Should you take a deposit for a trade job?

A deposit can be sensible when you are reserving time, ordering materials or taking on work that creates a real cost before the first day on site. There is no universal percentage that suits every trade job. The fair amount depends on what you are committing, what the customer receives and what you could genuinely lose if they cancel.

A useful rule: ask for money in advance only for a clear reason. Write down the amount, what it covers, when it is due, whether any part may be kept after cancellation and how it will be deducted from the final price.

When does a deposit make sense?

Taking money before work starts can be reasonable when:

• you are holding a date that would be difficult to refill at short notice;

• you need to order job-specific materials;

• the first stage carries significant labour, plant or supplier costs;

• the work will run over several weeks and needs an agreed payment schedule;

• the customer has asked you to commit to a product that cannot easily be returned.

A small repair using stock from the van may not need an advance payment at all. A bathroom refit with ordered sanitaryware is a different risk. Start with the real commitment created by that job, not a percentage copied from somebody else's terms.

A deposit and an advance payment are not always the same thing

People often use the word "deposit" for any money paid before work. It helps to be more precise.

A booking deposit mainly reserves the service or date. An advance payment funds part of the agreed job, such as materials or the first stage of labour. Both normally count towards the final contract price, but the reason for the payment matters if the job is cancelled.

The Competition and Markets Authority says consumer deposits and cancellation charges should be fair and should reflect the business's direct loss. Its guidance also distinguishes a small booking deposit from a larger advance payment intended to cover actual costs. Read the CMA guidance on fair consumer contracts.

How much should you ask for?

There is no government table setting a standard percentage for builders, plumbers or electricians. Work it out from the job.

1. List the costs you must commit before starting. Include non-returnable materials, supplier deposits, plant bookings and other job-specific costs.

2. Consider the value of the booking. If a late cancellation would leave a gap you could not reasonably fill, a small booking amount may be justified.

3. Leave a meaningful balance attached to delivery. The customer should not be paying the whole contract price before receiving the work.

4. Use stages for longer jobs. Tie payments to clear progress points instead of asking for one large sum at the beginning.

5. Explain the calculation. "Advance payment for the listed sanitaryware" is clearer than "50% deposit" with no reason.

If the advance payment is mainly for materials, show those materials in the quote. If the amount also reserves labour and a start date, say so. The label alone does not decide what is fair.

Be careful with the words "non-refundable"

A term saying that every deposit is non-refundable in every circumstance is likely to be unfair in a consumer contract. If the customer cancels and you are not at fault, you may be able to keep an amount that reflects the direct loss you cannot reasonably avoid. That does not give you a right to keep a large payment unrelated to the loss.

The CMA says a business should take reasonable steps to reduce its loss. For example, if materials can be returned or a date can be filled with another job, that affects what it is reasonable to keep. Read the government guide to deposits and cancellation charges.

Your terms should also explain what happens if you cancel or cannot carry out the work. Do not write a one-sided clause that lets you keep the customer's money whatever happens.

Cancellation rights can apply before work starts

Consumer cancellation rights depend on how and where the agreement was made, the type of work and whether the customer asked you to start during a cancellation period. The rules for an agreement made in the customer's home can differ from a quote sent later after a measuring visit.

This area is easy to get wrong. Use current Trading Standards guidance or legal advice for your own terms, particularly if you regularly agree work in a customer's home or start urgent work before a cooling-off period has ended.

If you are VAT registered

An advance payment can create a VAT tax point before the work is completed. HMRC says the tax point for an advance payment or deposit is normally the date you issue the VAT invoice for it or the date you receive it, whichever happens first. Read HMRC's guidance on VAT, deposits and instalments.

That means the payment needs to be recorded properly. Do not wait until the final invoice and assume the earlier money has no VAT effect.

Deposit wording you can adapt

These examples are starting points, not legal terms for every business. The details must match the real job and your cancellation arrangements.

Booking deposit

A booking deposit of £[amount] is due when this quote is accepted. It reserves the agreed start date and will be deducted from the final price. If either side needs to cancel, the refund will be worked out under the cancellation terms supplied with this quote.

Advance payment for materials

An advance payment of £[amount] is due before materials are ordered. It covers the items listed in section [number] of this quote and will be deducted from the contract total. We will not order those items until the payment has cleared.

Stage payments

The contract price will be paid in the following stages: £[amount] on acceptance, £[amount] when [clear milestone] is complete, and the balance of £[amount] when the agreed work is complete. Any change to the scope or stage values must be agreed in writing.

Keep the paperwork clean

When the customer pays, record:

• the quote or job it belongs to;

• the date and amount received;

• what the payment covers;

• the remaining balance;

• the VAT treatment, if relevant;

• any receipt or invoice sent to the customer.

The final invoice should show the full job value, the earlier payment and the balance still due. Do not send a final invoice that makes the customer pay the deposit twice.

TradePilot lets you request a deposit, record part payments and see the balance left to collect. The payment is not taken automatically, and TradePilot does not provide built-in card processing. See how accepted quotes, deposits and invoices stay connected.

Put the deposit inside a clear quote

The deposit only makes sense when the customer can see the work and total it belongs to. Use the trade quote checklist, then read how to choose payment terms for the remaining balance.

Written by Chris, founder of TradePilot. This guide is general information, not legal or tax advice. Consumer cancellation rights, fair contract terms and VAT treatment depend on the contract and circumstances. Check your own terms with Trading Standards, HMRC or a qualified adviser.