Retentions in Construction Invoices: How to Show and Recover Them

A retention is a slice of your price that the contractor holds back until the job is finished and any defects are put right. On your invoice or payment application it appears as a deduction from the value of work done, and you only get it back when the contract says it is due. If you are a sole trader subbing on commercial or larger domestic jobs, you need to know the percentage, the release trigger and the paperwork before you send the first invoice, not after the money is overdue.

This guide covers how retentions are calculated and shown, when they should be released, how CIS applies, what the proposed ban means, and how to chase money that has not arrived.

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TL;DR

A retention is money withheld from each payment as security against defects. It is owed to you, but only when the release conditions in your contract are met.
Show the gross value of work, the retention deducted, any CIS deduction and the net payable as separate lines, so nobody can dispute the arithmetic.
Check two things before you start: the retention percentage and the exact trigger for release. Many delays come from a missed or non-compliant application.
Retention is not yet banned. A Commercial Payments Bill was introduced in Parliament on 19 May 2026 proposing a ban, so check its current stage before relying on it.
If retention is late, apply formally under the contract, then use the Construction Act routes: payment notices, suspension after notice, and adjudication.

What a retention actually is
How much is usually held back
How to show a retention on an invoice or application
When retention should be released
Retention and CIS
Is there a ban on retentions?
Why late retention is common
How to recover retention that has not been paid
Our perspective on retentions and record-keeping
Keeping retention records tidy with TradeTally
Practical checklist before you accept a retention clause
FAQ
Sources

What a retention actually is

HMRC describes a retention as part of the contract price withheld for a period after the work is completed. If faults appear, the final payment can be held back until the subcontractor puts them right. If the contractor is satisfied at the end of the period, the money is released.

RICS frames it the same way: security that you will return to correct defects during the defects-correction or defects-liability period. It is a contractual arrangement, not a legal right of the contractor, so what applies to you is whatever your subcontract says.

That has a practical consequence. Your retention is not a discount and not a fee. It is a debt that is owed to you later. It belongs in your records as money receivable, and it should not be forgotten once the job is off your mind.

How much is usually held back

There is no single figure. Retentions are set in the contract, and the percentage varies with the contract form, the trade and how much bargaining power you have. Build UK’s published minimum standards give a useful picture of where the industry sits. They propose a standard of 1%, down from the 3% standard position in JCT Design and Build and the 3% example in the NEC4 User Guide. The same document proposes no retention at all on contracts below £100,000 or on purely temporary or preliminary works, such as scaffolding.

Those are proposals from an industry body, not law, and you may well be offered more than 3% on a real job. RICS notes that retention is usually a percentage of the contract works and generally applies to variations and changes as well as the original sum. Contracts may also cap the maximum amount deducted.

So when a contractor sends you a subcontract, find these four things:

The retention percentage.
Whether it applies to variations and extras.
Whether there is a cap, and what it is.
How and when each half of the retention is released.

If you cannot find them, ask in writing before you start. A short email now is much cheaper than a dispute in a year’s time.

How to show a retention on an invoice or application

Most subcontract work is paid on interim applications rather than a single bill. Whatever the format, the layout is the same: work out the gross value, take off the retention, take off anything else, and show what is payable.

Here is a worked example for a sole trader electrician on a subcontract with a 3% retention. The figures are illustrative only.

Line	Amount
Value of work completed to date	£8,000.00
Less previous applications	£5,000.00
Value this period (gross)	£3,000.00
Less retention at 3%	£90.00
Net after retention	£2,910.00
Less CIS deduction (if applicable)	see below
Amount due	after CIS

Three habits keep this clean:

Label the retention line clearly, with the percentage and the contract clause it comes from.
Keep a running retention total for each job, so you can see what is held and when each part falls due.
Record variations separately, because the retention usually applies to them too and they are where arguments start. Our guide to logging change orders before the deadline covers keeping that trail tidy.

Pro tip: do not net retention off silently. If the contractor’s payment is lower than your application and the invoice does not show why, you cannot tell whether it is retention, a counterclaim or a mistake.

Measured work and final accounts

On remeasurement contracts, the value of work done is agreed from measured quantities, and the final account is where retention and measurement disputes meet. If your jobs are priced from bills of quantities, it helps to understand how remeasurement contract final accounts are argued over, so your quantities are defensible before the retention release depends on them.

When retention should be released

Most contracts split release into two stages. RICS says a portion is generally released at completion, with the remainder after the defects period and the required certification. A common pattern is half at practical completion and half when the defects-liability period ends, but your contract may differ, so read it rather than assuming.

A few points matter for subcontractors:

Your release cannot hang on someone else’s contract. For contracts entered into on or after 1 October 2011, subcontract retention release cannot be linked to an act or event under another contract, such as the main contract completing. The government-commissioned Pye Tait report says the subcontract must carry its own trigger.
Sectional completion can bring partial release. RICS notes that partial possession can trigger it, but the final release may depend on whether the defects period is measured by section or for the works as a whole.
Terms should not be harsher down the chain. Build UK says subcontract retention terms should be no more onerous than the main-contract terms, with independent release triggers.

Diary the dates. When practical completion is certified, note the date, calculate when the defects period ends and set a reminder for the day after.

Retention and CIS

If you work under the Construction Industry Scheme, retention does not get a special rule. HMRC says retention payments are treated like other payments, and whether you are paid gross or under deduction depends on your CIS payment status on the date the retention is paid, not when the work was done.

In practice, that means a retention released a year after the job could be paid with a different deduction from the one on your original invoices, if your status has changed in between. HMRC also says a retention payment may contain different components, for example a contract payment and reimbursement for materials, so it should be analysed by component rather than assumed to be all labour.

For your records, keep the deduction statement the contractor gives you when retention is paid, and match it against your own figures. Our guides on CIS deduction rates and invoicing for VAT, CIS and MTD on site show how the deduction and the net figure should read. If VAT applies to your work, check the wording rules in our piece on the domestic reverse charge.

Retention and CIS — overview diagram

Is there a ban on retentions?

Not at the time of writing. The government consulted on options to reform or ban cash retentions in 2025, and the Commercial Payments Bill [HL] was introduced on 19 May 2026. According to its explanatory notes, it proposes banning contractual provisions that permit retention deductions, with a transition period and an implied fixed-sum remedy for unauthorised deductions.

What that means for you:

A bill is not law until it passes and comes into force, and the transition arrangements decide which contracts are caught.
Until then, the retention clause in your signed contract still governs your jobs.
Keep invoicing retention properly. Even if the ban arrives, retentions already held on older contracts will still need to be claimed and recorded.

Check the bill’s page on the UK Parliament website for its current stage before you quote on the basis that retentions will disappear.

Why late retention is common

The government-commissioned Pye Tait report found that about 71% of contractors with recent retention experience had experienced delays in receiving retention money. The survey covered 2013 to 2016 in England, so it is dated, but its finding is consistent with what trades report: average delays ran to several months, and longer delays were reported lower in the supply chain. A sole trader at the bottom of the chain is exposed to the worst of it.

That is why a small retention can matter more than it looks. Three jobs with £400 held on each is £1,200 sitting with other people, and for a one-person business that is a month of van costs and materials.

How to recover retention that has not been paid

Work through these steps in order. Each one builds the paper trail for the next.

Check the trigger. Re-read the clause. Has practical completion been certified? Has the defects period ended? Is there a certificate you need to wait for?
Make a compliant application. Scrutton Bland advises reviewing the release trigger and submitting a compliant retention payment application, because an informal email or an ordinary invoice may not be enough under the contract. Use the format and address the contract specifies.
Check the payment mechanism. Section 110 of the Construction Act requires a contract to provide an adequate mechanism for working out sums due, payment dates and a final date for payment, plus payment notices stating the amount and how it was calculated.
Chase in writing. Polite, dated and specific. Our guide to invoice reminders for builders has wording that keeps the relationship intact.
Consider suspension, carefully. Under the Act, if a sum due is unpaid after the final payment date and no effective withholding notice was given, the unpaid party may suspend performance after giving at least seven days’ notice. Take advice before you do this on a live job.
Adjudicate if needed. The same Act gives a party the right to refer a construction-contract dispute to adjudication. Scrutton Bland notes that if an application does not produce payment, formal dispute-resolution procedures such as adjudication can be used to recover retention.

If a sum is large or the contractor disputes the defects, speak to a construction solicitor or a trade body’s legal helpline before you issue notices. A badly served notice can cost you the position you were trying to protect.

Our perspective on retentions and record-keeping

We built TradeTally because the admin after a day on site is where money quietly goes missing. Retention is a good example. The work is done, the invoice is sent, and a year later nobody can find the application that triggered release.

Our view is simple. Treat each retention like a separate small invoice that you have not been able to send yet. Write down the percentage, the amount held and the release date at the moment you issue the application. Keep the contractor’s deduction statement with the job record. Make sure the CIS deduction you were paid under matches what you expected.

We would also say this: do not let retention make you accept a bad contract. If a clause ties your release to someone else’s completion, or the percentage is far higher than you can carry, say so before you sign. Late-night bookkeeping is bad enough without chasing money you agreed to in a rush.

— Simon

Keeping retention records tidy with TradeTally

TradeTally is built for UK sole traders who handle their paperwork from the van. You can create branded invoices, handle CIS deductions, snap receipts and keep tax-ready records, including an SA103F export for Self Assessment. The Starter plan is £0 per month. Professional is £12 per month, or £120 per year, with unlimited invoices, receipts and tax exports. See the plans and pricing, or look at our CIS invoice software page if deductions are your main headache.

If you want a starting layout for the invoice itself, our invoice template for builders is a good place to begin.

Practical checklist before you accept a retention clause

Percentage, cap and whether it covers variations: confirmed in writing.
First release date and second release date: diarised.
Release trigger: independent of the main contract.
Application format: known, and a template saved.
CIS status: checked, with a note of what happens if it changes.
Retention total per job: tracked, so you know what is owed to you.

Deposits and staged payments are a related way of improving cash flow. See our steps for deposit invoices with VAT and CIS correct and our note on when to invoice.

FAQ

Can a contractor hold back retention from my invoice?

Only if your contract allows it. Retention is a contractual term, so the percentage, the cap and the release rules come from your subcontract. If there is no retention clause, there is no basis for deducting one, although the contractor may have other grounds for withholding that need a proper notice.

Are retentions banned in the UK?

Not yet. The Commercial Payments Bill [HL] was introduced on 19 May 2026 and proposes a ban on contractual retention clauses, with transition arrangements. Until it becomes law and comes into force, your signed contract still applies, so check the bill’s progress on the Parliament website.

Does CIS apply to retention payments?

Yes, in the ordinary way. HMRC says there are no special CIS rules for retention. Whether you are paid gross or under deduction depends on your payment status on the date the retention is paid. A payment may also include non-labour elements, such as materials, which are treated separately.

What can I do if retention is overdue?

Check the release trigger, make a compliant application in the form the contract requires, and chase in writing. If that fails, the Construction Act lets you refer a dispute to adjudication, and in some circumstances suspend work after at least seven days’ notice. Get legal advice before suspending.