A worked example
A £60,000 single-storey extension (before VAT), starting on a Monday, paid in six stages: 15% when the foundations are in, 20% at DPC and floor slab, 25% when the walls are up, 20% when the roof is on and watertight, 10% at first fix and 10% on completion. At 20% VAT the client pays £72,000 in all; the walls-up payment, for example, is £15,000 plus £3,000 VAT.
How it works
Each stage is a share of the price and is invoiced on the Friday of the week you expect to reach it. The shares are rounded to the penny so they always add up to the price exactly. A deposit comes off the price first and is due on the first day. Retention is held back from every payment and released 180 days after the last one. Weekly in arrears spreads the price over the weeks on site, every Friday, slightly front-loaded for materials. The same calculation runs the payment plans in Bricken’s quotes.
Questions builders ask
What are stage payments in building work?
The price is paid in parts as the work reaches agreed stages, such as foundations, walls up, roof on and completion, instead of all at the end. Each stage is invoiced when it’s reached.
Stage payments or weekly in arrears: which is better?
Weekly in arrears means the client pays every Friday for the work done that week. Your cash stays steady and the client never pays for work that hasn’t been done, which makes it an easy sell. Stage payments mean fewer, bigger invoices, with longer gaps in between to fund out of your own pocket.
How much deposit should a builder ask for?
There’s no legal rule. Consumer guides usually say a deposit should be small, for example to cover materials ordered specially for the job, with the rest paid for work done. Many builders take no deposit and invoice weekly in arrears.
Is VAT added to stage payments?
If you’re VAT registered, VAT is charged on each payment as you invoice it, usually at 20% for extensions and refurbishments. Some work has a different rate, so check with your accountant. If you’re not VAT registered, you don’t add VAT.
What is retention?
A percentage of each payment held back until an agreed time after completion, to cover any snags. It’s common on commercial jobs (often 5%) and less common on domestic work.