What do the 2026 late payment reforms change for subcontractors?
Nothing yet: they are only proposals, and the 60-day cap on payment terms is not expected before 2027.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
The proposals are in Late payment consultation: time to pay up, government response, published on 24 March 2026. Three of them matter to you. First, a maximum payment term of 60 days between businesses, with limited exemptions, starting no earlier than 2027. Second, a right to statutory interest at 8% above the Bank of England base rate in every commercial contract. Your main contractor would no longer be able to agree a different remedy for late payment instead. Third, a ban on cash retentions in construction contracts, with a further consultation before it is brought in. For construction contracts, the response says a separate measure will be taken forward, fitted to the existing Payment Notice rules. None of this is law yet. Until it is, the payment terms in your subcontract still decide when you are paid, and today's rules on interest still apply. So do not wait for the new rules. Read the payment terms in each subcontract before you sign it. Then chase every late payment with the interest you can claim now.
Example
Illustrative example. The scenario and figures are invented.
The facts
In late 2026 a subcontractor is offered a subcontract that pays 75 days after each application. The commercial manager has read that 60 days will soon be the maximum.
What happens
- The proposals are checked. The 60-day cap is not law, and is not expected before 2027.
- So the 75 days would bind the subcontractor if it signs as drafted.
- The subcontractor sets the 75 days against its wage bill and supplier terms, and asks in writing for 30 days before it signs.
- The main contractor agrees 45 days, and every final date for payment goes in the diary.
The payment term in days
| Item | Days |
|---|---|
| Offered in the draft subcontract | 75 |
| Proposed cap, not yet law | 60 |
| Agreed before signing | 45 |
The outcome
The subcontractor signs on 45 days under the rules that apply today, instead of relying on a cap that is not yet law.
To have each subcontract's payment terms read before you sign, under the rules that apply today, see our Late Payment Prevention service.
Sources
- Late payment consultation: time to pay up, government response (24 March 2026). Department for Business and Trade, GOV.UK.