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A letter before action (LBA) is a formal written warning that legal action will follow if a debt is not paid, and it is the required final step before starting a county court claim in England and Wales.
This is general information to help you understand the process, not legal advice. Where it matters, it points you to the official source: gov.uk, the Ministry of Justice Pre-Action Protocol for Debt Claims, and the Late Payment of Commercial Debts (Interest) Act 1998. For a debt that is large, disputed, or complex, take advice from a solicitor.
It is the point where a chase becomes a legal step. Earlier reminders are about prompting payment. A letter before action is you putting the debtor on notice that the next move is a claim in the County Court, and giving them a last clear chance to settle or reply.
The courts in England and Wales expect both sides to try to resolve a dispute before anyone issues a claim. The letter before action is how you show you did that. It sets out the debt, the deadline, and the consequence in one place, in writing, so there is a record.
The general expectation comes from the Practice Direction on Pre-Action Conduct and Conduct, published by the Ministry of Justice. It says parties should exchange enough information to understand each other's position and try to settle before going to court. A judge can penalise a claimant who ignored that, usually on costs or interest, even where the claim itself succeeds.
Where the money is owed by an individual or a sole trader, there is a stricter rule: the Pre-Action Protocol for Debt Claims. It sets out exactly what your letter (there called a Letter of Claim) must include, and it requires you to give the debtor 30 days to respond before you start a claim. For debts between two limited companies the protocol does not apply, but the general pre-action conduct rules still do.
Use this checklist before you send. It covers what the Pre-Action Protocol for Debt Claims looks for and what a judge will expect to see if the matter reaches court.
What a letter before action must contain
The 14-day figure is the common practice for a straightforward commercial debt between two businesses. It is long enough to be reasonable and short enough to keep pressure on. The 30-day figure is not optional when your debtor is a person or a sole trader: the protocol sets it, and a court will expect you to have honoured it.
Whatever deadline you choose, count from the date on the letter, allow time for the post, and hold to it. A deadline you quietly extend twice teaches the debtor that the next one is soft too.
This template is written for a commercial debt and pre-wires the statutory interest wording under the Late Payment of Commercial Debts (Interest) Act 1998. It is a starting point, not a substitute for advice on a specific dispute. Work out the interest and compensation with the UK statutory interest calculator and enclose that figure.
[Your business name] [Your address] [Email] · [Phone][Date]
[Debtor name] [Debtor address]
Dear [Name],
LETTER BEFORE ACTION
Re: Outstanding invoice(s) [invoice number(s)]
Our records show that the following amount remains unpaid:
Invoice [number], dated [date]: [amount] Total now due: [amount]
Payment was due on [due date]. Despite our earlier reminders, we have not received payment or a response.
This is a formal letter before action. If we do not receive payment in full, or a proposal to settle, within [14 / 30] days of the date of this letter, we intend to issue a claim against you in the County Court without further notice.
As this is a commercial debt, we are entitled to claim interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998:
Statutory interest at 8% per year above the Bank of England base rate, calculated daily from the date the payment fell due. Fixed compensation of [£40 / £70 / £100], set by the size of the debt.
The interest and compensation due on this debt is set out in the enclosed calculation.
To avoid a court claim, please pay [total amount] to: [Bank name], sort code [xx-xx-xx], account [xxxxxxxx] Reference: [invoice number]
If you dispute this debt, or wish to propose a payment plan, please contact us in writing by [date] so we can try to resolve this without going to court.
Yours [sincerely / faithfully],
[Your name] [Your business name]
General information only. Adjust the wording to your situation, and take advice from a solicitor for a large or disputed debt.
That is the ceiling. The Act entitles a business owed money by another business to interest at 8% above the Bank of England base rate, and you should not claim more than that. The reference rate is set twice a year, so the base figure you use is fixed for a six-month period rather than moving day to day. Paidnice tracks the Bank of England base rate and indexes the interest automatically, which is the same mechanism we explain in how to auto-update the Bank of England interest rate.
On top of the interest, the Act allows fixed compensation for the cost of recovering the debt: £40 for a debt under £1,000, £70 for a debt of £1,000 up to £9,999.99, and £100 for a debt of £10,000 or more. It is one fixed sum per unpaid invoice.
Because the numbers depend on the invoice amount and the number of days late, do not guess them in the letter. Run them through the UK statutory interest calculator, enclose the figure, and the debtor sees the real cost of not paying. If you also charge your own late fees, the rules on what you can apply are in late payment fees for UK businesses.
Money Claim Online (MCOL) on gov.uk is the usual route for a straightforward money claim. You pay a court fee, which is scaled to the size of the debt and can often be added to the amount you are claiming back. The court then serves the claim on the debtor, who has a set period to pay, admit, or defend.
A letter before action often does the work on its own. For many debtors, the moment a demand names the County Court and encloses the interest figure, paying becomes cheaper and simpler than the alternative. That is the point of sending it properly rather than firing off a vague threat.
The two are often confused because they sit next to each other on the ladder. A final demand is the firmest step in your ordinary collections process: the last notice you send before you treat the debt as a legal matter. It might apply a late fee and set a short deadline, but it does not commit you to court.
The letter before action is the legal step that follows. It is more formal, it references the pre-action rules, and it states plainly that a claim will follow. If you want the wording for the step before this one, see our letter of demand template. In practice, a good final demand settles a lot of debts before an LBA is ever needed.
Here is the honest version. For a straightforward small-business debt, most cases never reach a letter before action. A firm, well-timed final notice with a late fee applied is enough, because the debtor would rather pay than let it grow. The LBA is the step you take when that ladder has run its course and the invoice is still unpaid.
What Paidnice does is run that ladder for you, consistently, so the final notice actually goes out on day X instead of whenever someone remembers. It applies your late fees and UK statutory interest, sends reminders by email and SMS, and routes politely to good customers while giving repeat late payers the full sequence. You can see how the sequence is built on the escalations page.
What Paidnice does not do is draft or send the legal letter or file the claim. That is a decision to take yourself, or with a solicitor, once the automated steps have failed. We are firm on the money and fair to the customer, and part of being fair is being clear about the line where software stops and a legal process begins.
A letter before action is a formal written notice that tells a debtor you will start court proceedings to recover a debt unless they pay or respond by a stated date. It is also called a letter before claim.
No single law makes it compulsory, but the courts in England and Wales expect you to send one before issuing a claim. For a debt owed by an individual or a sole trader, the Pre-Action Protocol for Debt Claims sets out what your letter must include.
Give at least 14 days for a business-to-business debt. Give 30 days where the debt is owed by an individual or a sole trader, because the Pre-Action Protocol for Debt Claims requires it.
Yes. On a commercial debt you can claim statutory interest at Bank of England base rate plus 8% per year, and fixed compensation of £40 to £100, under the Late Payment of Commercial Debts (Interest) Act 1998. You cannot claim more than base rate plus 8%.
A final demand is your own last warning before you escalate. A letter before action is the specific pre-court letter that tells the debtor a county court claim will follow if they do not pay.
If the deadline passes with no payment and no genuine response, your next step is to issue a claim through the Money Claim Online service or the County Court.
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