Requesting Deposits: When to Ask, How Much & Your Legal Position

Summary

Requesting a deposit before starting work is accepted practice for tradespeople. It demonstrates the customer is serious, covers initial material costs, and protects you against a last-minute cancellation that leaves you with ordered materials and a gap in your diary. For larger jobs, stage payments with deposits are standard in contracts from the Federation of Master Builders, RIBA, and other trade bodies.

Legally, a deposit is money paid in advance as security for performance of the contract. It differs from a part-payment (which is simply the first of several payments): a deposit is typically non-refundable if the customer cancels, whereas a part-payment may be refundable if the work is not yet started. The distinction matters — make clear in your quote whether the upfront payment is a deposit (security) or a part-payment (advance).

Customers are sometimes reluctant to pay deposits after high-profile cases of cowboy builders disappearing with advance payments. Your professionalism in explaining why you charge a deposit, providing a receipt, and having a clear written contract goes a long way towards overcoming this hesitation. Offering to provide materials receipts can also help with larger deposits.

Key Facts

• Deposit legality — deposits are legal and enforceable in UK law as part of a contract for services
• Reasonable deposit — courts and consumer bodies consider deposits up to 25–30% to be generally reasonable for building work
• Consumer Rights Act 2015 — deposit terms in consumer contracts must not be unfair; a term that forfeits a large deposit even for a minor cancellation may be unenforceable
• Receipt required — always provide a written receipt for deposit payments; state it clearly as a "deposit" or "advance payment"
• Insolvency risk — if you go insolvent before starting, the customer is an unsecured creditor; deposits are at risk; this is why customers are sometimes cautious
• Credit card protection — customers paying deposits by credit card for transactions over £100 have Section 75 Consumer Credit Act protection
• Cancellation — if the customer cancels after you have started work, the deposit may be legitimately applied against work done and losses incurred
• Your cancellation — if you cancel the job, you must return the deposit in full; failing to do so is a breach of contract
• Late cancellation by customer — a deposit clause in your contract can specify that the deposit is non-refundable if the customer cancels within a certain period of the start date
• Stage payments — for longer jobs, breaking payments into 3–4 stages is preferable to a single large upfront payment; reduces risk for both parties

Quick Reference Table

Detailed Guidance

Framing the Deposit Request

How you ask for a deposit matters. Customers who feel they are being asked for money before anything has happened often push back. Framing it correctly:

Less effective: "We require a 25% deposit before we can start."

More effective: "To secure your start date and order your materials, I'll ask for a 25% deposit of £X. I'll provide a receipt, and this will be deducted from the final invoice. The materials are usually ordered in the week before we start, so you'll see the first deliveries then."

This framing:

• Explains what the deposit is for
• Confirms when it will be spent (materials)
• Reassures the customer they will see evidence of the money being used
• References the final invoice, making clear it's a deduction, not an additional charge

Deposit vs Part-Payment: Getting the Terms Right

In your written quote or contract, state clearly whether the upfront payment is:

A deposit (security payment):

• Non-refundable if the customer cancels after a specified date
• Forfeited if the customer fails to provide access
• Applied to the final invoice if the job completes

An advance payment (part-payment for materials):

• Used solely for purchasing materials
• Refundable (less materials already ordered) if the customer cancels before work starts
• Provides less security for the tradesperson

Most domestic tradespeople use a hybrid approach: the deposit is non-refundable after a certain cancellation window (e.g. 7 days before start date), and refundable minus actual costs incurred if cancelled earlier.

What to Include in Your Deposit Terms

Include in your quote or contract:

• The deposit amount and percentage
• When the deposit is due (typically on acceptance of quote)
• Acceptable payment methods
• Cancellation policy (non-refundable within X days of start)
• That the deposit will be applied to the final invoice
• Your bank details for bank transfer (preferred over cash)

Example deposit clause:

"A deposit of [X]% of the total quoted amount (£[Y]) is required to secure your start date and cover initial material costs. This deposit is non-refundable if you cancel within 14 days of the agreed start date. If cancelled before that, the deposit will be refunded less any materials already ordered. The deposit will be deducted from the final invoice on completion."

Stage Payment Structure for Larger Jobs

For jobs lasting more than 2–3 weeks, a stage payment structure reduces financial risk for both parties:

Typical 4-stage structure:

• Stage 1 (25%): On commencement — covers initial materials and first week's labour
• Stage 2 (25%): At first fix / shell completion
• Stage 3 (25%): At second fix / near completion
• Stage 4 (25%): On practical completion (snagging sign-off)

Each stage payment should be invoiced when the relevant milestone is reached. Do not request the next payment stage until the milestone is genuinely achieved — this is a common source of disputes.

Handling Reluctant Customers

Some customers refuse deposits, particularly on larger jobs. Common objections and responses:

"I've heard too many stories about builders taking deposits and disappearing." — "I understand the concern — it's unfortunately common. Here's what I can offer: I'm registered with [trade association], and you can verify my membership online. I'm happy to provide references from recent customers. I can also provide receipts for materials as I order them, so you can see the deposit being used."

"I never pay deposits." — "I completely respect that — it's not unusual. In that case, I'll need to move your start date to when a deposit slot opens up, or we could structure it as materials only — I order the materials (typically [X]% of the total) and you pay for them on delivery."

"Why should I pay for materials before you start?" — "Materials for your job are typically ordered 1–2 weeks in advance. Some of them are non-returnable once ordered. The deposit covers that risk — without it, I'm personally funding your materials until the job is done."

Legal Protection for Customers

Be aware that customers paying by credit card for amounts over £100 have Section 75 of the Consumer Credit Act 1974 protection — their credit card company is jointly liable with you for the contract. This gives customers paying by card significant recourse if you do not perform.

For bank transfers, there is no automatic Section 75 protection. Many banks now offer a "Confirmation of Payee" service and fraud protection, but these are not guaranteed. Customers are increasingly advised by banks to be cautious about paying large sums to new payees.

For BACS/bank transfer payments, consider issuing a formal invoice with your company details before payment. This creates a paper trail and is more professional than simply providing your sort code and account number.

Using squote: Your payment terms and deposit requirements are included on every quote PDF sent through squote — so the customer sees and accepts the deposit terms as part of agreeing to the job, before any money changes hands.

Deposits and Insolvency

If a tradesperson goes insolvent after receiving a deposit but before starting work, the customer becomes an unsecured creditor. This is the genuine risk customers worry about. For large projects, professional indemnity insurance and membership of a trade association (which may have deposit protection schemes) partially mitigate this. The NHBC deposit indemnity scheme covers deposits for new-build homes from registered builders.

For large residential jobs, some tradespeople offer to hold deposits in a ring-fenced client account. This is complex to administer and not standard practice for smaller trades, but may be worth discussing for very large projects (£50,000+).

Frequently Asked Questions

Can I charge interest or a cancellation fee if the customer cancels after I've turned down other work to accommodate them?

Yes, provided this is stated clearly in your contract terms before the customer accepted. An unfair term introduced after the fact is unenforceable. A reasonable cancellation fee (e.g. the deposit, or a percentage reflecting genuine losses such as declined work) is enforceable. Courts have upheld deposit forfeitures where the tradesperson could demonstrate genuine loss.

The customer paid the deposit but now wants to delay the start by 4 weeks. Do I have to keep their slot?

Not unless you agreed to hold it. If the delay means you lose other work, you are entitled to charge a rebooking fee (if stated in your terms) or apply the deposit as a cancellation and rebook them when a slot is available. Communication is key — most customers respond better to an honest conversation about diary impact than a formal notice.

Should I charge VAT on deposits?

If you are VAT registered, VAT applies to deposits as they are advance payments for taxable supplies. Issue a VAT receipt (or VAT invoice) showing the deposit amount and VAT separately. Account for the VAT in the same VAT period in which you receive the deposit — not when you complete the work. Seek accountant advice if you are unsure about VAT on deposits.

What's a safe method to take deposit payments?

Bank transfer (BACS) is preferred for traceability and no transaction fees. Credit/debit card payments via SumUp, Square, or similar are increasingly common and give customers additional protection that many appreciate. Avoid large cash deposits — they are harder to prove in a dispute and may raise queries with HMRC if not properly recorded.

Can a customer dispute a deposit payment with their bank?

Via a chargeback, a customer can dispute a card payment to their bank if they believe the service was not provided. If you have provided nothing for the deposit (i.e. the job hasn't started and no materials ordered), the bank may side with the customer. The best protection is a clear written contract stating the deposit terms, a receipt acknowledging the purpose, and evidence of any costs incurred (material orders, cancelled bookings).

Regulations & Standards

• Consumer Rights Act 2015 — deposits must not be "unfair terms"; non-refundable deposits must be proportionate to genuine loss

• Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 — for contracts concluded off-premises (e.g. at the customer's home), a 14-day cooling-off period applies; deposits taken in this period may need to be refunded if the customer cancels within 14 days

• Section 75, Consumer Credit Act 1974 — credit card company jointly liable for breaches of contract where payment is by credit card; value £100–£30,000

• Insolvency Act 1986 — unsecured creditors (including customers with deposits) are low priority in insolvency proceedings

• Citizens Advice — Deposits for goods and services — Consumer rights regarding deposits

• Federation of Master Builders — Standard contracts — Standard domestic building contracts with payment provisions

• Which? — Deposit protection advice — Consumer-focused guidance on deposit risks

• HMRC — VAT on deposits — VAT treatment of advance payments and deposits

• payment terms — Full payment terms, stage payments, and late payment legislation

• scope creep — Variation orders that affect payment amounts

• quoting tips — Including deposit terms in quotes

• complaint handling — When deposit disputes become complaints