Can Help

Whether you are a UK-based business or an international exporter, working with a professional debt collection agency can accelerate recovery and reduce risk. Here is what experienced debt collection companies in the UK typically provide:

• Structured amicable recovery with escalating contact strategies and compliant demand letters.
• Credit intelligence and debtor tracing to assess viability before committing to legal action.
• Coordination with local solicitors and barristers for court proceedings and enforcement.
• Cross-border expertise, handling post-Brexit procedural complexities for foreign creditors.
• Transparent reporting and no-recovery, no-fee structures (depending on provider).

Atradius Collections operates in 96 countries and maintains an expert UK team that combines amicable recovery, legal coordination, and insolvency advisory under one roof. Whether your debt is £5,000 or £5,000,000, we can design a recovery strategy that balances cost, speed, and commercial considerations.

Frequently Asked Questions

What is the time limit for collecting a debt in the UK?

In England & Wales, most contract debts must be pursued within 6 years (Limitation Act 1980). Scotland applies a shorter 5-year prescriptive period that wholly extinguishes the obligation. Following the 2025 reforms under the Prescription (Scotland) Act 2018, the Scottish period now only begins when the creditor is aware of the loss, its cause, and the responsible party.

How long does UK debt recovery take?

An undefended claim can reach default judgment within four to six weeks. Defended claims often take months and can extend beyond a year depending on track allocation and court timetables.

Can I pursue a UK debtor without travelling to the UK?

Often yes. Many claims can be started online. However, since Brexit, EU enforcement mechanisms (EOP, EEO) no longer apply. Overseas creditors benefit from using a UK-based debt collection agency or representative for correspondence, enforcement logistics, and navigating the common law recognition framework.

Can I charge statutory interest and fees on a commercial debt?

If your claim is a qualifying commercial debt, you may add statutory interest (8% above the Bank Rate, currently 11.75% p.a.) plus fixed compensation per invoice (£40/£70/£100 depending on amount) and, in some cases, additional reasonable recovery costs.

When should I use a statutory demand instead of court proceedings?

Only for genuinely undisputed debts where you are prepared to follow through with insolvency proceedings. Courts penalise misuse—potentially ordering indemnity costs against creditors who weaponise insolvency tools for disputed claims.

What if the debtor becomes insolvent before I collect?

Submit a proof of debt to the insolvency practitioner. Unsecured creditor recoveries can be very limited (often near zero). A properly drafted simple RoT clause or secured claim can significantly improve outcomes. Complex RoT clauses may require Companies House registration to be enforceable.

Are complex RoT clauses (all-monies, proceeds of sale) enforceable?

Not always. Under English law, complex RoT clauses are frequently construed as floating charges requiring registration at Companies House within 21 days (Companies Act 2006). An unregistered clause is void against a liquidator. Always seek specialist legal advice on your specific clause before relying on it.

How does debt collection work in the UK for foreign companies?

Foreign companies can pursue UK debtors through the same court system. However, post-Brexit, EU-based creditors can no longer use streamlined enforcement mechanisms. The typical approach is to appoint a UK-based debt collection agency or solicitor, attempt amicable recovery, and escalate to local proceedings if necessary. Jurisdiction clauses in your contract are critical.

References and Further Reading

• GOV.UK – Late commercial payments: charging interest and debt recovery.
• Bank of England – Bank Rate (current rate for statutory interest calculations).
• GOV.UK – Make a money claim online (MCOL guidance).
• Ministry of Justice – Pre-Action Protocol for Debt Claims (scope and requirements).
• Ministry of Justice – Practice Direction: Pre-Action Conduct and Protocols (B2B claims).
• Ministry of Justice – CPR Part 26 (Case Management) and Part 28 (Fast Track and Intermediate Track).
• Ministry of Justice – Fixed Recoverable Costs public notice (October 2023 expansion).
• Legislation.gov.uk – Late Payment of Commercial Debts (Interest) Act 1998.
• Legislation.gov.uk – Limitation Act 1980.
• Legislation.gov.uk – Prescription and Limitation (Scotland) Act 1973.
• Legislation.gov.uk – Prescription (Scotland) Act 2018.
• Legislation.gov.uk – Insolvency Act 1986.
• Legislation.gov.uk – Companies Act 2006, Part 25 (registration of charges).
• BNY Corporate Trustee Services Ltd v Eurosail [2013] UKSC 28 (insolvency tests).
• Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] (retention of title).
• David T Morrison & Co Ltd v ICL Plastics Ltd [2014] UKSC 48 (Scottish prescription).