Construction retention money rules in the UK (and how to invoice it)
Retention is a cash flow killer if you do not track it. Here is how UK retention works and how to invoice it properly.
Construction retention money rules in the UK (and how to invoice it)
Retention can wipe out cash flow if you ignore it. The rules are simple, but you must track release dates and invoice the retained amount at the right time.
How retention usually works
- Retention percentage: 3% to 10% of the contract value
- Stage 1 release: at practical completion (often 50% of the retention)
- Stage 2 release: after the defects period (remaining 50%)
Example on a GBP 20,000 job with 5% retention:
- Retention total: GBP 1,000
- Release at practical completion: GBP 500
- Release at end of defects period: GBP 500
Why it matters
If you do not track retention, you forget to invoice it and the money sits with the customer. Many small contractors lose money each year this way.
How to invoice retention correctly
- Show retention on each invoice. Display the amount retained and the running total.
- Raise a retention release invoice at practical completion for the first half.
- Raise a final retention invoice at the end of the defects period.
- Attach evidence (sign-off, completion certificate, snag list resolution).
Sample retention line item (invoice)
Retention (5%) withheld to be released at practical completion and defects period.
Retention held to date: GBP 1,000
Retention to release now: GBP 500
Reduce retention pain
- Negotiate a lower retention percentage where possible.
- Shorten the defects period for small jobs (e.g., 30-60 days).
- Keep a strict snag list and close it fast.
Toolfy tip
Create a job reminder for the retention release date and attach the completion certificate to the job. That way you never miss the second payment.
⚠️ Important Disclaimer
This guide is for general informational and educational purposes only. It does not constitute professional advice of any kind (legal, financial, tax, insurance, or otherwise).
Before making business decisions: Consult with qualified professionals (solicitors, accountants, insurance brokers, etc.) who can assess your specific circumstances. Laws, regulations, and industry standards change frequently and vary by location and situation.
Toolfy and the article authors accept no liability for decisions made or actions taken based on information provided in this guide. You are solely responsible for ensuring compliance with all applicable laws and regulations.
Frequently Asked Questions
What is retention in construction?
How much retention is typical in the UK?
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