What is a letter before action for unpaid invoices in England and Wales
What is a letter before action for unpaid invoices?
A Letter Before Action is a formal notice that tells a debtor you will start court proceedings if the overdue invoice is not paid by a clear deadline. It is sometimes called a letter before claim or a letter of demand. Courts in England and Wales expect parties to send such a letter and to follow the pre-action rules before issuing a claim. If you skip this step or do it poorly, you risk delay, cost sanctions, and a weaker negotiating position.
Why the letter before action matters
A well-drafted letter before action does three jobs at once. It sets out the legal basis for the debt in plain English. It gives a fair last chance to pay or to raise any genuine dispute. It creates a paper trail that shows the court you acted reasonably, which helps on costs and interest if you later sue.
Which pre-action rules apply to unpaid invoices
The rules depend on who owes the money. If the debtor is a company or a partnership, the general Practice Direction on Pre-Action Conduct applies. You should give a reasonable period to respond. For a straightforward business-to-business invoice, 14 days is typical. For more complex disputes, allow longer in proportion to the issues.
If the debtor is an individual or sole trader, the Pre-Action Protocol for Debt Claims applies. You must include the Information Sheet, Reply Form, and Standard Financial Statement, and you must allow at least 30 days for a response. If the debtor asks for documents or seeks debt advice, you should give additional time. You should not issue proceedings until the protocol steps are complete.
What a letter before action should contain
The letter should identify the parties with correct legal names and addresses. It should explain the contract or account that gives rise to the invoice and state the invoice numbers, issue dates, and due dates. It should set out the principal sum outstanding and any credits already applied. It should explain the legal basis for interest and compensation. For business-to-business debts, the Late Payment of Commercial Debts (Interest) Act 1998 usually applies unless your contract provides a substantial alternative remedy. Under that Act, statutory interest runs at 8% above the Bank of England base rate, a fixed-sum compensation of £40, £70, or £100 is added depending on the size of the debt, and reasonable recovery costs can also be claimed where the fixed sum does not cover your
actual costs. The letter should enclose the key documents you rely on, such as the contract terms, the invoices, a short statement of account, and any delivery notes or approvals.
The letter should propose sensible next steps. It should say how and where the debtor can pay. It should invite any specific dispute to be set out in writing by the deadline. It should confirm that you are open to mediation or a pragmatic payment plan where appropriate. It should state, in clear terms, that if payment or a substantive response is not received by the deadline, you will issue a claim without further notice and will seek interest, compensation, and your legal costs.
How long to give before taking the next step
You should give a deadline that matches the applicable protocol. Fourteen days is usually appropriate for a straightforward business-to-business invoice claim. Thirty days is the minimum for individuals and sole traders under the Debt Claims Protocol. You should count the period from deemed receipt, and you should build in a short allowance for post if you are serving by letter as well as email. You should avoid artificial or aggressive cut-offs that a court would view as unreasonable.
How to calculate statutory interest and the daily rate
You can calculate statutory interest for commercial debts using a simple method. Take the principal debt, apply the annual rate (the Bank of England base rate plus 8%), and divide by 365 to get a daily figure. Multiply that daily figure by the number of days since the invoice fell due. You should show the calculation in your letter so the debtor and, if necessary, the court can follow it.
What happens if the debtor does not pay or respond
If the deadline passes without payment or a proper response, you can issue a County Court money claim online using HMCTS’s portals. For most fixed-sum claims up to £25,000 the Online Civil Money Claims service is the default; larger specified claims up to £100,000 can be started using Money Claim Online. Claims started online are administered by the Civil National Business Centre (CNBC) in Northampton. Under OCMC, the defendant must respond by 4pm on the 28th day after the claim is issued (and the parties can agree an extension of up to 28 days in total). Under MCOL, the defendant has 14 days from the date of service to respond, or 28 days if an Acknowledgment of Service is filed. If there is no response, you can request default judgment. If a weak defence is filed, you can consider summary judgment. Otherwise, the claim will be allocated and proceed in the usual way.
Common mistakes that reduce leverage
You should avoid vague demands that do not identify the contract, the invoices, and the legal basis for interest. You should avoid unrealistic deadlines and threats that you do not intend to carry out. You should avoid sending only a single email without proof and then rushing to issue. You should avoid forgetting the Debt Claims Protocol when dealing with individuals or sole traders. You should avoid claiming Late Payment Act interest where a contract already provides a genuinely substantial remedy, because double recovery is not permitted.
Frequently asked questions
1. Do I always need to send a Letter Before Action?
You should send one in almost all cases, because the court expects parties to follow pre-action conduct. The only real exceptions are urgent injunctions and limitation deadlines where you risk a claim becoming time-barred.
2. Can I recover the cost of drafting the letter?
You can usually recover reasonable pre-action costs if you win and the claim is not on the small claims track. For commercial debts, you can also rely on the Late Payment Act for fixed-sum compensation and reasonable recovery costs beyond the fixed sum.
3. How long should I wait after sending the letter?
You should wait 14 days for a simple business debt and at least 30 days for an individual or sole trader under the Debt Claims Protocol, unless there is agreement to a different timetable.
4. Should I offer a payment plan?
You should consider one if cash flow rather than liability is the barrier, because staged payments can be secured with a consent order or personal guarantee and can often save time and cost.
5. What if the debtor raises a partial dispute?
You should ask for documents and a clear explanation, consider mediation, and still press for payment of any undisputed balance by an agreed date.
How Acumen Law can help
We act for SMEs in Brighton & Hove and across the South East. We draft compliant letters before action that include correct interest and compensation. We manage responses and negotiations. When needed, we issue and enforce swiftly. We offer clear fixed-fee options for pre-action work so you can budget with confidence.
Important Note
This guide is general information for England and Wales. It is not legal advice. Your facts and your contract terms will determine the best approach.
If you would like our team to review your unpaid invoices and send a compliant, persuasive letter before action, you can contact Acumen Law for a short initial discussion.
