This is a general overview for UK subcontractors, not legal advice. Retention terms vary a great deal between subcontracts, so the wording of yours is what counts.
What retention is
Retention is a percentage held back from each interim payment as security against defects or the subcontractor not finishing the work. It is still your money: it has been earned, and it is held until the release dates in your subcontract.
Typical rates are 3% to 5% of the gross valuation, sometimes with a cap (a "limit of retention") so that once the amount held reaches a set figure, no more is deducted. Retention is a term of your subcontract, not a legal requirement, so the rate, any cap and the release dates are all whatever was agreed.
How it is calculated on each application
Retention is normally worked out on the cumulative gross valuation, not month by month:
| Application 3 | Application 4 | |
|---|---|---|
| Gross valuation to date | £60,000 | £90,000 |
| Retention at 5% | £3,000 | £4,500 |
| Net valuation | £57,000 | £85,500 |
| Less previous payments | £38,000 | £57,000 |
| Due this time | £19,000 | £28,500 |
Check whether your subcontract applies retention to everything or excludes some items, such as dayworks or materials, and whether there is a cap. Main contractors sometimes apply their own standard rate rather than the one in your order. Our payment application checklist shows where retention sits in the summary of each application.
Retention limits (caps)
A limit of retention stops the deduction once a set amount is held. It is usually expressed as a percentage of the contract sum, or as a fixed amount.
Say your subcontract sum is £200,000, retention is 5% and the limit is 2.5% of the contract sum (£5,000):
| Gross valuation to date | 5% would be | Retention held (capped at £5,000) |
|---|---|---|
| £60,000 | £3,000 | £3,000 |
| £100,000 | £5,000 | £5,000 |
| £160,000 | £8,000 | £5,000 |
From the point the cap is reached, every further pound you value is paid in full. On a large job a cap can be worth more than a lower rate, so it is worth asking for one before you sign.
When it is usually released
Most subcontracts release retention in two halves:
- First half at completion of your works, or at practical completion of the project.
- Second half at the end of the defects period (also called the rectification or defects liability period), often 12 months later, once any defects have been put right.
The trigger matters. Release on completion of your works is far better for you than release on completion of the whole project, which can be years later if you are an early trade.
Retention release: a worked example
Continuing the example above, you finish your works with £5,000 held:
| When | What you apply for | Amount |
|---|---|---|
| Practical completion | First half of the retention held | £2,500 |
| End of the 12-month defects period | The second half, once defects are signed off | £2,500 |
Each release is applied for like any other payment, usually as a line in your next application, so the usual payment notice and pay less notice deadlines apply to it.
Some subcontracts tie release to events under the main contract, such as the client's certificate of making good. The 2011 changes to the Construction Act restrict how far a payment can be made to depend on certificates under another contract, so if your release is tied to someone else's certificate, it is worth taking advice.
Why retention goes missing
Retention is often lost not through dispute but through nobody asking for it. Jobs finish, people move on, the defects period ends quietly and two years later nobody remembers what was held. Across many jobs, that can add up to a significant sum.
How to make sure you get it back
- Record the release terms at the start: the rate, any cap, the two triggers and the length of the defects period.
- Track the amount held on every application, so you always know what is owed.
- Diary both release dates as soon as the completion date is known.
- Apply for release on time, as a line in your application or as a separate application if your subcontract says so. Treat it like any other payment: send it to the right person and keep proof.
- Get defects signed off. Ask for written confirmation that defects are closed so there is no reason to hold the second half.
- Follow the payment process. A retention release is a payment like any other, so watch for the payment notice and pay less notice deadlines that follow your application. Our guide to the Construction Act payment process sets out each step.
Negotiating better terms
Before signing, it is worth asking for a lower rate, a cap, release on completion of your own works, and a shorter defects period that runs from your completion. Some main contractors accept a retention bond instead of cash retention.
Common questions
Is retention a legal requirement?
No. Retention is a term agreed in the subcontract. If your subcontract does not provide for it, it should not be deducted.
Can retention be held indefinitely?
Retention should be released on the dates your subcontract sets. Where release depends on events under another contract, such as the client's certificate, the 2011 changes to the Construction Act may limit how far that can be relied on, so take advice if your retention is being held back for that reason.
What is a retention bond?
A bond from a bank or insurer that the main contractor can call on instead of holding cash. You pay a premium, but you are paid in full on each application.
Is retention deducted from variations?
Usually yes, at the same rate, unless your subcontract says otherwise. Check whether materials and dayworks are treated differently.
Constructicore records the retention terms for each subcontract, works out retention on every application and shows how much is held on each job, so release dates are not missed. See how payment applications work in Constructicore.
Published 5 October 2026, updated 9 October 2026.