For businesses
Deposit terms for a small business: what holds up and what sells
Deposit terms for a small business in the UK hold up when they are proportionate, transparent and in writing before the customer commits: the deposit reflects real costs, the cancellation terms return anything not yet spent, and the customer’s 14-day cancellation right is stated where it applies. Terms that keep the whole deposit “in all circumstances” are usually unenforceable — and they lose deposits, because careful customers read them as a warning.
Key facts
- A term requiring a consumer who cancels to pay a disproportionately high sum, or forfeit a deposit out of proportion to the trader’s loss, is on the statutory “grey list” of terms likely to be unfair and not binding (Consumer Rights Act 2015, s.62 and Sch. 2, paras 4–5).
- Contracts agreed in the customer’s home or at a distance carry a 14-day cancellation right; if the trader fails to state it, the period extends by up to 12 months (Consumer Contracts Regulations 2013, regs. 29–31).
- If the customer asks in writing for work to start inside the 14 days and then cancels, they pay only for what was done, in proportion (Consumer Contracts Regulations 2013, reg. 36).
- The CMA’s guidance says a deposit should be no more than is needed to protect the trader against loss if the consumer cancels, and that “non-refundable” cannot make an unfair term fair (CMA37, Unfair contract terms guidance, 2015).
- Deposits of 30–50% for made-to-order work and 5–20% in stages for building work are the bands customers are shown as normal (SafeToPay deposit guidance, methodology v1.2).
The three tests deposit terms must pass
Deposit terms are enforceable when they are proportionate, transparent and agreed before the money changes hands; a term that fails any one of the three can be ignored by the customer and, in a dispute, by a court.
Proportionate means the amount matches the cost you actually commit — the materials ordered, the workshop slot booked, the survey done — and any sum kept on cancellation matches your genuine loss at that point. Transparent means plain language, prominent, not buried on page four of the terms. Agreed before commitment means the customer saw the terms on the quote, not on the invoice after paying. The Consumer Rights Act 2015 applies all three; the CMA’s guidance spells them out for deposits in particular.
What holds up and what doesn’t
The same deposit can be enforceable or worthless depending on how the cancellation term is written, so the wording matters more than the percentage.
| Term | Likely enforceable? | How a careful customer reads it |
|---|---|---|
| “30% deposit on order, covering materials and workshop booking; refunded in full if you cancel before materials are ordered, less costs incurred after” | Yes | Normal, professional; the money has a purpose |
| “50% deposit, non-refundable in all circumstances” | Unlikely — Sch. 2 para 4 | A warning; the business expects disputes |
| “Deposit forfeited if the customer cancels for any reason after 24 hours” | Unlikely, unless costs really are incurred within 24 hours | Aggressive; invites a challenge |
| “Full payment before delivery” for made-to-order goods | Can be enforceable, but scores badly | All the risk on the customer; card payment or deposit protection expected |
| Stage payments tied to milestones (“on delivery to site”, “on first fix complete”) | Yes | The safest structure; money follows the work |
| Stage payments tied to dates regardless of progress | Enforceable but poor practice | Payments can run ahead of the work; hesitation |
| “Deposit” that is really the whole price for a standard, off-the-shelf item | Disproportionate | Why is a stock item being paid for up front? |
| No written deposit term at all; verbal “we take half up front” | Weak; the customer’s version is as good as yours | Unprofessional; nothing to refer back to |
“Non-refundable” is not a legal category
Calling a deposit non-refundable does not change what a court will allow you to keep; it can only ever be the loss you actually suffer on cancellation. Early on that may be nothing, once materials are cut it may be most of the deposit, and the honest term says so. A deposit described as a genuine pre-estimate of loss at each stage is enforceable and, to a customer, looks like a business that has thought about it.
A deposit is not a cancellation charge
Two different things get bundled under one word. The deposit is the customer’s part-payment of the price; the cancellation charge is what you keep if they walk away. Terms that separate them — “the deposit is applied to your balance; if you cancel, we deduct our costs to date and refund the rest” — are the ones that survive scrutiny and calm a nervous customer at the same time.
Stage payments protect both sides
A milestone schedule means the business is never far out of pocket and the customer is never far ahead of the work. It also gives each payment a reason a customer can check with their own eyes, which is why it is the structure SafeToPay’s deposit guidance shows to customers for every trade. A customer who refuses to pay a deposit will very often accept the same total as a schedule.
The 14-day cancellation right you have to state
If the contract was agreed in the customer’s home, at a show, or online or by phone without meeting, the customer has 14 days to cancel for any reason and get the deposit back — and you must tell them so in writing. Fail to state it and the 14 days becomes up to 12 months and 14 days. This catches many trades: a kitchen agreed at the kitchen table, a staircase ordered by email after a site visit, a driveway quoted on the doorstep. Contracts signed at your premises or showroom are not covered.
The regulations still let you start early. If the customer asks in writing for work to begin within the 14 days — a line on the order form does it — and then cancels, they pay a proportionate amount for what was done, and bespoke items made to their specification are excluded from cancellation altogether once made. State that too.
The line that costs nothing and saves the deposit: “You have the right to cancel this contract within 14 days without giving a reason. By ticking this box you ask us to begin work within that period and agree to pay for work done and materials ordered if you then cancel.” One sentence, on the order form, above the signature.
Deposit wording that works
Good deposit wording answers three questions in the customer’s order: how much, what for, and what happens if I cancel. The clause below is a starting point for made-to-order work; adjust the percentages and the stage names to your trade.
Deposit and payment. A deposit of [30]% of the quoted price is payable on acceptance and is applied to your final balance. It covers our survey, the materials we order for your job and the reservation of a manufacturing slot. The balance is payable [on delivery to site / in the stages set out below]. You may pay the deposit by credit or debit card, bank transfer or card payment link; we recommend card.
If you cancel. Before we order materials, your deposit is refunded in full within 14 days. After materials are ordered, we deduct their cost and any work done to that date and refund the balance; we will show you the figures. Items made to your specification cannot be returned once manufactured. Nothing in these terms affects your legal rights.
The wording says what the money buys, returns anything unspent, and names the payment methods — the three things a customer’s check is looking for. It does not say “non-refundable” anywhere, and it does not need to.
Two real checks
Both from live checks; names withheld, figures as filed on the register.
Fitted furniture manufacturer, 40 years on the register
Asks for 50% on order — top of the band — with written terms that say what it covers and what is refunded before manufacture starts, card accepted, balance on delivery. The record behind it is strong: full accounts on time, £1.8 million net assets, own factory, company number on every page. A customer reading the report sees a large deposit with a reason, a route to recover it and a company able to absorb a cancellation. Deposit guidance in the report: 30–50% normal, first stage by card.
Kitchen fitting company, eleven months on the register
Terms on the website: 50% “non-refundable” on order and the remaining 50% before delivery, bank transfer only. Registered at a serviced office, no landline, no accounts filed yet. Nothing on the register is wrong, but the terms ask a customer to pay the whole price to a company with no filed accounts and no card option before anything arrives. Deposit guidance in the report: 25–50% by card, balance on installation, contract in the company’s name. The terms, not the age, are what a customer walks away from here.
Enter a website address, e.g. smithkitchens.co.uk
What to put on the quote
The quote is where deposit terms are agreed, so it has to carry everything the customer will later rely on.
- Registered company name and number at the top, with the registered office and trading address. The contract, the invoice and the bank account must all be in this name.
- The deposit as a percentage and an amount, and what it covers.
- The payment schedule by milestone, with amounts.
- The cancellation term: what is refunded before materials are ordered, what is deducted after, and that bespoke items cannot be returned once made.
- The 14-day cancellation notice and the “start early” request line, where the contract is off-premises or at a distance.
- Payment methods, card first, with the card link or terminal offered for the deposit.
- Any deposit protection or scheme membership with the registration number, so the customer can verify it.
Together these are the pre-contract information the 2013 Regulations require and the evidence a customer’s check reads. Businesses that get this far usually find the deposit conversation stops happening; the terms have already answered it. How the rest of the record looks to that customer is covered in what customers see on Companies House and how to prove your business is legitimate.
Put the terms next to the record
Deposit terms are read alongside the company behind them: the same 50% is reasonable from a solvent 40-year-old manufacturer and alarming from an eleven-month-old company with no accounts. Showing the record first — through the free verified business badge, which links from your website to your full public report — gives the terms their context before the customer has to ask for it.
Enter a website address, e.g. smithkitchens.co.uk
Frequently asked questions
Is a non-refundable deposit legal in the UK?
Only to the extent it reflects your genuine loss when the customer cancels. A term keeping the whole deposit regardless of what you have spent is on the Consumer Rights Act 2015 grey list of unfair terms and is unlikely to bind the customer. Wording that deducts costs to date and refunds the rest is enforceable.
How much deposit can a small business ask for?
There is no statutory cap; the test is proportionality to the costs you commit. 30–50% for made-to-order work and 5–20% in stages for building work are the bands customers are told to expect. Above that, state the reason on the quote.
Does the 14-day cooling-off period apply to trades?
Yes, when the contract is agreed at the customer’s home, at a show, or online or by phone without meeting. It does not apply to contracts signed at your premises. You must state the right in writing, and you can ask the customer to request an early start in writing so that work done is paid for if they cancel.
Can I keep the deposit if the customer cancels after I’ve ordered materials?
You can keep the cost of materials ordered and work done to that date, and should show the customer the figures. Bespoke items made to their specification are excluded from the cancellation right once manufactured. Anything beyond your actual loss should be refunded.
Do I have to accept card payments for a deposit?
No, but customers are told that a bank transfer to a company that fails is usually unrecoverable and to pay by card where possible. Offering card for the deposit costs about 1.5–2% and removes the most common reason a deposit is refused. You cannot add a surcharge for card payment.
Where should the deposit terms appear?
On the quote or order form the customer accepts, before any money is paid, in plain language and not only in a linked terms page. Terms first seen on the invoice after payment were not agreed and will not bind the customer.
Sources
- Consumer Rights Act 2015, Schedule 2 — terms which may be regarded as unfair — legislation.gov.uk
- CMA — Unfair contract terms guidance (CMA37)
- Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, Part 3 — right to cancel — legislation.gov.uk
- Consumer Rights (Payment Surcharges) Regulations 2012 — legislation.gov.uk
- Consumer Credit Act 1974, section 75 — legislation.gov.uk
- Business Companion — Trading Standards guidance for businesses on consumer law
- SafeToPay methodology v1.2 — deposit guidance