Construction Retention Ban: What Changes and When
The short answer
The Commercial Payments Bill would ban cash retentions in construction contracts. It passed the House of Lords on 20 October 2026 and is now in the Commons. It isn't law yet, and the ban only bites after a two-year transition, so today's retention clauses still apply.
- Not law yet. The Bill finished its Lords stages on 20 October 2026 and now goes to the House of Commons.
- Two years, then three. Once the provisions start, retentions can still be agreed for two years. Everything still held must be repaid by the 'last retention day', three years in.
- Holding it late costs 150%. After the ban, a payer who keeps a retention owes it back plus the higher of £40 or 50%, plus interest.
- Act now, not in 2030. Chase what you are owed today and stop agreeing new retention where you can.
Every subcontractor has the same line in their accounts: money earned, invoiced and paid for, except the 3 to 5% the main contractor kept back. Now the government says it will ban retentions. So when does that money stop being held, and what do you do until then?
This guide sets out where the construction retention ban stands in October 2026, the timeline, what counts as a retention and what to do now. It is for owners of UK subcontracting and contracting businesses. Want your own retentions and terms looked at? Book a free strategy call.
Where the retention ban stands today
The ban is part of the Commercial Payments Bill. It was introduced in the House of Lords on 19 May 2026. It finished its Lords stages at third reading on 20 October 2026, with no amendments, and now goes to the House of Commons.
So, today:
- It isn't law. The Commons can still change it, and it needs Royal Assent.
- Your clauses still apply. A retention in a subcontract you sign this week is lawful and enforceable.
- The ban has no start date. Ministers set it by regulations after the Act is passed.
One law firm expects Royal Assent in 2027 and the outright ban no earlier than 2030.
The timeline, step by step
As the Bill is drafted, the ban arrives in three steps:
- Commencement. Ministers bring the retention sections into force. Nothing changes on your jobs that day.
- Two-year transition. Retention clauses can still be agreed and stay lawful, including in new contracts. A clause can't be varied to make it worse for the subcontractor, only better.
- The ban and the last retention day. From the start of year three, new retention clauses are void. Sums still held must be repaid by the "last retention day", three years after commencement, using the normal payment notice and pay less notice rules.
If a contractor still holds retention after that, the Bill turns it into a retention debt. The contractor owes it back plus a fixed extra of the higher of £40 or 50% of the debt, plus statutory interest and compensation. In effect, keeping it costs them about 150%.
Not sure how much retention you have held across your jobs right now?
Book a free strategy call and we'll list it with you.
What counts as a retention under the Bill
The drafting is wide on purpose. It looks at what a payment really does, not what it is called:
- Any payment under the contract. Interim and final payments, variations, fluctuations and claims.
- Oral or side letters. A retention agreed outside the written subcontract is still caught.
- Disguised retention. Holding back money for finished work as security for defects is caught, even if it is called a "deferred" or "staged" payment.
- Genuine stage payments. Paying on real milestones stays lawful. So do escrow and bank-held project accounts, unless they are used to hold back money as security.
Ministers also get a power to widen the definition if contractors find a way round it.
Homeowner jobs and the ban
The ban is written into the Construction Act (the Housing Grants, Construction and Regeneration Act 1996). That Act does not apply to a contract with a residential occupier for work on their own home. As the Bill stands, homeowner jobs sit outside the ban.
For most domestic builders that changes little: retention is rare on homeowner work. It matters most to subcontractors working for main contractors, developers and housing associations. Check the final Act when it passes.
Why you shouldn't wait for 2030
Retention is your money, sitting in someone else's account. On a business turning over £400K with 5% held, that is £20,000 (example figures) that could pay wages, a van or a deposit on materials.
Every new subcontract you sign before the ban can still hold 3 to 5% back. And if the contractor holding it goes bust before the release date, you usually rank as an unsecured creditor. The ban won't help with that.
So treat retention as a cash problem now, not a law change later. Our cash flow guide shows how to forecast it four weeks ahead.
What subcontractors should do now
Five things, starting this week:
- List every retention held: job, contractor, %, sum, release event and date.
- Chase every sum already due, in writing, with the dates and numbers.
- Price retention in: on a 5% retention, the cash is late, so your price has to carry it.
- Push back before you sign: lower %, one release at practical completion, a cap on the total.
- Keep the log going: when the last retention day arrives, you'll know exactly what is owed.
If a sum is due and still unpaid, follow the timetable in our guide on getting retention money released. A request letter, a reminder at 7 days, then an application or invoice and adjudication if needed.
For a four-minute score of your pricing, cash, sales and systems, take the free Construction Business Scorecard.
What main contractors should plan for
If you hold retention from your supply chain, plan your cash flow without it. Once the ban bites, that free working capital goes, and holding it late costs you 150%.
- Fund the job properly. Price, payment terms and stage payments that work without your subcontractors' money.
- Replace the security. Expect more retention bonds, performance bonds and parent company guarantees. The bond market is tight, so start the conversations early.
- Check the payment rules too. The same Bill sets a general 60-day maximum for payment, or 30 days for public bodies. A pay less notice must go no later than 7 days before the final date.
The same applies on the other side: if your own client holds retention from you, the ban releases your money too. Build both into the forecast.
Why it matters to who you learn from. Sviat Jay runs a working construction company, Craftex, and mentors owners one to one himself. He deals with payment terms, retention and cash flow on live jobs, not from a textbook. Every business is different, so working one to one he builds on what you are already good at.
He is aiming for results in about 4 months rather than 1–3-year programs. To get your retentions and payment terms sorted, book a free strategy call. If chasing retentions is eating your week, our commercial management service handles applications, notices and final accounts for you.
Want every retention and final account collected on time, ban or no ban?
Book a free strategy call.
Your retention ban checklist
This is general information about a Bill before Parliament as of 26 October 2026, from a contractor's experience, not legal advice. For your situation, speak to a construction solicitor.
Before you go
- Every retention held is on one list with sums and release dates
- Every sum already due has been chased in writing
- Your prices carry the cost of cash held back
- Your next subcontract has a lower % or a single release
- You'll check the commencement date when the Bill becomes law
