What a statutory demand actually is
It is a formal written demand for payment of a debt, made under the Insolvency Act 1986. What gives it force is not the wording but the consequence: if the debt is not paid, secured or compounded within 21 days, the debtor is deemed unable to pay their debts, and that is the gateway to a bankruptcy petition or a winding-up petition.
That is why it works. A county court claim asks a court to decide whether the money is owed. A statutory demand skips that question entirely and goes straight to the debtor's solvency. For a debtor who can pay and simply has not, it changes the conversation immediately.
Individual or company? The route changes completely
Who owes you the money?
An individual, or a sole trader
Bankruptcy route
- Debt must be at least £5,000
- 21 days to pay, secure or compound
- Debtor may apply to SET ASIDE within 18 days of service
- Then: petition for bankruptcy
A limited company or LLP
Winding-up route
- Debt must be at least £750
- 21 days to pay, secure or compound
- No set-aside procedure, the company must seek an injunction
- Then: petition to wind up the company
The set-aside point is the one most guidance skips, and it matters to both sides. An individual who receives a demand can apply to the court to have it set aside, and they have only 18 days from service to do it, which is less than the 21 days they have to pay. A company has no equivalent route. If it wants to stop the demand it has to apply for an injunction restraining the creditor from presenting a petition, which is a more expensive and more urgent step.
When not to use one
This is the part that separates a statutory demand used well from one that costs you money. The procedure assumes the debt is not in dispute. Where it genuinely is, serving a demand is an abuse of process.
A statutory demand fits
- The debt is clear and undisputed
- An invoice acknowledged but unpaid
- A judgment already obtained and ignored
- The debtor can pay and is choosing not to
- Above the threshold — £5,000 or £750
Use something else
- The debtor disputes the sum or the quality of the work
- There is a plausible cross-claim or set-off
- The debt is below the threshold
- The debtor is genuinely insolvent and has no assets
- You want the money more than you want leverage
That last one is worth sitting with. A winding-up petition can destroy a company's banking and supply relationships within days of being advertised. If the business collapses, you join the queue of unsecured creditors and typically recover little. The threat is often worth far more than the execution.
The 21-day clock
Day 0
Demand served
Service matters. For an individual it should be personal service where reasonably practicable, A demand served badly is a demand set aside.
By day 18
Individual may apply to set aside
Only individuals, and the window is shorter than the payment window. A company has no equivalent and must seek an injunction instead.
Day 21
Compliance period expires
The debt must be paid, secured or compounded. Compounded means an agreement the creditor accepts in satisfaction, a payment plan you have actually agreed, not one they have proposed.
After day 21
Petition may be presented
Bankruptcy for an individual, winding up for a company. This is where the real cost begins — court fees, a deposit, and advertising in the Gazette.
What it costs
- Statutory demand against an individual
- £250
- Statutory demand against a company
- £350
- Letter before action first, if appropriate
- £75
- Responding to a set-aside application
- On quote
Fixed, including service
Fixed, including service
Plus 15% of sums recovered
Written estimate before I start
All figures include VAT. Court fees, the petition deposit and Gazette advertising are additional and only arise if you go on to petition.
Compared with issuing a claim, this is cheap — no court fee, no allocation, no directions. Compared with doing nothing it is decisive. What it is not is a substitute for thinking about whether the debt is disputed, because that decision is what determines whether the £250 buys you leverage or a costs order.
How I handle one
- 01Before anything
Check the debt is really undisputed
Correspondence, invoices, any complaint about the work. If there is a genuine dispute buried in the file, this is the wrong instrument and I will say so.
- 02Same day
Check the threshold and the entity
£5,000 or £750, and whether you are dealing with a company, an LLP or a sole trader. It changes the form, the route and the defences.
- 03Within two working days
Prepare and serve
Personal service on an individual where practicable; registered office for a company. Bad service is the most common reason a demand fails.
- 04Days 1–21
Handle the response
Payment, a proposal worth accepting, a set-aside application, or silence — each needs a different answer, and the 21 days move quickly.
Common questions
What is a statutory demand?
A formal written demand for payment made under the Insolvency Act 1986. If the debt is not paid, secured or compounded within 21 days, the debtor is treated as unable to pay their debts, which allows the creditor to petition for bankruptcy or winding up.
How much does the debt have to be?
At least £5,000 before you can present a bankruptcy petition against an individual, and at least £750 before you can present a winding-up petition against a company. Below those figures the demand cannot lead anywhere.
How long does the debtor have?
21 days from service to pay, secure or compound the debt. An individual who wants the demand set aside has a shorter window — 18 days from service to apply.
Can a company apply to set aside a statutory demand?
No. The set-aside procedure applies only to individuals. A company that wants to stop a demand must apply for an injunction restraining the creditor from presenting a winding-up petition, which is a more urgent and more expensive step.
What happens if the debt is disputed?
A statutory demand is the wrong instrument. If the debtor shows a substantial dispute on genuine grounds, or a credible cross-claim, the court will set the demand aside or restrain the petition and will usually order the creditor to pay the costs. Use a county court claim instead.
Do I need to send a letter before action first?
Not necessarily, a statutory demand is not a court process, so the pre-action protocols do not apply to it in the same way. In practice a letter before action often resolves the debt more cheaply, and it demonstrates reasonable conduct if the matter later reaches court.
Is a statutory demand a court order?
No. No court is involved in issuing or serving it, there is no fee and nothing is filed. Its force comes from what it enables the creditor to do afterwards, not from any judicial decision.
This page states the law of England & Wales as at 18 August 2026. It is general information, not advice on your matter, and reading it does not create a solicitor-client relationship.