It comes after your reminders and final notice, as the last step before a court claim. It is also called a pre-action letter or final demand letter, and in the US a demand letter. In England and Wales, which this entry covers, court rules set what it contains and how long the debtor has to reply.
Which rules apply to a letter before action
The Pre-Action Protocol for Debt Claims applies when a business, including a sole trader or public body, claims a debt from an individual or sole trader. It does not cover debts between businesses unless the debtor is a sole trader. Between companies, the Practice Direction on Pre-Action Conduct and Protocols applies, unless another protocol covers the dispute.
| Who owes you | Rules | Time to reply |
|---|---|---|
| A company or other business that is not a sole trader | Practice Direction on Pre-Action Conduct | A reasonable time, 14 days in a straightforward case and up to 3 months in a very complex one |
| An individual or sole trader | Pre-Action Protocol for Debt Claims | 30 days from the date at the top of the letter |
What a letter before action must contain
For a company, the Practice Direction asks for concise details of the claim, which for a debt means these points.
- The basis of the claim. The contract or order, what you supplied and which invoices are unpaid.
- A summary of the facts. Due dates, the reminders you sent and any replies. A logged dunning letter sequence already holds this history.
- What you want and how you worked it out. The sum due, with statutory interest and any fixed late payment compensation shown separately.
- Key documents. Your terms, the unpaid invoices and proof of delivery.
- A deadline and the next step. The date to pay or reply by, an offer to discuss settlement or mediation and the claim you will issue if nothing happens.
Check every figure. A knowingly false statement in a pre-action letter can lead to proceedings for contempt of court, the Practice Direction warns.
A letter to an individual or sole trader should also say whether interest or charges are still being added and how to pay or discuss repayment. Enclose an up-to-date statement of account, the protocol's Information Sheet and Reply Form and a Financial Statement form. Date the letter at the top, post it that day or the next and email it too if you can.
Example. A wholesaler is owed £8,400 by a limited company on an invoice due on 31 July 2026, and its terms have no interest clause. Statutory interest runs from 1 August at 11.75% a year, 8% over the 3.75% Bank Rate in force on 30 June 2026. All figures are illustrative.
On 14 September, 45 days after the due date, the letter claims £8,400 × 11.75% ÷ 365 × 45 = £121.68 of interest and the £70 fixed sum, so £8,400 + £121.68 + £70 = £8,591.68, with interest still running at about £2.70 a day. It asks for payment or a reply within 14 days, by 28 September. A sole trader would get 30 days, until 14 October.
What happens after a letter before action
A company's reply should say whether it accepts the claim and, if not, what it disputes and whether it has a counterclaim. When an individual returns the Reply Form, wait at least 30 days from receiving it, or from sending documents they asked for if later, before you start proceedings, and longer if they are getting debt advice.
- The debtor offers a payment plan. Agree it in writing. Under the debt protocol, give an individual written reasons if you turn down their offer to pay in installments.
- The debtor disputes the debt. Exchange the documents behind each side's position and consider negotiation or mediation, since ignoring an invitation to ADR can lead to a costs order.
- No reply or no agreement. You can make a court claim for money in the county court, online if both you and the debtor have an address in England or Wales, or by post on form N1 if not. Give an individual who replied at least 14 days' notice first. If the debtor does not respond in time, you can ask the court for judgment.
Skipping the pre-action steps costs you even if you win. The court can order the party at fault to pay costs, including on the indemnity basis, cut a claimant's interest or make a defendant pay interest of up to 10% above base rate.
Sunbay runs the steps that come before a letter before action. It sends reminders by email and SMS from your ERP or accounting system, makes AI voice calls, issues interest notes and demand letters and keeps every reply, dispute and promise to pay next to the invoice. That record gives you the summary of facts the letter needs. See how Sunbay handles debt collection.
Frequently asked questions
Is a letter before action a legal requirement?
It is not a condition for starting a claim, but in England and Wales the court expects you to have followed the pre-action steps. If you skip them, it can order you to pay costs or cut your interest, even if you win.
What is the difference between a final demand and a letter before action?
A final demand is the last reminder in a collections sequence and can be short. A letter before action follows the pre-action rules, with the claim, the calculation, the deadline and the next step. One letter can do both.
How long does a debtor have to respond to a letter before action?
A company usually gets 14 days for a straightforward debt and up to 3 months in a very complex case. An individual or sole trader gets 30 days from the date of the letter. This entry is general information, not legal advice.
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