Retention in construction: what it is and how to get it back

↑ Part of the Getting Paid series · Getting paid on time

Retention is a percentage of each payment that the customer keeps back until the job has proved itself. It is usually somewhere around 2.5% to 5%, often released in two halves: one at practical completion, the other at the end of the defects period, commonly a year later. It is your money, already earned, and it is one of the most often forgotten sums in the trade, because by the time it is due you are three jobs further on.

This page sits under our guide to getting paid on time. It covers what retention is for, what is normal, the clauses to watch before you sign, and the routine that gets it back.

Part 1What retention is for

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Retention gives the customer some security that snags and defects will be put right after you leave. Instead of trusting you to come back, they hold a slice of the money until the defects period ends. On a well-run job it costs you nothing but time: you fix the snags, the period ends, the money comes back.

It is standard on commercial work and on subcontracts, where a main contractor holds retention from every subcontractor because their own client holds it from them. On a job for a homeowner it is unusual, and you are under no obligation to offer it. Some trades do agree a small retention on a big domestic job, because it reassures a nervous customer more than any promise about aftercare.

Part 2How much, and when it comes back

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The figures are a matter of contract, not law, so they are whatever you agree. What you will usually see:

• The percentage: around 2.5% to 5% of each payment, and sometimes capped at a total.
• The first release: half the retention at practical completion, when the work is finished apart from minor snags.
• The second release: the rest at the end of the defects period, often 12 months after practical completion.

Paid through the job, 95% of each valuation	£19,000.00
First half of the retention, at practical completion	£500.00
Second half, at the end of the defects period	£500.00
What the job pays you in total	£20,000.00

The £1,000 held back is real profit on most jobs. On a £20,000 subcontract at a 10% margin it is half of everything you made.

Part 3Read these clauses before you sign

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The retention clause is short and easy to skim. These are the lines that decide whether you see the money:

• The release events. "Half at practical completion" is clear. "On completion of the main contract" or "when we receive ours" ties your money to someone else's job. On contracts the Construction Act covers, payment cannot be made conditional on obligations under another contract, and the Act separately stops a contractor making your payment depend on being paid by their own client, unless someone up the chain has become insolvent. So a clause like either is worth querying before you sign, and worth taking advice on if the contractor will not move.
• Who decides the dates. Practical completion and the end of the defects period should be fixed by something you can see: a written handover, a dated certificate, a set number of months. A date nobody records is a date that never arrives.
• The percentage and any cap. 5% on a long job adds up. Ask for a lower figure or a cap on the total, particularly where you are carrying the materials cost.
• What happens if they go bust. Money held as retention is usually just a debt. If the business holding it fails, you are an unsecured creditor and it is generally gone. On a large subcontract it is fair to ask for a retention bond instead, or for the money to be held separately.

The Construction Act does not cover a contract with a homeowner who lives, or will live, in the property. On those jobs there is no statutory backstop at all, so whatever retention you agree lives entirely in your own terms. Write the percentage and both release events down.

Part 4Getting it back

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Retention goes missing through admin, not argument. The fix is a routine:

• Diary both release dates the day the job is signed off, with the amount next to each.
• Get practical completion in writing: an email confirming the date and listing any snags is enough. Your defects period runs from it.
• Clear the snags promptly, in writing, so there is nothing to point to when the release falls due.
• Invoice for the release on the due date. Do not wait to be offered it. An invoice with the original job reference, the retention percentage and the amount held is hard to ignore. Our guide on how to write an invoice covers the rest of it.
• Chase it like any other debt if it is late. On a commercial job, statutory late payment interest applies to an overdue retention release just as it does to an overdue valuation.

When the VAT on a retention falls due is a question for your accountant, because it depends on when it is invoiced and paid.

Common questionsRetention: quick FAQ

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What is retention in construction?

A percentage of each payment, typically 2.5% to 5%, that the customer holds back as security for defects. It is released once the work has proved itself, usually half at practical completion and half at the end of the defects period.

When should retention be released?

When the contract says. The most common pattern is half at practical completion and the rest at the end of a defects period, often 12 months later. If your contract does not give dates you can identify, agree them in writing before you start.

Can a main contractor hold my retention until they get theirs?

The Construction Act generally stops a contractor making your payment depend on being paid by their own client, though that changes if someone up the chain has become insolvent. A release tied to completion of the main contract is caught too, because payment cannot be made conditional on obligations under another contract. Either is a clause to query before signing, and to take advice on if it is already in a contract you have signed.

Do I have to accept retention on a domestic job?

No. The Construction Act does not apply to a homeowner's own home, and retention on domestic work is unusual. If you agree to it, put the percentage and the release dates in your terms.

What happens to my retention if the contractor goes bust?

Usually it is treated as an ordinary debt and you rank as an unsecured creditor, which often means it is lost. That is the case for asking for a retention bond, or a cap, on a large subcontract.

This guide is general information for UK tradespeople, current to the best of our knowledge in 2026, and is not tax, accounting or legal advice. Rates, thresholds and how they apply to you change, so confirm your position with HMRC, a qualified accountant or a solicitor before relying on it. TradeDraft accepts no liability for decisions made on the basis of this guide. Questions: hello@tradedraft.co.uk.