Should you take a deposit, and how much?

Taking a deposit is a business choice, not a legal requirement. It's most useful where you have to buy materials or turn other work away. Keep it in proportion to your upfront costs, put it in writing on the estimate, and remember that work agreed in the customer's home usually comes with a 14-day right to cancel.

Should you take a deposit at all?

Take a deposit when you’re about to spend your own money or give up other work for a customer: special-order materials, a long job booked weeks ahead, or a new customer you’ve never worked for. For a small repair or a call-out, a deposit usually adds friction for little protection.

A deposit does three jobs. It covers what you spend before you’re paid. It shows the customer is serious, so the slot you’ve kept free doesn’t vanish. And it gives you something to set against your costs if the job is called off.

What it shouldn’t be is your profit up front. A large deposit before you’ve lifted a tool makes careful customers nervous, and it can be hard to justify if the job is cancelled.

How much deposit is normal?

There’s no fixed legal percentage. The amount is whatever you and the customer agree. As a guide to what customers are told, Citizens Advice advises homeowners not to pay everything up front, to push any deposit down as far as possible, and not to agree to more than 25%.

Citizens Advice also suggests homeowners offer to buy materials themselves instead of paying a deposit for them, and says paying in stages is a good idea because problems can be put right before the final payment. So a sensible approach, and one customers will recognise, looks like this:

These are example approaches, not legal rules. Whatever you choose, give a receipt for every deposit. Citizens Advice tells customers to ask for one.

What are the cancellation rules when you agree work in a customer’s home?

If a homeowner agrees the job with you in their home, or by phone, email or online, they usually get 14 days to cancel. Under the Consumer Contracts Regulations 2013, the period ends 14 days after the day the contract was made. You must give them the cancellation information and a cancellation form.

The details that matter for trades:

• Who it covers. Consumers only, not business customers. An “off-premises” contract is one agreed in person away from your business premises, such as at the customer’s kitchen table. Contracts agreed at a distance (phone, email, online) have a 14-day right to cancel too.
• What you must give. The cancellation information and a cancellation form, on paper or, if the customer agrees, another “durable medium”. The regulations define that as paper or email, or similar. For contracts agreed in the home, you must also give a copy or confirmation of the contract before the work starts.
• If you don’t. The cancellation period is extended by up to 12 months. For contracts agreed in the home, failing to give notice of the right to cancel is a criminal offence under regulation 19.
• Urgent repairs. There’s an exception where the customer specifically asked you to visit to carry out urgent repairs or maintenance, such as a burst pipe. It doesn’t cover extra work beyond the urgent repair, or parts beyond those needed for it.

The regulations also don’t apply to contracts to build new buildings, or substantially new ones by conversion.

Can you start work inside the 14 days?

Yes, but only if the customer expressly asks you to. For a contract agreed in their home, regulation 36 says that request must be made on a durable medium, so get it on paper or by email. A verbal “crack on” isn’t enough.

What happens next depends on what you told them:

• If they cancel after you’ve started, they pay a proportionate amount for the work done up to when they told you, based on the agreed price. But they only owe this if you gave them the cancellation information, including the fact that they’d have to pay for work done. Otherwise they owe nothing for it.
• If you finish the job inside the 14 days, the right to cancel ends, as long as they asked you to start and acknowledged they’d lose the right once the work was complete.

Example wording you could ask the customer to sign or send by email:

“I’d like the work to start before the end of the 14-day cancellation period. I understand that if I cancel, I’ll pay for work done up to that point, and that I lose my right to cancel once the work is complete.”

What happens to the deposit if the customer cancels?

If the customer cancels within the 14 days, you must refund everything they’ve paid, including the deposit, within 14 days of being told. The only deduction allowed is the proportionate amount for work you did at their express request, and only if you gave them the right information.

Cancellations after the cooling-off period are a different matter. Citizens Advice says a business will most likely keep some or all of a deposit to cover its expenses or losses, but if the deposit is more than the work done is worth, the customer can ask for the difference back. In practice, what you can keep depends on your written terms and the costs you’ve really had, so put both in writing.

If you’re VAT registered, HMRC treats most deposits as advance payments. The deposit creates a tax point when you receive it, so the VAT on it belongs in that period’s return, not the one when the job finishes.

What should the estimate say about the deposit?

Put the deposit on the estimate, not in a text message afterwards. If it’s written down before the customer agrees, there’s no argument later about what they signed up to.

Include:

• the deposit amount in pounds, and the percentage if you use one
• what it’s for, for example “covers the bathroom suite, ordered on acceptance”
• when it’s due and how to pay it, with your bank details and a reference
• that it will come off the final invoice
• any stage payments and the points they fall due
• what happens to it if the job is cancelled, alongside your cancellation information

The guide to quotes and estimates covers what else belongs on the document.

Worked example: a bathroom refit

Made-up figures for illustration. You quote a homeowner £6,000 for a bathroom refit, agreed at their house. The suite and tiles cost you £1,800 and need ordering two weeks ahead.

You give the cancellation information and form with the estimate. The customer wants you to start in 10 days, inside their 14-day period, so you get their request by email. The final invoice shows the £6,000 total, less the £1,500 deposit and £2,000 stage payment, with £2,500 to pay.

One thing to plan for: if the customer cancels inside the 14 days before you start, the whole £1,500 goes back to them. Time any order you can’t return with that in mind.

How does TradeLinkers handle deposits?

In TradeLinkers you can set a deposit as a percentage on an estimate and email the customer a deposit request. The customer can accept the estimate from the email by typing their name and tapping Accept, with no login, and you get an email with their answer. When the job’s done, you turn the estimate into the invoice in one tap and any deposit paid is carried across.

TradeLinkers doesn’t write cancellation information for you, so send your own cancellation notice and form with the estimate. See quotes and estimates, or make one now with the free quote template.

Sources

• Citizens Advice: Before you get work done on your home
• Citizens Advice: Cancelling building or decorating work
• Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013
• Regulation 36: supply of a service in the cancellation period
• Regulations 30 and 31: the cancellation period and its extension
• Regulation 28: urgent repairs and other exceptions
• Regulation 19: offence of not giving notice of the right to cancel
• HMRC: VAT guide (VAT Notice 700), paragraph 14.2.3 on deposits

This guide is general information for UK sole traders and small firms, not tax or legal advice. Rules change; check the source or ask an accountant for your own situation.