Do I have a legal right to stage payments as a sole-trader builder?

Yes. The Housing Grants, Construction and Regeneration Act 1996 gives every UK construction contractor a statutory right to interim (stage) payments on any construction contract expected to last more than 45 days. This applies whether the customer is a homeowner or a main contractor, and whether the contract is written or verbal.

What happens if my contract is silent on stage payments?

The Scheme for Construction Contracts (England and Wales) Regulations 1998 fills the gap automatically. Under the Scheme, stage payments become due every 28 days, the payer has 5 days to issue a payment notice, and the final date for payment is 17 days after the due date. A pay-less notice must be served no later than 7 days before the final date for payment.

What interest can I charge on unpaid stage payments?

Statutory interest at 8% above the Bank of England base rate under the Late Payment of Commercial Debts (Interest) Act 1998, plus a fixed compensation sum (£40 for debts under £1,000, £70 for £1,000-£9,999, £100 for £10,000+). This right cannot be contracted out of. Interest runs from the date payment was due, not the date you chased it.

Can I stop work if I'm not paid on time?

Yes. The Construction Act gives you the right to suspend performance after 7 days' written notice of non-payment. During suspension, programme dates extend and you can claim reasonable costs and expenses incurred. Suspension is often the fastest way to unblock a disputed payment — use it sparingly but don't be afraid of it when genuinely owed money.

What is adjudication and how fast is it?

Adjudication is a statutory dispute resolution process under the Construction Act. You can refer any construction dispute to an adjudicator at any time. The adjudicator must decide within 28 days (extendable to 42 by agreement). The decision is binding in the short term and enforceable by the courts. Nominating bodies include RICS, CIArb and RIBA.

Does HGCRA 1996 apply to contracts with homeowners?

Mostly no. The Act specifically excludes construction contracts with residential occupiers from the stage-payment and adjudication provisions (section 106). So the statutory rights apply mainly to B2B contracts — subbie to main contractor, main contractor to developer. For homeowner jobs, rely on contractual payment terms with clear stage-payment schedules written into your quote.

Stage Payments Under the Construction Act 1996: A UK Tradesperson's Guide

Why the Act exists

Before 1996, main contractors and developers routinely withheld payment from subcontractors for months while a job was in progress. Subbies funded the work out of their own cashflow and often went bust waiting to be paid. Parliament passed the Construction Act to give the construction supply chain a basic right to regular payment and a fast dispute resolution mechanism (adjudication).

The Act applies to almost all 'construction operations' as defined in Section 105 — building, repair, alteration, decoration, mechanical and electrical installation, site clearance, scaffolding. It applies whether the contract is written or oral, big-ticket or small, between a main contractor and a subbie, or between a subbie and a homeowner.

When stage payments apply

You are entitled to interim (stage) payments when the contract is for construction operations and is expected to last longer than 45 days. For shorter contracts, a single final payment is acceptable.

'Expected to last' is judged at the time the contract is made. A kitchen fit planned for 2 weeks that runs to 8 weeks doesn't retrospectively trigger stage rights — but if you know on day one the job will take 10 weeks, it does.

What the contract must say

A compliant construction contract must provide:

•An adequate mechanism for determining what payments become due, and when
•A final date for payment for any sum that becomes due
•A requirement for the paying party to issue a payment notice within 5 days of the due date
•A right for the payee to issue their own 'default payment notice' if the payer fails to
•A 'pay less notice' mechanism if the payer wants to pay less than the notified sum
•A right to suspend performance for non-payment, after giving 7 days' written notice

What happens if your contract is silent

If your written contract doesn't cover payment properly — or you're working off a verbal agreement — the Scheme for Construction Contracts (England and Wales) Regulations 1998 applies automatically. Under the Scheme:

•Stage payments become due every 28 days
•The 'due date' is the later of the stage application date or the 28-day interval
•The final date for payment is 17 days after the due date
•The payer has 5 days from the due date to issue a payment notice
•If they don't, your application becomes the notified sum
•A pay less notice must be served not later than 7 days before the final date for payment

The payment notice mechanism step by step

This is the sequence that decides who owes what, and when. Miss a step and you lose leverage.

•Step 1: You submit a payment application for the stage — what's been done, at what price, supported by photos or a schedule
•Step 2: The due date triggers (either the date in your contract or 28 days from the last one under the Scheme)
•Step 3: The payer issues a payment notice within 5 days — if they don't, your application is the notified sum
•Step 4: If the payer wants to pay less, they must serve a pay less notice no later than 7 days before the final date for payment
•Step 5: Final date for payment arrives — payer must pay the notified sum in full
•Step 6: If payment is late or short, you can charge interest (see below) and serve 7 days' notice to suspend work

The interest you can charge

Under the Late Payment of Commercial Debts (Interest) Act 1998, late payment on B2B contracts attracts statutory interest at 8% above the Bank of England base rate, plus a fixed sum of £40 (for debts under £1,000), £70 (£1,000–£9,999) or £100 (£10,000+) as compensation.

This right cannot be contracted out of — a clause saying 'no interest on late payment' is void against commercial customers. Interest runs from the date the payment was due, not the date you chased it. Include the statutory interest clause on every invoice so the position is clear from day one.

Suspending work — the biggest lever

The Construction Act gives you the right to suspend performance of your obligations until payment is made in full, provided you first give 7 days' written notice. This is a powerful tool — use it sparingly, but don't be afraid of it when you're genuinely owed money.

During suspension, any programme dates extend, and you are entitled to reasonable costs and expenses incurred as a result. Suspending work is often the difference between being paid on day 10 and being paid on day 90.

Adjudication — the 28-day dispute process

The Act also gives you the right to refer any dispute to adjudication at any time. An adjudicator must decide the dispute within 28 days (extendable to 42 by agreement). The decision is binding in the short term and enforceable by the courts — the losing party must pay on the adjudicator's decision, even if they later take it to arbitration or court.

Adjudication is cheaper than court and much faster. Nominating bodies include RICS, CIArb and the RIBA. For small-value disputes under £100,000, the Construction Industry Council's Low Value Dispute Model Adjudication Procedure caps adjudicator fees.

A worked example: £32,000 extension

Homeowner commissions you to build a single-storey extension, 10 weeks expected duration, £32,000 total. Because the contract is over 45 days, you're entitled to stage payments. You agree five stages of £6,400 each: (1) foundations complete, (2) walls to wall plate, (3) roof on and watertight, (4) first fix, (5) final completion.

You submit stage 1 application on day 18. Due date day 18. Payer has until day 23 to issue a payment notice. They don't. Your application becomes the notified sum. Final date for payment is day 35 (17 days after due date). They miss it. You send a 7-day notice. Day 42, you're still unpaid — you suspend. Interest runs at 8% + base from day 35. On the facts alone, an adjudicator would order payment plus interest plus your reasonable costs.

Put the right wording on every job

You don't need a 50-page contract to benefit from the Act. You need a short written statement of the payment schedule and the statutory interest clause on every invoice. Adding these takes minutes and costs nothing, but it's the difference between being owed money and being paid.

TradeDoc AI includes the Construction Act payment mechanism, stage schedules, and late-payment interest clause as standard on every quote and invoice. Generate one in about two minutes. Free for 7 days, no card required.