Construction
Construction retention release estimator
A retention is money you've earned that arrives in two pieces, months and sometimes years apart, and the second piece is the one that goes missing. Put in your contract's figures and this shows how much is held, when each half falls due, and what lands in the bank once CIS is taken off at the rate that applies on the day it's paid.
How release works
Two halves, two dates, and a CIS deduction on each
The party above you holds back a percentage of each payment as retention. The government's 2017 consultation puts the typical figure at 5% of the amount due, with the first half customarily released at completion and the second half once the defects liability period ends, typically 12 to 24 months later (Retention payments in the construction industry, consultation document). Your contract sets the real numbers, and it can set different ones.
For CIS, a release isn't special. HMRC's guide says retention payments "are treated the same way as any other payments", and whether one is paid gross or under deduction "depends on the subcontractor's tax status at the date of payment and not when the work was actually done" (CIS 340, paragraph 6.13). So the deduction is worked out when the money is paid: the rate on the day, applied after VAT and materials are taken out, at 20% if you're registered, 30% if you're not, and nothing with gross payment status.
Worked example
£200,000 of work, 5% retention, completion on 30 June 2027
Example inputs, not market figures: a £200,000 subcontract, 5% retention, half released at practical completion on 30 June 2027 and half at the end of a 12-month defects period. Materials make up 30% of the value, and the subcontractor is CIS registered, so 20% comes off the rest.
Retention held by completion: 5% of £200,000 is £10,000. Each half is £5,000. CIS on each is 20% of the 70% that isn't materials: £5,000 × 0.7 × 0.2 = £700, leaving £4,300 to arrive each time.
| Release | Falls due | Gross | CIS deducted | Net received |
|---|---|---|---|---|
| At practical completion | 30 June 2027 | £5,000 | £700 | £4,300 |
| At the end of the defects period | 30 June 2028 | £5,000 | £700 | £4,300 |
| Total | £10,000 | £1,400 | £8,600 | |
The £1,400 of CIS isn't lost: it counts towards the subcontractor's tax and National Insurance. A limited company sets it against what it owes through its payroll scheme; a sole trader gets it credited through Self Assessment after the tax year.
Your own contract
Estimate your retention release
Free to use, nothing is saved or sent anywhere. Runs entirely in your browser. The figures start as the worked example above: change them to your contract's.
Retention held
£10,000.00
Second half falls due 30 June 2028, 366 days after practical completion. £8,600.00 arrives in total after £1,400.00 of CIS.
| Release | Falls due | Money arrives | Gross | CIS | Net |
|---|---|---|---|---|---|
| At practical completion | 30 June 2027 | 30 June 2027 | £5,000.00 | £700.00 | £4,300.00 |
| At the end of the defects period | 30 June 2028 | 30 June 2028 | £5,000.00 | £700.00 | £4,300.00 |
Rates: CIS at 20%, 30% or 0% on the payment after VAT and materials are excluded (GOV.UK), at the status that applies on the date the retention is paid (HMRC CIS 340, paragraph 6.13). Everything else comes from your contract. Dates are calendar months from practical completion. The tool doesn't know about set-off for defects, disputes, contra-charges or an insolvent payer, any of which can reduce or stop a release. Not legal or tax advice.
Schedule tables
Retention held per £100,000 of work
| Retention rate | Held in total | Released at practical completion (half) | Released after the defects period (half) |
|---|---|---|---|
| 2.5% | £2,500 | £1,250 | £1,250 |
| 3% | £3,000 | £1,500 | £1,500 |
| 5% | £5,000 | £2,500 | £2,500 |
Arithmetic only. 5% is the rate the 2017 consultation calls typical; its survey research found an average of 4.8% of contract value held from contractors, and clients reported around 4.9% (2017 consultation, page 12). The other rows are for contracts that set a different figure.
When the second half falls due
| Defects period | Practical completion | Second half falls due | Days held after completion |
|---|---|---|---|
| 12 months | 30 June 2027 | 30 June 2028 | 366 |
| 18 months | 30 June 2027 | 30 December 2028 | 549 |
| 24 months | 30 June 2027 | 30 June 2029 | 731 |
12 and 24 months are the ends of the range the 2017 consultation gives as typical. The days count to the date the release falls due; payment comes after that, on whatever terms the contract sets.
CIS on a £5,000 retention release
| Materials share | Gross payment status (0%) | Registered (20%) | Not registered (30%) |
|---|---|---|---|
| 0% | £5,000 received (£0 CIS) | £4,000 received (£1,000 CIS) | £3,500 received (£1,500 CIS) |
| 30% | £5,000 received (£0 CIS) | £4,300 received (£700 CIS) | £3,950 received (£1,050 CIS) |
The column that applies is your status on the day the retention is paid. A subcontractor that has gained gross payment status since the work was done gets the release without deduction; one that has lost it, or was never verified, has the deduction taken at the rate that applies then.
What the tool can't see
The second half is the one that goes missing
A release date on paper isn't cash. The 2017 consultation found delays in paying retentions "appear to be commonplace", running to several months at each tier and longer further down the supply chain, and that most holders keep retention money in a main bank account, so "retention monies held against their work are not typically ring-fenced". In the survey research it cites, 44% of contractors who'd had retentions held in the previous three years had experienced non-payment because another business became insolvent, with a median loss of £10,000 over those three years (consultation document).
One contract term to check: since October 2011 in England and Wales, a subcontract's payment mechanism isn't adequate if payment is conditional on the performance of obligations under another contract, or on a decision about whether they've been performed (Housing Grants, Construction and Regeneration Act 1996, section 110(1A)). The 2017 consultation said its contractor survey indicated that some construction customers may be making retention payments conditional on the performance of obligations under another contract, and suggested some contractors may not know what the 2011 amendments mean for retentions. A subcontract release clause that waits on the main contract is worth reading against that section.
Where the law on retentions is heading
In its response to the late payments consultation, published on 24 March 2026, the government said it would take forward a measure "to prohibit the deduction and withholding of retention payments under the terms of a construction contract", but would consult further before deciding on implementation (government response). The Commercial Payments Bill, introduced in the House of Lords in May 2026, includes that prohibition; the government's overview says it will consult further on timing. As of 23 September 2026 the bill hasn't become law, so retentions under existing contracts carry on exactly as agreed, and the tool above still applies to them.
Sources
- GOV.UK: Retention payments in the construction industry, consultation (2017) and summary of responses (2020)
- HMRC: Construction Industry Scheme guide for contractors and subcontractors (CIS 340), paragraph 6.13, retention payments
- GOV.UK: What you must do as a CIS contractor, make deductions and pay subcontractors
- legislation.gov.uk: Housing Grants, Construction and Regeneration Act 1996, section 110
- GOV.UK: Late payment consultation, time to pay up, government response (24 March 2026)
- UK Parliament: Commercial Payments Bill [HL]
Retentions and CIS squeezing cash across several jobs?
When net receipts keep running well below certified value, the fix is usually a facility that understands CIS-deducted sums and staged releases, or a credit line sized to the gap. Tell us what's happening and we'll tell you whether it's something we can help with.
Adam Parker
Founder of Muswell Rose Consulting Ltd, which trades as Established Finance · former Managing Director of Penny, an invoice finance business, working in mortgages, commercial finance and fintech lending since 2010 (career history).
Last reviewed:
Common questions
Questions about this
Is CIS deducted from a retention when it is released?
Yes, if the subcontractor is paid under deduction at that point. HMRC's CIS 340 guide (paragraph 6.13) says there are no special rules for retention payments: they are treated like any other payment, and whether the release is paid gross or under deduction depends on the subcontractor's tax status at the date of payment, not when the work was done.
How much retention is usually held?
The government's 2017 consultation describes retention as typically 5% of the amount due, with the first half customarily released at completion and the second half after a defects liability period of typically 12 to 24 months. Your contract sets the actual figures, and some contracts hold no retention at all.
Can a subcontract tie retention release to the main contract?
Not as a payment mechanism. Since the 2011 amendments to the Housing Grants, Construction and Regeneration Act 1996, section 110(1A) says a payment mechanism isn't adequate if payment is conditional on the performance of obligations under another contract, or on a decision about whether those obligations have been performed.
Are retentions being banned?
Not yet. The government's response to its late payments consultation, published on 24 March 2026, proposed prohibiting the deduction and withholding of retention payments under construction contracts, and the Commercial Payments Bill introduced in May 2026 includes that measure. The government has said it will consult further on the timing, so existing contracts and retentions carry on as agreed for now.