Invoice payment terms: examples and tips for UK businesses

Published Tuesday 6 October 2026

Table of contents

• What are invoice payment terms?
• Common types of payment terms
• How to choose the right payment terms
• How to write payment terms on your invoices
• Payment terms examples you can use
• Your legal rights with payment terms in the UK
• How shorter payment terms affect when you get paid
• Get clients on the clock quickly
• Chase payments with confidence
• Creating an invoicing system that works
• Set clear payment terms with Xero invoicing
• FAQs on invoice payment terms

Key takeaways

• Invoice payment terms tell customers when and how to pay, so state your due date, payment methods, bank details and late payment policy
• Shorter terms of seven to 14 days bring your due date forward, which helps your cash flow even when customers pay late
• UK law lets you charge statutory interest of 8% plus the Bank of England base rate and claim fixed compensation on late business payments
• Send invoices as soon as the work is done and start reminders before the due date to keep payments on track

What are invoice payment terms?

Invoice payment terms are the conditions on an invoice that tell your customer when and how to pay you. Clear terms set expectations before the work starts, so there’s less room for dispute later.

Whether you’re a sole trader or a small business, every invoice should state:

• the due date, so customers know exactly when payment is expected
• the payment methods you accept, such as bank transfer or card
• your bank details, including your account number and sort code
• your late payment policy, including any interest or compensation you’ll claim
• the currency you expect for international work

The due date matters most, because it decides when money reaches your account.

The way you send invoices is changing too. E-invoicing becomes mandatory for all VAT invoices from 2029, and industry estimates in the government’s consultation suggest it cuts invoicing costs by 60–80%. With online payments, customers can receive and settle invoices more easily.

Common types of payment terms

Standard payment terms use short codes that tell customers when payment is due. These are the most common:

• Net 7, Net 14, Net 30 and Net 60, where the number is how many days the customer has from the invoice date
• Due on receipt, where payment is expected as soon as the invoice arrives
• Payment in advance (PIA), where the customer pays before you deliver goods or services
• Cash on delivery (COD), where payment is due when the goods arrive
• End of month (EOM), where payment is due by the last day of the month the invoice is dated
• 2/10 Net 30, where the customer gets a 2% discount for paying within 10 days, otherwise the full amount is due in 30 days

How to choose the right payment terms

The right payment terms balance your need for cash with what your customers can realistically manage. Weigh these factors before you set a default:

• How long you can cover costs such as materials and rent before payment arrives
• What’s standard in your industry, so your terms look fair to customers
• How large the client is, since bigger organisations may have fixed payment runs and approval steps
• Whether you know the client already, or need a credit check before offering credit to a new one
• Whether the project is big enough to justify a deposit or staged payments

Say you’re a freelance designer quoting a three-month website build for a new client. Ask for a 50% deposit up front, then set Net 14 on the final invoice, so money arrives while you work.

For a long-standing client who always pays on time, Net 30 may be a fair trade for keeping the relationship strong.

How to write payment terms on your invoices

Clear wording means customers can act on your invoice straight away. Put your terms near the total and include:

• a due date in plain words, such as “Payment due within 14 days of the invoice date”
• a list of accepted payment methods, with a payment link if you offer one
• your account number and sort code, double-checked before you send
• your late payment policy, stating the interest and compensation you’re entitled to claim
• the customer’s purchase order number, if they gave you one
• your VAT number and the VAT amount, if you’re VAT registered

Address the invoice to the person who approves payments, as well as your day-to-day contact. Then submit it through the client’s correct department or payment portal, since an invoice sent to the wrong place can sit unpaid.

A ready-made invoice template keeps these details in the same place every time.

Payment terms examples you can use

These payment terms examples cover common situations. Adapt the wording to suit your business.

Standard 14-day payment terms

This works as a default for most one-off jobs: “Payment is due within 14 days of the invoice date. Please pay by bank transfer to the account details shown above.”

Late payment clause

This clause puts customers on notice of your statutory rights.

“Invoices not paid within the agreed terms will incur statutory interest at 8% above the Bank of England base rate. Fixed compensation will also be claimed under the Late Payment of Commercial Debts (Interest) Act 1998.”

Deposit clause

Use a deposit for larger jobs or new clients: “A 50% deposit is required before work begins. The remaining balance is due within seven days of project completion.”

Early payment discount clause

This rewards prompt payers, though it reduces your margin on every invoice paid early: “Pay within seven days to receive a 2% discount. Otherwise, full payment is due within 30 days.”

Instalment clause

Staged payments spread a large invoice across a project.

“Payment is due in three instalments: 33% on order, 33% on delivery and 34% within 14 days of completion.”

Your legal rights with payment terms in the UK

UK law gives you firm rights when business customers pay late, and knowing them helps you set fair terms.

If you agree a payment date, it must usually be within 30 days for public authorities or 60 days for business transactions. You can agree longer than 60 days only if it’s fair to both businesses.

If no date is agreed, payment is late 30 days after the customer gets the invoice or you deliver, whichever is later. GOV.UK sets out what each side must do in its guidance on payment obligations.

Once a business customer is late, two statutory remedies apply. You can:

• charge statutory interest of 8% plus the Bank of England base rate
• claim fixed compensation of £40 for debts up to £999.99, £70 for £1,000–£9,999.99, or £100 for £10,000 or more

The Bank Rate is 3.75% as of September 2026, so statutory interest is currently 11.75% a year. Xero’s guide shows you how to calculate late payment interest on an overdue invoice.

More change is on the way. The Commercial Payments Bill, introduced to Parliament in May 2026, would cap payment terms at 60 days and make late payment interest mandatory.

It would also give the Small Business Commissioner new powers. The Bill isn’t law yet, and no start date is set.

How shorter payment terms affect when you get paid

According to Xero Small Business Insights, UK small businesses waited an average of 29.1 days to be paid after sending an invoice in the June 2026 quarter, and payments arrived 8.3 days late on average.

Late payment counts from the due date, so terms of seven to 14 days move the whole timeline earlier. Picture a customer who pays one week late. On Net 7, the money arrives about two weeks after you invoice, while on Net 30 you wait more than five weeks.

Signatories of the Fair Payment Code, which replaced the Prompt Payment Code, aim for clear payment targets. A Silver award requires paying 95% of all invoices within 60 days, including at least 95% of small business invoices within 30 days. Gold requires 95% of all invoices within 30 days.

Large invoices may still need longer terms, as long as they’re fair to both sides. If a customer pushes for a discount, propose shorter payment terms as the trade-off instead of lowering your price.

Get clients on the clock quickly

Your payment terms start counting once the customer has your invoice, so the sooner it lands, the better. To start the clock sooner:

• send the invoice as soon as the work is done
• reuse a standard template so each invoice is quick to prepare
• send invoices electronically instead of by post
• invoice on-site from your phone before you leave the job
• invoice each job as it finishes, instead of batching them at the end of the week
• ask the customer to confirm they’ve received the invoice

Learn how to send an invoice customers can process quickly. GOV.UK also covers the rules on invoicing and taking payment from customers.

Chase payments with confidence

A consistent follow-up routine keeps payments moving. Work through these steps in order:

1. Send a friendly reminder two to three days before the due date
2. Email an overdue notice as soon as the payment is late
3. Call the customer if your emails go unanswered
4. Send a formal letter citing the Late Payment of Commercial Debts (Interest) Act 1998, with a separate invoice for interest and compensation
5. Contact the Small Business Commissioner for guidance on dealing with unpaid invoices
6. Take the claim to the small claims court as a last resort

To cut the manual work, invoicing software can send automatic reminders, and some accountants will chase overdue clients on your behalf. Find wording ideas in the guide to chasing outstanding invoices.

Creating an invoicing system that works

The right invoicing system saves admin time and shows what you’re owed. Look for software that can:

• send payment reminders automatically
• show at a glance which invoices are paid and which are overdue
• let customers pay online by card or bank transfer
• produce cash flow reports that highlight payment patterns
• send e-invoices, ready for the 2029 mandate

Pair these features with the habits in this guide to reduce payment delays across your customer list.

Set clear payment terms with Xero invoicing

Clear terms and steady follow-up give you more control over when money arrives. With online invoicing in Xero, you can set default payment terms and schedule automatic reminders from one place.

Choose the plan that suits your business and get one month free.

FAQs on invoice payment terms

Here are answers to common questions about setting and enforcing invoice payment terms.

What are standard payment terms for invoices in the UK?

Net 14 and Net 30 are common choices, though no single legal standard exists. Put your terms in your quote or contract as well as on the invoice, so they’re agreed before work starts.

What does Net 30 mean?

Net 30 means the full invoice amount is due within 30 days of the invoice date. The days usually count as calendar days, so weekends and bank holidays are included.

What happens if I don’t set payment terms?

You can still claim statutory interest and compensation once the 30-day default passes. Stating your own terms gives you a shorter, clearer deadline and fewer grounds for dispute.

Can I charge interest on late payments?

Yes, on business-to-business debts, and the statutory right applies even if your invoice doesn’t mention it. The Late Payment Act covers commercial debts only, so sales to consumers depend on the terms in your contract.

Should I offer early payment discounts?

A discount such as 2/10 Net 30 can help when you need cash quickly, but it comes off your margin on every early payment. Try shorter standard terms first.

What should I do if a customer doesn’t pay?

Keep a record of every reminder and call as evidence in case the claim reaches court. Check the customer is still trading before paying court fees, since a judgment only helps if they can pay.