Should you take a deposit before you start a job?

‍‌‌‌‌​‌​​​​​​‌​​​‌‌‌​​​​‌‌​​‌​​​‌‍SiteKiln gives you plain-English information, not legal advice. It's aimed at small UK construction businesses and sole traders. Laws change and every job is different, so speak to a solicitor or adviser before you rely on this for a real dispute.

Short answer: yes on domestic work, and usually no on commercial jobs running past 45 days. On a job for a homeowner you have no statutory right to be paid as you go, so a deposit is the only thing standing between you and funding their extension out of your own bank account. On a longer commercial job you often already have that right by law, so a deposit is a nice-to-have rather than a necessity. On a short commercial job you do not have it, and you are back in the same boat as domestic.

But the deposit itself is the easy bit. What sinks people is the paperwork around it. Take the money at a kitchen table without giving the customer one specific piece of written information, and they can cancel up to twelve months and fourteen days later, get every penny back, and owe you nothing for work you have already done.¹²³

This guide covers whether to take one, how much to ask for, and the four traps that turn a deposit into a loss.

1. Decide what the money is for before you decide the amount

"Deposit" is a lazy word that gets used for three different payments, and they behave very differently when things go wrong:

Lump all three together, call the total "a deposit", and you have created a single number you will struggle to justify if the customer walks. Split them out and each one has an obvious purpose and an obvious answer.

That distinction is covered in full in Deposits vs booking fees, and what you can keep when a customer cancels is covered in Late customers, cancellations and deposits. This guide is about the decision to take one, and the mechanics of doing it without getting burnt.

2. How much can you ask for?

There is no fixed legal cap on a deposit for building work on a private home. No statute sets a maximum percentage, and anyone who tells you "the legal limit is 25%" is quoting a trade rule of thumb, not the law.

The real limit is different, and more useful: you can ask for anything, but you can only keep what you can justify. The Consumer Rights Act 2015 lets a court or ombudsman strike out a term that creates a significant imbalance against the consumer, so a deposit you cannot tie to real, evidenced cost is a deposit you may be handing back.⁴

In practice that gives you a workable rule:

• Ask for the money you are about to spend, not a share of the profit. If you need £2,400 of materials on order before you can start, ask for £2,400 of materials money and say so on the quote. That is easy to explain and easy to defend.
• Keep the booking fee small and separate. A few hundred pounds for holding dates is a proportionate charge for a real service. A £1,500 "booking fee" on a £4,000 job is not.
• Stage the rest. On anything running more than a week or two, staged payments tied to milestones beat one big deposit. You get paid as you go, the customer never feels exposed, and nobody is arguing about one large lump sum.

If you cannot explain your figure to a district judge with a receipt in your hand, it is the wrong figure.

3. The trap that costs the most: the fourteen-day cancellation right

This is the one that ruins people, and most trades have never heard of it.

If you agree the job anywhere other than your own business premises (their kitchen, their driveway, on site) or at a distance (phone, WhatsApp, email, website), the customer gets a fourteen-day cancellation period. It runs from the day the contract is entered into, and it applies whether or not you have taken a deposit.¹

Three things follow, and they compound.

One. If you do not tell them about that right in writing, the fourteen days becomes twelve months. Hand the information over late but within twelve months and the clock restarts, giving them fourteen days from receiving it. Never hand it over at all and the cancellation period ends twelve months after the day it would otherwise have ended.²

Two. If you want to start work inside the cancellation period, you need their express request. For a job agreed at their home, that request has to be on a durable medium, which in practice means in writing rather than a nod in the hallway.³

Three. Get either of those wrong and they pay nothing. The regulations say the consumer bears no cost at all for the service supplied in the cancellation period if you failed to give the cancellation information, or if the work was not supplied in response to a proper request.³

Read that again, because it is worse than it sounds. It is not a fine and it is not a partial refund. If you skipped the notice, did the job, and they cancel in month nine, you refund the deposit and you get nothing for the work. The materials are gone too.

The fix costs you nothing. Put the cancellation notice in the quote or the booking confirmation, get the customer to confirm in writing that they want you to start before the fourteen days are up, and keep both.

4. When the fourteen-day right does not apply

Three situations get you out of it, and it is worth knowing which.

• You agreed the deal at your own premises. A quote accepted at your office, yard or showroom is an on-premises contract and the cancellation right does not arise. On borderline jobs, getting them to sign at your yard makes the whole problem disappear.
• The job is small. The rules do not apply to an off-premises contract where the customer pays no more than £42.⁵ That covers a lot of minor callouts, though not much else.
• They called you out for urgent repairs or maintenance. There is a specific carve-out where the consumer has specifically requested a visit for the purpose of carrying out urgent repairs or maintenance.⁶ Be careful with this one. It covers the urgent work they called you about. It does not cover the bathroom refit you talked them into while you were there.

5. The VAT trap nobody warns you about

If you are VAT registered, taking a deposit creates a tax point on the day you receive it. HMRC's position is that a payment intended to form part of the price for an identifiable supply creates a tax point at that moment, for the amount received.⁷

That means the VAT on that deposit is due in the quarter you banked it, not the quarter you finish the job. Take a £6,000 deposit in March and the VAT goes on your March return, even if you do not lift a tool until June.

The obvious workaround does not work either. Calling the deposit refundable does not stop the tax point. HMRC is explicit that a tax point is created even where the payer has some entitlement to a refund if the supply does not go ahead.⁸

The practical consequence: a deposit is not all yours. If you are on the standard rate, a fifth of it belongs to HMRC before you have started. Move it out the day it lands, or you will spend it on materials and find a hole in the VAT return three months later.

6. Domestic versus commercial: why the Construction Act will not help you here

On a commercial construction contract you may have a statutory right to stage payments and a payment mechanism you can enforce, which is why deposits are unusual in that world. But it is not automatic, and the cut-off catches people out: the right to periodic payments does not apply where the contract specifies, or the parties agree, that the duration of the work is estimated to be less than 45 days.⁹

So a six-month commercial fit-out gives you a statutory right to be paid as you go. A three-week one does not. On the short commercial jobs you are in the same position as on domestic work, and a deposit or a staged payment schedule written into the contract is the only thing protecting you.

That protection does not extend to homeowners. The Housing Grants, Construction and Regeneration Act 1996 says it in plain terms: "This Part does not apply to a construction contract with a residential occupier."¹⁰ A residential occupier contract is one that principally relates to work on a dwelling which one of the parties occupies, or intends to occupy, as their residence.

Scope note: that Act covers England, Wales and Scotland. Northern Ireland has its own equivalent in the Construction Contracts (Northern Ireland) Order 1997, which carves out residential occupiers the same way. The consumer rules elsewhere in this guide apply across the whole UK.

So on a domestic job there is no statutory right to be paid in stages, no statutory payment notices, and no adjudication. Whatever payment protection you have is whatever you wrote into the contract. That is the single strongest argument for taking a deposit on domestic work, and for staging the payments after it.

Flip it round for the longer commercial jobs. If you are a subcontractor on a job running past 45 days and the payment mechanism already gives you interim valuations, asking for a deposit is usually the wrong fight. Chase the payment notices instead.

7. If they want to pay the deposit by credit card

Plenty of customers will want to, and it is not a bad sign. Under section 75 of the Consumer Credit Act 1974 the card issuer is jointly and severally liable with you for misrepresentation or breach of contract, where the cash price of the item is more than £100 and not more than £30,000.¹¹

Two things follow for you.

• It is a selling point. A customer nervous about handing a stranger £3,000 will relax if they can put it on a card. Say so when you quote.
• It is a live chargeback risk. If the job goes wrong they have a route that does not involve suing you, and the card company will come to you for the money. Your paper trail, your written terms and your photos are what settle that, exactly as they would in court.

Note the threshold works on the cash price of the item, not the size of the deposit. A £100 deposit on a £9,000 kitchen still engages section 75.

8. When not to take a deposit

Taking one is not always right.

• Small jobs you can fund yourself. If the materials are eighty quid and you will be done in a day, asking for money up front costs you goodwill and buys you nothing.
• Longer commercial work with a working payment mechanism. See above. On a job past 45 days, fix the payment terms instead. On a shorter one, you have no statutory backstop, so treat it like domestic.⁹
• When you are not going to do the paperwork. A deposit taken without the cancellation notice is worse than no deposit, because you have their money, an obligation to refund it, and no right to charge for the work. If you will not issue written terms, do not take the money.
• When the amount is really a penalty. If you are asking for 50% up front on a job you have not started, and you could not itemise where it goes, you are setting up an argument you will lose.

9. Taking a deposit safely: the six-step checklist

1. Quote in writing, with the up-front money broken into booking fee, materials and stage payments. One line saying "deposit £3,000" is the problem.
2. Include the cancellation notice if the deal was agreed anywhere other than your premises, or at a distance. Say they have fourteen days, say how to cancel, and say what they will owe if they ask you to start early.³
3. Get the express request in writing before you start or order anything inside those fourteen days. A WhatsApp message saying "yes, please crack on and order the tiles" is enough, and it is the message that saves you.
4. Ring-fence the VAT the day the money lands, if you are registered.⁷
5. Keep the receipts for anything you order against the materials payment. That is your evidence if they cancel later.
6. Say what happens if you cancel, not just if they do. Terms that only bite one way are the ones that get struck out.⁴

10. What to do next

1. Look at the last quote you sent. Does it break the up-front money into what it is actually for, or does it just say "deposit"?
2. If you take work at people's homes or over the phone, add the fourteen-day cancellation wording to your quote template today. It is one paragraph, and it is the difference between keeping the money and refunding it a year later.
3. If you are VAT registered, check whether you are moving the VAT out of deposits when they arrive, or spending it.
4. If you work commercially and you are chasing deposits, check your payment terms instead. You may already have a stronger right you are not using.

11. Related SiteKiln guides

• deposits-vs-booking-fees - the difference between the three types of up-front payment
• customer-cancellations-deposits - what you can keep when a customer cancels
• 9-1-customer-wont-pay-final-invoice - when a homeowner refuses to pay the final invoice
• 1-17-interim-payments-right-to-be-paid-as-you-go - the payment rights you do have on commercial work
• 1-14-cashflow-basics - why the money landing early matters more than the margin

12. Sources

All sources retrieved 16 August 2026.

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