What has happened so far
- 2025: the government consulted on tackling late payment, including options for cash retentions in construction.
- 24 March 2026: it published its response, “Time to Pay Up”, saying it would legislate to prohibit the deduction and withholding of cash retentions under construction contracts, alongside wider late payment measures.
- 19 May 2026: a bill was introduced in the House of Lords. Referred to as the Commercial Payments Bill and later as the Small Business Protections (Late Payments) Bill, it received an unopposed second reading in June 2026 and has since been amended in committee.
As of October 2026 the bill is still going through Parliament. It isn’t law, and its details may change before it is.
What the bill proposes
- A ban on cash retentions in construction contracts, by amending the Housing Grants, Construction and Regeneration Act 1996, with transitional arrangements still to be finalised.
- Maximum payment terms of 60 days for larger businesses paying smaller suppliers, with limited exemptions.
- Mandatory statutory interest on late payments at 8% above the Bank of England base rate, which the parties couldn’t contract out of.
- A deadline for disputing invoices.
- Stronger powers for the Small Business Commissioner to investigate, adjudicate payment disputes and fine persistent late payers.
What it means for builders and clients now
Until the bill becomes law and is brought into force, existing retention clauses continue to apply, and contracts signed today will usually run on their agreed terms. In practice:
- Contractors and subcontractors: keep applying for retention release at each trigger, and consider asking for retention bonds or trust accounts in new contracts.
- Clients and main contractors: review how you use retention as security, and consider alternatives such as bonds, so you’re ready if the ban comes in.
- Everyone: watch the bill’s progress on the UK Parliament website, and check any transitional rules once they’re confirmed.
See our guide to how retentions work today.
General information, not legal advice. What applies to you depends on your contract, the facts and where the work is, and the law changes. Check the sources below and take advice from a qualified professional before acting on anything that matters.
Last updated: 15 October 2026
