Should You Take a Deposit for Building Jobs?

Building work involves significant upfront costs that fall on you, the contractor, before you receive a penny from your customer. Materials for a kitchen extension can easily reach £15,000–£30,000. A loft conversion requires structural timber, insulation, roofing materials, and windows (often £8,000–£15,000 in materials alone) all of which must be procured before the job progresses.

Without a deposit, you are financing your customer's building project from your own working capital. For a sole trader or small building company, this is not just uncomfortable. It can be dangerous for your business finances.

The reasons deposits exist:

• Materials procurement: You need to order timber, blocks, lintels, and roofing materials before work begins. Suppliers expect payment in 30 days regardless of when your customer pays you
• Cancellation protection: A customer who cancels after you've turned down other work and ordered materials has cost you real money. A deposit compensates for part of that loss
• Labour scheduling: You've committed your team's time to a project. A deposit demonstrates the customer is serious about proceeding
• Working capital: Building projects can run for weeks or months. A deposit keeps your cash flow positive during the early stages

The right deposit structure depends on the size and duration of the project.

Small jobs (under £5,000): 10–20% deposit

For jobs like a bathroom refit, small structural repairs, or a single-room renovation, a modest deposit of 10–20% is appropriate. This covers your materials risk without asking for a large sum upfront on a short-duration job.

Medium projects (£5,000–£30,000): 10–25% deposit, then staged payments

A deposit of 10–25% on contract, with staged payments tied to milestones (foundations complete, walls at roof height, roofed and weathertight, first fix complete, completion), is standard for extension and loft conversion work. This keeps your cash flow positive without exposing the customer to a large upfront sum.

Large projects (over £30,000): formal JCT contract with payment schedule

Larger projects typically use a formal building contract, often a JCT Homeowner Contract or similar, with a structured payment schedule based on monthly valuations or stage completions. The initial payment under a JCT contract is often described as a mobilisation payment rather than a deposit, typically 5–10% of the contract value.

Monthly valuations for long-running projects

On projects lasting more than six to eight weeks, monthly valuations are more practical than milestone payments. At the end of each month, you submit a valuation for the value of work completed to date, and the customer pays within an agreed period (typically 14 days). This is standard practice on larger residential and commercial projects.

The Joint Contracts Tribunal (JCT) publishes standard building contracts widely used in the UK residential and commercial construction sector. For domestic residential work, the JCT Homeowner Contract is the most common format.

What JCT contracts say about payment:

• Payment is structured through interim payments (regular payments during the project) plus a final payment
• Interim payments are based on the value of work completed at each payment date
• The final payment resolves the account, including any retention held during the project
• Retention, typically 2.5–5% of the contract value, is held back until the end of the defects liability period (usually six to twelve months)

Do you need a JCT contract?

Not necessarily. JCT contracts are thorough but complex. For jobs under £30,000, a well-written, plain-English quote with clear payment terms is often sufficient. The key is to have something signed by both parties before work starts.

At minimum, your building contract should state:

• Scope of work (what's included and what's excluded)
• Start date and estimated completion
• Total price (and how variations are handled)
• Deposit amount and due date
• Interim payment schedule (milestones or monthly)
• Final payment terms
• What happens if the customer cancels or if you encounter unforeseen conditions

Some customers, usually those who've read warnings about rogue traders, will refuse to pay any deposit. Understanding their concern, and how to address it, is more productive than walking away from good jobs.

Why customers refuse deposits:

• They've heard horror stories about builders taking large deposits and disappearing
• They don't know you and haven't built trust yet
• They've had a bad experience previously

How to address the concern:

• Explain what the deposit is for: "The deposit covers materials I need to order before we start. I'm not asking for it to hold onto: it's committed the moment I place orders with my supplier."
• Offer a reduced deposit for materials only: If a 25% deposit is causing pushback, offer a deposit equal to your materials cost only. This is harder to dispute. You can show them the supplier invoices
• Use a reputable payment method: Accepting deposit by card (rather than cash) gives the customer some protection via their card issuer's chargeback rights. This reassures nervous customers
• Show your credentials: FMB membership, Federation of Master Builders logo, trade association membership, and verifiable reviews all increase trust. A customer who can verify your credentials is more comfortable paying a deposit

When to walk away:

If a customer insists on paying nothing upfront for a project requiring significant materials procurement, and you cannot get to a position of mutual trust, walking away is a legitimate choice. A customer who won't pay any deposit is also more likely to dispute the final payment. Your time and materials are better spent on customers who understand how building contracts work.

The Consumer Rights Act 2015 governs your relationship with domestic customers. For commercial contracts, common law and the agreed contract terms apply.

For domestic customers:

You can retain the portion of the deposit that covers actual costs and losses you've incurred at the time of cancellation. If you've ordered materials and they cannot be returned, you can retain enough to cover those costs. If you've simply confirmed the booking and turned down other work, you can retain a reasonable amount to compensate for that loss of opportunity, but not more.

A "you keep everything, no refund" approach on a large deposit is likely to be seen as an unfair contract term under the Act, particularly if you haven't incurred costs commensurate with the deposit amount retained.

Cooling-off rights:

The Consumer Contracts Regulations 2013 give domestic customers a 14-day cooling-off period for off-premises contracts (e.g. if you agreed the job at their home or over the phone). If a customer cancels within this window and you haven't started work, they are entitled to a full refund. If you've ordered materials or started preparation work at their written request within the cooling-off period, you can deduct those costs.

Document everything:

• Keep supplier purchase orders and delivery notes
• Save any written confirmation from the customer agreeing to start work
• Record the date you turned down other work to schedule this project

How you present your deposit terms is almost as important as what they say. A deposit request that looks professional and is clearly explained in writing is rarely questioned. A deposit request that comes as a casual text message is more likely to cause friction.

Best practice:

• Include deposit terms in your written quote: not as an afterthought, but as a standard section
• State the deposit amount in pounds, not just a percentage
• Specify what the deposit is for ("this covers materials procurement and scheduling of your project")
• State the due date clearly ("deposit is due within 5 working days of accepting this quote")
• Explain what happens if the project is cancelled (tiered, based on costs incurred)
• Accept payment by bank transfer or card: not cash only

Example deposit clause for a building quote:

"To confirm this contract, a deposit of £[amount] ([X]% of the total) is required within 5 working days. This deposit is used to procure materials and secure your project in our schedule. In the event of cancellation after materials have been ordered, we will retain the portion of the deposit covering supplier costs incurred. We accept BACS transfer or card payment."

Using a job management platform that sends quotes digitally and includes a payment link for the deposit makes the process smooth: customers confirm and pay the deposit in one step, and you have a clear record of when it was received.

Not all deposit practices are defensible. And some will actively damage your reputation or expose you to legal challenge. Avoid these common mistakes:

• Asking for more than 50% upfront on residential work: This raises red flags for customers and is rarely justified unless the job is almost entirely materials cost. Deposits above 50% are very unusual in legitimate residential building work
• Taking deposits in cash with no receipt: Cash deposits with no paper trail are a warning sign to customers and make it harder for you to prove payment if there's a dispute. Always issue a receipt
• No written terms attached to the deposit request: A deposit received without a signed quote or contract is hard to enforce and easy to dispute. Get something signed before banking the deposit
• Spending the deposit before ordering materials: A customer's deposit is held against their project. If they cancel before you've committed the funds, they're entitled to a refund of unspent amounts. Don't treat deposits as general business income until costs are committed
• Not confirming receipt of the deposit in writing: Always send a receipt confirming the deposit has been received and the project start date is confirmed. This protects you and gives the customer confidence