Stage payments on a building job: set them up so you're never working on credit

Three weeks into an extension, the foundations are in, the blocks are up and the materials are on your card. The customer's lovely. They'll sort you out at the end.

That's you lending them several thousand pounds, interest-free, secured against nothing.

Stage payments exist so that doesn't happen. But the rules around them split in two depending on who you're working for, and the one that catches the most builders isn't about getting paid at all — it's about whether the customer can walk away from a job you've already started.

First: who are you working for?

Everything below depends on this.

A homeowner who lives in the property, or is going to. This is a consumer contract. You have no statutory right to stage payments. You get exactly what you agreed, plus consumer protection that mostly points the customer's way.

Everyone else. A landlord doing up a rental, a developer, a business, or a main contractor you're subbing for. The Housing Grants, Construction and Regeneration Act 1996 — the Construction Act — gives you payment rights whether or not the contract spells them out.

The dividing line is narrower than people assume. The Act's exclusion only covers a contract with someone who occupies or intends to occupy the dwelling as their home. In a 2013 High Court case, a client who meant to let the property out couldn't rely on it. A developer can't either. And if you're subbing to a main contractor on a homeowner's extension, your contract is with the contractor, not the homeowner — on a plain reading of the Act that's covered, though no court decision says so in terms.

The Act applies in Scotland too, with its own default scheme.

Working for a homeowner: it's all in what you agree

The Consumer Rights Act says nothing about deposits or instalments. If nothing is agreed, the customer owes a reasonable price and you owe completion in a reasonable time — which is exactly the vagueness you don't want halfway through a build.

So the payment schedule belongs in writing, before you start: how much, triggered by what, and paid within how long.

On the deposit, there's no legal percentage. The CMA's guidance on unfair terms says a deposit kept on cancellation should normally be "a small percentage of the price" — and that a bigger prepayment is more likely to be unfair. The Federation of Master Builders describes around 10% as a common guide. Citizens Advice goes further on the homeowner's side and tells them not to agree to more than 25%. A bigger upfront sum is much easier to defend when it matches a real cost — bespoke windows, a kitchen, anything you have to order and can't send back — and there's more on that in taking a deposit.

If you use a standard contract, the homeowner versions from JCT and, in Scotland, the Scottish Building Contract Committee both assume a lump sum paid either on completion or in agreed interim payments. The FMB recommends short, regular stage payments, every week or two, and says its own domestic contracts build that in.

The cancellation rule that catches builders out

This is the part worth reading twice.

If you agree the job in the customer's home — they say yes at the kitchen table, or straight after you've been round — that's usually an off-premises contract under the Consumer Contracts Regulations. The customer then has 14 days to cancel. Extensions and conservatories are included; only building a new house, or something close to it, is excluded.

If instead you leave or send a quote and they accept it later — by email, say, once you've gone — Trading Standards' business guidance treats that as an ordinary contract with no cancellation right.

Where the right does apply, three things follow:

• You have to give the customer the cancellation information — the right, the time limit and a cancellation form — on paper or by email, before they're bound.
• You can't start inside the 14 days unless they ask you to, in writing. If they do and then cancel, they pay for the work done so far, in proportion to the whole job.
• If you don't give the cancellation information, the period stretches — by up to twelve months. Read together, the regulations then say a customer who cancels in that window bears no cost for the work done and must have their payments refunded within 14 days. We couldn't find a case applying that to a building job, but it's what the regulations say, and failing to give the information is also a criminal offence.

That last point is why this matters more than any argument about percentages. The simplest way to stay clear of it is to send the quote and let the customer accept it in their own time. If you do take the job on at the kitchen table, give them the cancellation information there and then, and get their request to start early in writing.

Working for a business: the Construction Act is on your side

On a construction contract that isn't with a homeowner-occupier, you have real rights.

Stage payments. Unless the work is agreed to take under 45 days, you're entitled to stage or periodic payments. If the contract doesn't set the schedule, a default one applies: a valuation every 28 days, each payment due seven days after the period ends, and the final date for payment 17 days after that.

Payment and pay less notices. The payer has to say what they think is due. If they want to pay less than the sum that's been notified, they have to serve a pay less notice in time, saying why. Without a valid one, the notified sum is what they owe.

Suspension. If you're not paid by the final date, you can suspend some or all of the work after giving at least seven days' written notice saying why. The time lost is added to the contract period, and your reasonable costs of suspending are recoverable.

Adjudication. Either side can refer a dispute to an adjudicator, who normally decides within 28 days. The decision binds until it's overturned in court, arbitration or by agreement.

Late payment. On business contracts without their own interest clause, you can add statutory interest — 8% above the Bank of England's base rate — and a fixed compensation sum of £40, £70 or £100, scaled to the debt.

One change to watch: the Commercial Payments Bill, introduced in May 2026, would make retention clauses in construction contracts void after a transition period. It isn't law yet.

Building the schedule

Whichever side you're on, the same principles make a schedule that actually protects you.

Tie each payment to something that can be seen done, not a date. Dates slip for reasons nobody controls, and "second payment due 1 March" becomes an argument when the roof isn't on. "Due when the roof is on and watertight" doesn't. A typical extension goes groundworks and foundations, damp-proof course, walls, roof, windows, first fix, plaster, second fix, snagging — and those make natural stage points. How you weight them is your call; there's no standard split.

Keep payment level with your spend. The question for each stage is how much you've paid out by then — in materials, labour and hire — and whether the payments so far cover it. Stages heavy in materials want their money early. The point is never to be owed more than you could afford to lose.

Get paid for bespoke materials before you order them. A customer who changes their mind about made-to-measure glazing leaves you holding it, not them.

Say in the contract that the next stage doesn't start until the last one is paid. On trade work you have a statutory right to suspend. On a homeowner job you only have what you wrote down.

Agree any holdback for snagging up front. Where a homeowner holds some back until snags are fixed, the FMB puts it often at around 2.5% to 5%. Agree the amount and what releases it before you start, not at the end.

Put changes into the next stage, not a mystery total at the end. Extra work priced and agreed as it comes up is far easier to be paid for — the variations guide covers how.

VAT and CIS on stage payments

If you're VAT-registered, the tax point for a stage payment is the earlier of receiving the money or issuing a VAT invoice. Issue a VAT invoice for a stage before you're paid and you owe the VAT on money you haven't had — unless you're on the cash accounting scheme, where VAT follows the payment. Some builders send a request for payment first and the VAT invoice when it's paid; HMRC's guidance says a request clearly marked as not a VAT invoice doesn't create a tax point, though that passage was written about continuous services rather than construction specifically.

The domestic reverse charge doesn't apply when the customer is a homeowner.

If you're a CIS subcontractor, each stage payment has CIS deducted from the labour and any materials markup, but not what the materials actually cost you. The CIS guide has the detail.

Where grafter.ly fits

Plainly: grafter.ly doesn't do stage payments yet.

You can raise more than one invoice against a job — a blank invoice for each stage, each with its own card payment link if you've connected Stripe, its own reminders if it goes unpaid, and the CIS deduction applied if it's due. But nothing keeps track of how much of the quote you've billed so far, and an invoice built from the quote copies the whole of it.

The job's status does keep up with stages. Send an invoice on a job you haven't marked complete and you're asked whether the job is finished. Answer that there's more to do and the job stays on your schedule, however many stages are paid. A deposit paid when the customer accepts the quote leaves it there too.

When the work's done, mark the job complete. It moves to paid if every invoice is settled, or to billing if one is still owed. Raise the final invoice before you do, or the job shows as paid until that invoice goes out.

So if you bill in stages, keep the schedule in the contract and a note on the job, and raise each stage's invoice yourself.

The short version

1. Work out who you're working for. A homeowner living there gets consumer protection; almost everyone else is covered by the Construction Act.
2. For homeowners, write the schedule down before you start, and keep the deposit modest unless it matches a real cost.
3. Don't agree a homeowner job at the kitchen table without the cancellation paperwork. Send the quote and let them accept later, or give them the information on the spot.
4. For trade work, know your notices. A missing pay less notice means the notified sum is owed, and you can suspend on seven days' notice.
5. Tie payments to visible progress, keep them level with your spend, and don't start the next stage unpaid.

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Sources. The Housing Grants, Construction and Regeneration Act 1996, Part II, in particular sections 106, 108, 109 and 112; the Scheme for Construction Contracts (England and Wales), and the Scottish Scheme as amended by SSI 2011/371; the Consumer Rights Act 2015, sections 51 and 52; the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, including regulation 36; the CMA's unfair contract terms guidance, CMA37, as revised in July 2026; Business Companion's guidance on off-premises sales; Citizens Advice on what to do before getting work done on your home; the Federation of Master Builders on keeping a renovation on budget and its domestic building contracts; JCT's Building Contract for a Home Owner/Occupier and the SBCC's Scottish homeowner contract; Which? on the stages of building an extension; HMRC's VAT Notice 708, VAT time of supply manual, reverse charge technical guide and CIS manual on materials; GOV.UK on claiming late payment interest and recovery costs; the government's Commercial Payments Bill overview; and, on the residential occupier exclusion and Westfields Construction v Lewis [2013], Muckle LLP's commentary. All checked 16 September 2026.

This is a guide to how the rules work in general, not legal advice about any particular contract.