Deposit invoice template UK: how to request upfront payments properly

In the UK, about 62% of invoices are paid late, and for tradespeople, it often feels worse. If you've ever begun a kitchen job, ordered materials costing thousands, and then waited two months for payment, you'll understand. Deposit invoices solve this. They ensure you receive money before you start, safeguarding both you and the client.

What is a deposit invoice?

A deposit invoice is sent before beginning work, asking the customer to pay part of the total cost upfront. It's not a quote or estimate, but a formal payment request with a set amount and deadline.

The remaining amount is billed separately, either as a final invoice or in stages throughout the job. Electricians rewiring a home might bill in multiple stages. A plumber replacing a boiler might request a deposit followed by a final bill. The payment structure varies depending on the job's size and duration.

Deposit invoices are common across UK trades. Builders, kitchen fitters, landscapers, bathroom installers, and plasterers on larger projects all use them. They help avoid timewasters, cover initial material costs, and provide working capital from the start.

What percentage should you charge?

The UK doesn't have a legal maximum for deposit percentages. Technically, you can charge any amount. However, the Consumer Rights Act 2015 requires that deposits are fair and proportionate to the trader's actual losses if a customer cancels. Asking for 80% upfront on a small job can be hard to justify in a dispute.

Here's what works in practice across various trades:

It's straightforward. If buying costly, non-returnable materials specific to a job, a higher deposit makes sense. If it's mainly labour, keep the deposit lower and bill more regularly.

Deposit vs stage payments

For projects over two weeks, stage payments are often better than a single deposit with a final invoice. A builder working on a house extension might arrange payments like this:

• 10% deposit on signing
• 25% at foundation completion
• 25% at roof level
• 25% at first fix (electrics and plumbing)
• 15% on final completion and sign-off

This keeps funds coming in throughout the project and reduces the risk of a large balance at the end. Each stage payment has its own invoice.

What to include on a deposit invoice

A deposit invoice needs the same elements as a standard invoice, plus some extras. According to HMRC's invoicing rules, every invoice must include:

Additionally, your deposit invoice should include:

• The total agreed job value, meaning the full contract price before any deposit
• The deposit amount you are requesting, shown as both a value and percentage
• The balance remaining after the deposit
• A clear "DEPOSIT INVOICE" label so nobody confuses it with the final bill
• Refund terms covering what happens if the customer cancels before work starts
• A reference to the quote or contract, linking the deposit to the agreed scope of work

You can create deposit invoices quickly using our free invoice generator. Add the full job value in the description, set the invoice total to the deposit amount, and note the balance in the footer.

Getting the refund terms right

This is where many tradespeople slip up. They accept a deposit but don't specify what happens if the job is cancelled. Months later, a customer might ask for a refund, and the money is already spent on materials.

Your deposit terms should cover three scenarios:

Customer cancels before work starts

If no materials have been ordered and no work has been done, a full refund is reasonable. If bespoke or non-returnable materials have been ordered, you should keep the cost of those materials. Make this clear: "If cancellation occurs after materials have been ordered, the cost of non-returnable materials will be deducted from any refund."

Customer cancels during the job

You're entitled to payment for completed work and used materials. The deposit should apply to this amount. Any excess is refunded; any shortfall is invoiced separately.

You cannot complete the work

If you cancel or can't finish, the customer should get a refund of the deposit minus the value of any work done. Don't try to keep deposits for uncompleted work. The Consumer Rights Act 2015 is clear here, and you'd lose any court claim.

VAT on deposit invoices

If you're VAT registered, the deposit payment creates a tax point. You must account for VAT on the deposit in the period you receive payment, not when the job finishes. This often trips people up.

For example, if you receive a £3,000 deposit (including VAT) in March for a job starting in May, the £500 VAT element must go on your March VAT return, not May. Use our VAT calculator to figure out the split.

The final invoice should show the total job value, the deposit already paid, and the remaining balance with VAT calculated on the full amount.

Worked example

Let's say you're a kitchen fitter quoting £8,400 including VAT for a full kitchen installation. You want a 25% deposit.

Your deposit invoice shows £2,100.00 due. The description reads: "25% deposit for kitchen installation at 14 Maple Road, Bristol BS3 4QT, as per quote QU-2024-0089. Total project value £8,400.00 inc. VAT. Balance of £6,300.00 due on completion." Clear. Professional. No room for confusion.

Common mistakes with deposit invoices

Having reviewed countless invoices from UK tradespeople, these errors keep cropping up:

Issuing a deposit invoice without an accepted quote or contract is the biggest one. If the scope isn't agreed in writing, there's no basis for the deposit. Closely related: missing refund terms. These should be on the invoice or accompanying quote, not just in your head.

Another frequent issue is invoices that simply say "£2,100 for kitchen installation" without specifying it's a deposit. The customer could argue they've paid in full. Always label it clearly.

Then there's the follow-up issue. Sending a deposit invoice and just... waiting. Set a clear due date (7 days is standard for deposits) and follow up on day 8. Better yet, set up automatic reminders.

Finally, asking for 50% upfront on a £200 job looks unprofessional. For anything under £500, consider just invoicing on completion with short payment terms.

The legal position on trade deposits in the UK

UK law treats deposits differently depending on whether your customer is a consumer or a business.

For consumer customers, the Consumer Rights Act 2015 applies. Deposit terms must be fair and transparent. An unfair term, like "deposits are non-refundable under any circumstances," can be struck out by a court. The Competition and Markets Authority guidance says deposits should be proportionate to actual losses.

For business customers, you have more flexibility. Business-to-business deposits are governed by whatever terms both parties agree to. You have more room to set strict non-refundable conditions, though they still need to be reasonable.

In both cases, the best protection is a clear written agreement. A quote accepted in writing, followed by a deposit invoice with explicit terms. If it ever goes to small claims court, the judge looks at what was agreed, not what either party assumed.

Frequently asked questions

Stop chasing deposits manually. InvoiceAdept's free invoice generator lets you create professional deposit invoices in under a minute, with automatic payment reminders that chase the money so you do not have to. See how it works.