Getting paid on time: payment terms, retention and your rights as a UK builder

More building firms are killed by cash flow than by poor workmanship. A builder can do excellent work, win referrals, and still go under because £40k of completed work is sitting unpaid while wages, merchants and subcontractors all need paying now. Profit is an opinion; cash is a fact.

Getting paid on time is partly about the law, but mostly about how you set the job up before a single brick is laid. Here is how the two fit together.

Payment terms are won before the job starts

The single biggest driver of getting paid on time is a clear, written payment schedule agreed before work begins. Vague terms — "stage payments as we go" — are an invitation to disputes. Specific terms are not.

• Take a deposit. For most domestic work a deposit confirms commitment and funds initial materials. Keep it proportionate; excessive deposits can fall foul of consumer protection rules and frighten good clients.
• Bill in stages tied to milestones, not dates. "On completion of first-fix" is verifiable and hard to argue with. "Week four" is not, because weeks slip.
• Keep stages small. Frequent, smaller invoices smooth your cash flow and shrink the size of any single dispute. A client querying a £3k stage payment is a smaller problem than one querying a £30k final bill.
• Put the terms in writing and have the client agree them. A schedule the client has actually seen and accepted is enforceable in a way a verbal understanding never is.

What the law actually gives you — and what it does not

This is where a lot of confident pub advice is simply wrong, because the rules depend on who your client is.

Commercial clients (business to business). If you are working for another business — a main contractor, a commercial landlord, a developer — the Late Payment of Commercial Debts (Interest) Act 1998 applies. It gives you the right to charge statutory interest (8% above the Bank of England base rate) plus fixed compensation on overdue invoices, even if your contract is silent on the matter. Separately, the Housing Grants, Construction and Regeneration Act 1996 (the "Construction Act") gives parties to most construction contracts the right to stage payments, payment and "pay less" notices, and the right to suspend work for non-payment.

Domestic clients (homeowners). Here is the catch most builders miss: the Construction Act specifically excludes contracts with a "residential occupier" — i.e. a homeowner having work done on their own home. And the Late Payment Act applies to commercial debts, not consumer ones. So on a typical homeowner job, neither statute is riding to your rescue. Your right to be paid, and when, comes almost entirely from the contract you agreed. That is precisely why the written schedule above matters so much: for domestic work, it is your main protection.

None of this is legal advice for your specific situation — if a payment dispute is heading towards court, take proper advice. But knowing which regime you are in tells you how much you are relying on paperwork versus statute.

Retention, and whether you should accept it

On larger and commercial jobs, clients may hold "retention" — commonly around 2.5% to 5% of each payment — released after a defects period (often six to twelve months) once any snags are resolved. Retention protects the client, but it parks your money and a meaningful share of retained sums are never released without chasing. If you accept retention, write down exactly when and how it is released, and diarise the release date. On domestic work, retention is far less common and usually not worth introducing.

Transparency is a payment tool, not just a nicety

Here is the part builders underrate: clients pay faster when they can see what they are paying for. An invoice that arrives cold, months into a job, with a number the client cannot reconcile, gets queried. An invoice that lands against a backdrop of visible progress, agreed variations and a running quote-versus-final total gets paid.

When the client has watched the project unfold — milestones ticked off, variations they signed for, photos of the work — the invoice is the expected conclusion of a story they already believe. There is nothing to dispute because nothing is new.

A simple system that gets you paid

• Agree a written, milestone-based payment schedule before starting.
• Invoice promptly the moment a milestone is hit — not in a monthly batch.
• Make every variation a priced, client-agreed item so it is never a surprise on the bill.
• Keep the client's view of finance live: quoted, varied, invoiced, paid, outstanding.
• Chase politely but immediately. The longer an invoice ages, the harder it is to collect.

Builders Ready is built around this: invoices are tied to projects the client has been watching, every variation is signed before it reaches the bill, and both you and the client see the same live finance summary. Online invoice payment is on our roadmap — but even today, the fastest route to getting paid is removing every reason a client has to hesitate.