UK Business News Round-Up: Key Updates on Late Payments, Tax Changes, & SME Opportunities

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Welcome to our latest business news round-up. These updates are intended to keep you informed and support your planning with confidence.

If you would like to discuss how these developments may affect your business, please contact us. We are here to provide expert guidance and support.

Table of Contents

Government Responds to Late Payments Consultation

The government has published its response to the late payments consultation (July–October last year), outlining new measures to tackle a long-standing issue for UK businesses.

Late payments are estimated to cost the UK economy £11 billion each year, and many businesses continue to struggle with cash flow.

Here’s what you need to know:

1. Stronger Powers for the Small Business Commissioner

The Small Business Commissioner will be given new authority to:

Investigate businesses suspected of poor payment practices or inaccurate reporting.
Resolve payment disputes outside of the court process.
Issue fines, including significant penalties for large companies that persistently pay late or fail to comply with regulations.

These changes aim to hold businesses more accountable and improve payment behaviour across the supply chain.

2. Maximum Payment Terms & Mandatory Interest

60-day maximum payment terms will be introduced (with limited exceptions).
All commercial contracts must include a right to statutory interest at 8% above the Bank of England base rate.

This is designed to protect smaller businesses and encourage timely payments.

3. Deadline for Disputing Invoices

A statutory time limit will be introduced for raising invoice disputes.
Compensation may be required where deadlines are not met.

Clear deadlines will help reduce delays caused by prolonged or unfair disputes.

4. Greater Scrutiny of Payment Practices

Large companies that consistently pay late must publish explanations.
Boards or audit committees will need to outline why performance is poor and what actions are being taken to improve it.

Increased transparency puts pressure on businesses to improve payment performance.

5. Ban on Construction Retention Payments

The practice of withholding retention payments under construction contracts will be banned.

This will improve cash flow and certainty for businesses operating in the construction sector.

What Happens Next?

The government has confirmed that it intends to legislate these changes as soon as Parliamentary time allows.

In the meantime, take a look at our accompanying article with three practical tips to reduce late payments and improve your cash flow.

Struggling with late payments or cash flow?
Now is a good time to review your processes and protections. Book a free consultation with us today, and we’ll help you put practical strategies in place to safeguard your business.

Free accounting consultation for business owners

Three Practical Tips to Deal with Late Payments

If you run a small business, you will know that late payments can quickly move from a minor irritation to a serious cash flow problem.

While new legislation is expected following the government’s recent consultation, there are practical steps you can take right now to improve your payment cycle.

Here are three simple but effective strategies:

1. Make It Easy and Obvious for Customers to Pay

Late payments are not always intentional; they are often caused by confusion or missing information.

Quick wins to improve payment speed:

Include your bank details clearly on every invoice.
Add a prominent “Payment due by [date]” line.
Offer multiple payment methods where possible.
Send invoices immediately after completing the work.

The easier it is to pay, the faster you are likely to get paid.

2. Set Expectations Early and Reinforce Them

Clear communication reduces misunderstandings and delays.

Best practices:

Confirm price and payment terms in writing before starting work.
Repeat terms on quotes, invoices, and reminders.
Be upfront about deposits or staged payments.

For example:

“We take a 25% deposit to secure the work, with the balance due within 14 days of invoice.”

Setting expectations early helps create a professional and consistent payment culture.

3. Be Polite but Firm When Chasing

Chasing payments can feel uncomfortable, but delaying action often makes things worse. A structured routine removes emotion and improves consistency.

Suggested follow-up process:

Day 1: Send a friendly reminder, check the invoice hasn’t been overlooked.
Day 7: Follow up more firmly, attach the invoice and request a payment date.
Day 14: Inform the customer that late payment interest may apply under the Late Payment of Commercial Debts Act.

Most customers respond positively to clear, polite, and consistent communication.

In Conclusion

Managing late payments is about consistency, clarity, and having a system you stick to. Small changes can make a significant difference to your cash flow.

Need help improving your payment processes?
If you would like support setting up reminders in your accounting software or creating clear, effective payment terms, get in touch with us today. We can review your current approach and help you implement simple, practical improvements that work for your business.

Extracting Dividends from Your Company Ahead of the April 2026 Tax Rise

From 6 April 2026, dividend tax rates are increasing and may affect how you take company income.

New dividend tax rates:

Basic rate: 8.75% → 10.75%
Higher rate: 33.75% → 35.75%
Additional rate: remains at 39.35%

For shareholders of owner-managed businesses, dividends remain a tax-efficient way to extract profits, but now is the time to review your strategy.

1. Make Use of 2025/26 Tax Rates

With only a short time left before the tax year ends, timing is crucial.

Opportunity: Accelerate dividend payments before 6 April 2026.
Benefit: Take advantage of lower current tax rates.

Acting early could reduce your overall tax liability.

Not sure if this applies to you? Book a free consultation with us to review your options before the deadline.

2. Salary vs Dividends in 2026/27

A combination of salary and dividends is often the most tax-efficient approach.

Typical structure:

Take a salary up to £12,570 (personal allowance).
Draw the remaining income as dividends.
This approach will still be effective in 2026/27.
However, higher dividend tax rates may mean increasing dividend withdrawals to maintain the same net income.

Small adjustments to your mix can make a noticeable difference to your take-home income.

3. When a Higher Salary May Make Sense

In some cases, an increase in salary could be beneficial:

Where the Employment Allowance is available.
To offset the employer’s National Insurance contributions.

The right balance depends on your individual circumstances and business structure.

In Summary

With dividend tax rates rising, reviewing your profit extraction strategy before April 2026 is essential. Early planning can help you:

Reduce tax liabilities
Maintain your income levels.
Make the most of available allowances.

Need tailored advice?
If you would like help maximising income from your company in the most tax-efficient way, book a free consultation with us today. We’ll provide clear, personalised guidance based on your situation.

CMA Report to Bring New Obligations for Vet Practices

The Competition and Markets Authority (CMA) has concluded its investigation into the veterinary sector, setting out major reforms due to come into force later this year.

These legally binding measures aim to improve transparency for pet owners while increasing regulatory requirements for veterinary businesses.

Key Changes for Veterinary Practices

1. Greater Pricing Transparency

Practices must publish clear price lists for standard services, including consultations, procedures, diagnostics, prescriptions, and cremation options.
Pricing and ownership details will be available via the RCVS ‘Find a Vet’ service, with data shared on comparison platforms.

This will make it easier for clients to compare services and costs.

2. Clear Ownership Disclosure

Practices must clearly state whether they are independent or part of a group.
Ownership information must be displayed on-site and online.

3. Written Estimates & Itemised Billing

For treatments expected to exceed £500, practices must provide a written estimate in advance (excluding emergencies).
An itemised bill must be issued afterwards.

4. Prescription Transparency

Clients must be informed of their right to a written prescription.
Fees will be capped at:
- £21 for the first medicine
- £12.50 for additional medicines

This could help pet owners reduce medication costs.

5. Independent Clinical Advice

Practices must have policies ensuring vets can provide independent and impartial advice, free from commercial pressure.

6. Clear Pet Care Plans & Cremation Pricing

Pet care plans must show:
- Individual component pricing
- Total cost
- How savings are calculated
Cremation services must include clear pricing, including lower-cost communal options.

7. Improved Contracts & Complaints Handling

Out-of-hours providers cannot impose unreasonable notice periods.
Practices must have a clear complaints process and engage in mediation where needed.

Regulatory Reforms

The CMA supports changes to the Veterinary Services Act, making businesses (not just individuals) accountable to a regulator.
The Royal College of Veterinary Surgeons (RCVS) will oversee compliance.

Estimated costs:

Initial levy: £150–£250 per practice
Ongoing annual levy: £450–£550 per practice

Next Steps

The CMA has until 23 September 2026 to implement legally binding Orders.
Businesses will have 3 to 12 months to comply, depending on the measure.
Smaller practices will receive an additional three months to implement many changes.

What does this mean for your practice?
Now is the time to review your pricing structure, compliance processes, and client communication.

If you would like support preparing for these changes or understanding how they impact your business, book a free consultation with us today. We’ll help you stay compliant and plan with confidence.

Increased Opportunities in the Public Sector for Small Businesses

For the first time, government departments have set individual spending targets for small and medium-sized enterprises (SMEs).

By 2028, the government plans to spend £7.4 billion per year with SMEs, creating significant new opportunities for smaller businesses to secure public sector work.

What’s Changing?

The targets form part of the government’s Plan for Small Business, designed to:

Support business growth
Strengthen the UK economy.
Increase SME participation in public sector contracts.

Greater Accountability for Departments

To ensure progress is made:

Government departments must publish annual performance updates.
Underperforming departments will need to outline improvement plans.

This introduces a new level of transparency and accountability in public sector spending.

What This Means for Small Businesses

This initiative is expected to:

Open the door to more government contract opportunities.
Create consistent pipelines of work for SMEs
Help smaller businesses scale and grow sustainably.

Small Business Minister Blair McDougall commented:

“These new targets will ensure thousands of smaller businesses have greater opportunity to win lucrative government contracts and grow their businesses.”

How You Can Take Advantage

If you run a small or medium-sized business, now is the time to:

Review your readiness for public sector contracts.
Ensure your financials and compliance processes are in order.
Explore relevant tender opportunities.

Need support getting started?
Winning public sector work often requires strong financial records, clear pricing, and compliance with procurement rules.

If you would like help preparing your business to bid for government contracts, book a free consultation with us today. We can guide you through the process and help position your business for success.

FAQs

1. What are the new late payment rules in the UK?

The government plans to introduce stricter rules, including 60-day payment terms, mandatory interest on overdue invoices, and stronger enforcement powers for the Small Business Commissioner.

2. How will the 2026 dividend tax changes affect business owners?

From April 2026, dividend tax rates will increase, meaning business owners may need to review how they extract profits to maintain their income efficiently.

3. What is the NCSC Early Warning service?

It is a free service that provides UK businesses with alerts about potential cyber threats, vulnerabilities, and malicious activity to help prevent attacks.

4. What changes are coming for veterinary practices?

The CMA is introducing new rules requiring transparent pricing, clearer ownership disclosure, capped prescription fees, and improved customer communication.

5. How can SMEs benefit from new government spending targets?

The UK government plans to spend £7.4 billion annually with SMEs by 2028, creating more opportunities for smaller businesses to win public sector contracts.

6. How can businesses reduce late payments?

Businesses can improve payment speed by setting clear terms, sending invoices promptly, offering multiple payment methods, and following a consistent chase process.