Staged Payments in Construction UK
A complete guide to progress billing and staged payments for UK construction projects. Learn how to structure payments, create interim invoices, and maintain healthy cash flow.
What are Staged Payments?
Staged payments (also known as progress payments or interim payments) are partial payments made throughout a construction project as work is completed, rather than one payment at the end.
This approach benefits both parties:
- Contractors/subcontractors: Improved cash flow, reduced risk
- Clients: Only pay for completed work, easier budget management
Common Payment Stage Structures
For New Build / Extensions
For Trades / Subcontractors
Subcontractors typically invoice:
- Monthly: Most common for longer projects
- Per phase: First fix, second fix, completion
- Milestone-based: Agreed deliverables
- Day/week rates: For labour-only contracts
How to Structure Your Payment Stages
1. Define Clear Milestones
Each payment stage should be tied to a verifiable milestone—something that can be inspected and signed off. Vague stages lead to disputes.
Good: "All plastering complete and sanded, ready for decoration"
Bad: "50% of plastering done"
2. Weight Stages by Cost
Payment stages should roughly reflect the cost and risk at each phase. Don't front-load payments too heavily or clients may resist. Don't back-load payments or your cash flow suffers.
3. Include Materials Properly
Consider when materials are paid for:
- On delivery: Invoice when materials arrive on site
- On installation: Invoice when materials are fixed
- Advance payment: Request payment for expensive materials before ordering
Creating Interim / Progress Invoices
Progress invoices should clearly show the stage being billed and the cumulative position. Include:
Essential Information
- Project reference: Site address and contract number
- Valuation number: Sequential (Valuation 1, 2, 3...)
- Valuation period: Dates covered
- Cumulative value: Total work done to date
- Less previous: Amounts already invoiced
- Less retention: Amount withheld
- This application: Amount due this invoice
Example Progress Invoice Layout
Period: 1-31 January 2026
Legal Framework: Construction Act
The Housing Grants, Construction and Regeneration Act 1996 (often called the "Construction Act") gives you important rights regarding stage payments:
Right to Interim Payments
For contracts over 45 days, you have the legal right to stage payments. The contract should specify:
- How often payments are made (usually monthly)
- How amounts are calculated
- When payments are due
Payment Notices
Clients must issue a payment notice within 5 days of each due date, stating how much they'll pay. If they want to pay less, they must issue a pay less notice before the "prescribed period" ends.
Right to Suspend
If you're not paid on time, you have the right to suspend work (with 7 days' notice). This is a powerful protection, though it should be used carefully.
Payment Applications vs Invoices
In construction, there's an important distinction:
| Document | Purpose | When Issued |
|---|---|---|
| Payment Application | Formal request for payment, triggers valuation process | At each valuation date per contract |
| Invoice / Tax Invoice | Legal document for payment and VAT purposes | After payment notice is received |
Many contracts require a payment application first, followed by an invoice once the amount is agreed.
Tips for Healthy Cash Flow
- Invoice promptly: Submit applications on or before the due date
- Keep records: Photograph progress to support valuations
- Chase quickly: Follow up immediately if payment is late
- Know your rights: Understand the Construction Act provisions
- Track everything: Keep cumulative records across all projects
- Separate labour and materials: Important for CIS deductions
Manage Stage Payments Easily
Experi helps you track progress across projects, create interim invoices with proper cumulative calculations, and manage retention. See all your project billing in one place.
Frequently Asked Questions
How many payment stages should I have?
This depends on project length and value. For projects under 4 weeks, you might just have deposit + completion. For longer projects, monthly valuations are standard. The key is matching payments to work completed and maintaining cash flow.
Can I request a deposit before starting?
Yes, deposits of 10-25% are common for construction work. This helps cover initial material costs and shows client commitment. For domestic customers, keep deposits reasonable and explain what they cover.
What if the client disputes a valuation?
They must issue a pay less notice explaining why they're paying less. If you disagree, you can use adjudication (a quick dispute resolution process under the Construction Act). Document everything to support your position.
How does retention affect stage payments?
Retention (usually 5%) is deducted from each stage payment. Track the cumulative retention held and ensure you claim it back—half at practical completion, half after the defects period.