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.
A deposit and a booking fee are not the same thing. Get the wording wrong and you'll hand money back you shouldn't have to. Get it right and you have a clear, legally defensible structure that protects your diary, covers your costs, and keeps things fair for the customer. This guide explains the difference, what you can keep at each stage, and how to write it into your quotes.
1. The difference in plain English
There are three types of upfront payment you might take. They look similar but they work differently in law and in a dispute.
Deposit
A deposit is a part-payment toward the total price of the job. It comes off the final bill. If you quote £5,000 and take a £500 deposit, the customer owes £4,500 on completion.
Because it is a part-payment, it belongs to the customer until you have earned it by doing the work. If the job is cancelled and you have not done anything yet, the starting position is that the deposit should be returned -- unless you can show genuine losses that justify keeping some or all of it.
Booking fee
A booking fee is a charge for a service -- specifically, the service of reserving dates in your diary, doing admin, planning, and holding a slot that could have gone to someone else. It may or may not be offset against the final price.
A booking fee is easier to defend as non-refundable because it is payment for something you have already done (reserved the dates, turned down other work). But it still has to be a reasonable amount -- you cannot charge a £2,000 "booking fee" on a £4,000 job and call it admin.
Materials payment
A materials payment is an advance to cover the cost of ordering materials before work begins. It is separate from both the booking fee and the deposit. If the customer cancels and you have already ordered non-returnable materials, you keep the amount that covers those materials (with receipts). If you have not ordered yet, it goes back.
The key point: When you take a lump sum upfront and just call it "a deposit," you are lumping everything together. If the customer cancels and you try to keep the lot, they can argue it was all a part-payment and you have not earned it. If you split it into a booking fee, a materials payment, and a deposit (or staged payments), each bit has a clear purpose and a clear justification for keeping or refunding.
2. What is legally defensible -- the CRA tests
The Consumer Rights Act 2015 (CRA 2015) Part 2 governs unfair terms in consumer contracts. Section 62 is the core provision: a term is unfair if it causes a significant imbalance in the parties' rights and obligations to the detriment of the consumer, contrary to the requirement of good faith.
Schedule 2 of the CRA lists terms that may be regarded as unfair. The ones that matter for deposits and booking fees are:
-
Paragraph 4 -- terms that let you keep sums paid by the consumer when the consumer cancels, without providing for equivalent compensation if you cancel. If your terms say "customer loses booking fee on cancellation" but say nothing about what happens if you cancel, that imbalance is flagged as potentially unfair.
-
Paragraph 6 -- terms requiring the consumer to pay a "disproportionately high sum" in compensation for failing to carry out their obligations. A £1,500 cancellation charge on a £3,000 job where you have not ordered materials or started work is going to struggle here.
-
Paragraph 7 -- terms letting you dissolve the contract and keep payments for services not yet supplied. You cannot pocket money for work you have not done.
The "could I explain this to a judge?" test
GOV.UK and the CMA (Competition and Markets Authority) tell consumers: "A business can only keep deposits or charge cancellation fees if the term is fair and reasonable. They are only entitled to keep an amount that covers their actual losses."
Courts and ombudsmen apply what is sometimes called a "genuine pre-estimate of loss" test. At the time you set the charge, you honestly estimated that a cancellation at that point would cost you about that much. The amount protects a legitimate business interest and is not out of all proportion to the actual loss.
Ask yourself: If a district judge asked me to explain why I kept this money, could I show them a clear breakdown -- diary time, admin, work turned down, materials ordered -- that roughly matches the amount? If yes, you are on solid ground. If you are keeping a round number that has no connection to real costs, you are not.
Non-refundable clauses
A clause that says "non-refundable deposit" is not automatically unfair. But it can be if:
- It is unclear or buried in small print -- the CRA requires terms to be transparent and prominent.
- It is unreasonably large relative to your actual loss -- £800 booking fee on a £2,000 job with no materials ordered is hard to defend.
- It has no link to real costs -- "non-refundable" without any explanation of what it covers looks like a penalty.
- You refuse a refund even when you have resold the slot -- if the customer cancels and you fill the dates the next day, keeping the full booking fee is harder to justify because your loss has been mitigated.
3. How to structure it on your quotes
Option A: Booking fee plus separate materials payment
This works well for medium to large domestic jobs (£3,000+). You take a small booking fee upfront to reserve the dates, then a separate materials payment before you order, then staged payments during the job.
Example wording (copy-paste ready):
Payment schedule
Booking fee: £[150-300] -- payable on acceptance to secure your start date. This covers administration, site visit(s), planning, and reserving your dates. Non-refundable (represents our genuine cost of holding your slot and turning down other work for this period).
Materials payment: £[amount] -- payable [7/14] days before the start date. This covers the cost of ordering materials for the job. If you cancel before materials are ordered, this is refunded in full. If materials have already been ordered, we retain the cost of any non-returnable items (receipts provided).
Stage payment(s): £[amount] -- payable at [agreed milestone, e.g. "completion of first fix" / "end of week one"]. Covers work completed to that point.
Final payment: £[amount] -- payable on completion and your sign-off of the finished work.
If we cancel or are unable to carry out the work, we refund all payments in full, including the booking fee, within 14 days.
Option B: Staged payments (no separate booking fee)
This works well for bigger jobs (£10,000+) where a booking fee is too small to matter and staged payments do the heavy lifting.
Example wording (copy-paste ready):
Payment schedule
Deposit: 10% (£[amount]) -- payable on acceptance. Offset against the final invoice. Covers our commitment to hold your dates and begin procurement planning.
First stage: 30% (£[amount]) -- payable [7/14] days before the start date. Covers materials procurement.
Second stage: 30% (£[amount]) -- payable at [milestone].
Final payment: 30% (£[amount]) -- payable on completion.
Cancellation: If you cancel before materials are ordered, we retain a reasonable amount (up to £[X]) to cover administration, planning, and diary time, and refund the balance within 14 days. If you cancel after materials are ordered, we additionally retain the cost of non-returnable materials. If you cancel after work has started, you pay for work completed to date plus materials used.
If we cancel, we refund all payments in full within 14 days.
Small jobs (under £2,000)
For small jobs, keep it simple. A 10-20% deposit on acceptance, balance on completion. If the job is under £500, many trades just take payment on completion and skip the deposit entirely -- but if you want to protect your diary, even a £50-100 booking fee is worth it.
Example wording for small jobs:
"A deposit of £[amount] (approximately [10-20]% of the quoted price) is payable on acceptance to confirm your booking. This is offset against the final invoice. If you cancel with more than [7/14] days' notice, the deposit is refunded in full. If you cancel with less than [7] days' notice, the deposit is retained to cover our costs of holding your dates. Balance payable on completion."
4. What happens when they cancel at each stage
Before materials are ordered
Your actual loss is limited to admin time, site visits, planning, and diary time held. A small booking fee (£100-300 on a typical domestic job) is easy to defend. Keeping a large deposit when you have not spent anything on materials or started work is much harder.
If you have resold the slot to another customer, your loss is further reduced. You might keep a small admin charge but you would struggle to justify keeping a full booking fee for dates that are no longer lost.
After materials are ordered
You can keep the booking fee plus the cost of any non-returnable materials. Provide receipts. If the materials can be returned to the merchant, you should return them and refund the customer -- the CRA expects you to take reasonable steps to reduce your losses (this is called "mitigation").
Mid-job
The customer pays for all work completed to date (at the agreed rate or a reasonable rate if none was agreed), plus all materials used or ordered, plus the booking fee. Any overpayment is refunded. You are not entitled to charge for work you have not done.
After completion
If the job is done and the customer has not paid the balance, this is a debt, not a cancellation. Chase it through normal debt recovery (see the SiteKiln guide on getting paid).
5. The sliding scale approach
Some trades use a sliding scale for cancellation charges based on how much notice the customer gives. This is easy to explain, easy for the customer to understand, and easy to defend in a dispute as long as the numbers are proportionate.
Example sliding scale (for a £5,000 job with a £500 deposit)
| Notice given | What you keep | Why |
|---|---|---|
| 14+ days before start | Refund in full (or keep small admin fee of £50) | Plenty of time to rebook the slot. Minimal loss. |
| 7-14 days before start | Keep 10-15% of deposit (£50-75) | Some diary disruption, may be able to partially rebook. |
| 3-7 days before start | Keep 25-30% of deposit (£125-150) | Hard to fill the slot at short notice. Real diary loss. |
| Under 3 days / no-show | Keep up to 50% of deposit (£250) | Almost impossible to rebook. Genuine lost income. |
| After materials ordered | Keep booking fee + non-returnable materials cost | Evidenced costs with receipts. |
| After work started | Pay for work done + materials + booking fee | Standard CRA position. |
Tip: The percentages above are guidelines, not rules. The test is always whether the amount reflects your genuine loss. If you regularly fill cancelled slots within 48 hours, keeping 50% of a deposit for a 2-day cancellation would be hard to justify. If you work in a niche trade where rebooking takes weeks, higher retention is more defensible.
How to write a sliding scale into your terms
Cancellation charges
If you cancel this booking:
- 14 or more days before the start date: full refund of deposit (a £[50] administration fee may be retained).
- 7 to 13 days before the start date: we retain [10-15]% of the deposit to cover diary reorganisation.
- 3 to 6 days before the start date: we retain [25-30]% of the deposit. At this notice, we are unlikely to fill your dates.
- Less than 3 days or no-show: we retain up to [50]% of the deposit to cover lost income.
- After materials have been ordered: we additionally retain the cost of any non-returnable materials (receipts provided on request).
- After work has started: you pay for all work completed plus materials used.
If we cancel, we refund your deposit in full within 14 days.
In all cases, retained amounts reflect our genuine estimated losses. We will take reasonable steps to rebook your dates and will reduce the cancellation charge if we are able to fill the slot.
6. Different rules by job size
What works for a £800 bathroom refresh does not work for a £40,000 extension. Here is how to think about it by job size.
Small jobs (under £2,000)
- Keep it simple. 10-20% deposit, balance on completion.
- A booking fee of £50-100 is enough to show the customer is committed without creating a dispute risk.
- Do not overthink the terms -- a clear one-paragraph cancellation clause is plenty.
Medium jobs (£2,000-£10,000)
- Booking fee of £150-300 plus separate materials payment.
- Staged payments if the job runs more than a week.
- Written cancellation terms with a simple sliding scale or fixed retention amounts.
- This is the sweet spot where a dispute is big enough to hurt but too small for a solicitor. Get the terms right and you will never need one.
Large jobs (£10,000+)
- Staged payments tied to milestones.
- Formal written contract with detailed cancellation and variation clauses.
- Consider a separate "pre-construction" stage covering design, planning, procurement -- paid separately from the build.
- Materials payments aligned to procurement schedule, not just "X% upfront."
- Your accountant should be involved in structuring this. VAT, cash flow, and retention all come into play.
The rule of thumb
The bigger the job, the more detailed your payment structure needs to be. The smaller the job, the simpler. But every job, no matter how small, should have something in writing confirming what the customer pays upfront, what it covers, and what happens if either side cancels.
7. Who to contact
- Citizens Advice -- free advice on consumer contracts, deposits, and cancellation terms: 0800 144 8848 (England), citizensadvice.org.uk
- Trading Standards -- contact through Citizens Advice for referral. Useful for general guidance on fair trading obligations.
- Your accountant -- for advice on how to record booking fees vs deposits for tax purposes (they are treated differently for VAT in some circumstances).
- A solicitor -- if a deposit dispute involves a significant amount or the customer is threatening legal action. Look for consumer law or construction dispute specialists.
- Competition and Markets Authority (CMA) -- publishes guidance on unfair contract terms that is worth reading if you want to understand how regulators think about deposits and cancellation fees: gov.uk/cma
8. Related SiteKiln guides
customer-cancellations-deposits-- the full guide to cancellation terms, cooling-off periods, and what you can keeps16-writing-your-first-quote-- how to write quotes that protect you from day onematerial-pricing-and-markup-- getting your materials pricing and markup rightprotecting-your-diary-- how to stop customers wrecking your schedule
9. What to do next
- Decide your structure. Are you taking a deposit, a booking fee, or both? For most domestic trades, a small booking fee plus a separate materials payment is the cleanest approach.
- Update your quote template. Add the payment schedule and cancellation clause. Use the example wording in Section 3 as a starting point.
- Check your existing terms against the CRA tests. Are the amounts proportionate? Do they reflect genuine costs? Do they cover what happens if you cancel, not just the customer?
- Talk to your accountant. Booking fees and deposits can be treated differently for VAT and income recognition. Make sure you are recording them correctly.
- Read the cancellations guide. This guide covers the structure. The cancellations guide covers the legal detail, the cooling-off rules, and what to do when it all goes wrong.
10. Sources
- Consumer Rights Act 2015 -- Part 2 (unfair terms in consumer contracts), Section 62 (requirement of fairness), Schedule 2 paragraphs 4, 6, and 7 (indicative list of unfair terms). legislation.gov.uk/ukpga/2015/15/part/2
- GOV.UK -- "Cancelling goods or services" guidance (consumer-facing, on deposits and cancellation fees): gov.uk/consumer-protection-rights
- Competition and Markets Authority (CMA) -- Unfair contract terms guidance: gov.uk/government/organisations/competition-and-markets-authority
- Office of Fair Trading (OFT) -- Guidance on Unfair Terms in Consumer Contracts (OFT311, now superseded but still widely cited on genuine pre-estimate of loss and proportionality of deposits).
- Citizens Advice -- "Cancelling a service" guidance (consumer-facing, covers deposits, cancellation fees, loss of profit): citizensadvice.org.uk
Know someone who needs this?
Was this guide useful?
Didn't find what you were looking for?
Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.
In crisis? Samaritans 116 123 ·