Commercial Payments Bill: What It Means for Construction Retention

There’s a Bill in front of Parliament right now that would change how retention works in UK construction for good. It’s worth knowing what it actually says, because most of what subcontractors have heard about it is secondhand, and some of it is wrong.

What the Bill actually proposes

The Commercial Payments Bill was introduced to the House of Lords in May 2026. As drafted, it would ban the withholding of retention in construction contracts outright, apply 8% above the Bank of England base rate as interest on retention paid late, and fine a party that wrongly withholds retention 50% of the amount involved.

That’s a meaningful shift. Right now, a main contractor holding your retention past the release date faces no automatic penalty unless you chase it yourself. If this Bill passes as written, the penalty becomes automatic and substantial.

What it doesn’t do, yet

It’s still a Bill. It hasn’t passed, and even once it does, it’s expected to carry a transition period before it applies in full. Nobody should act, or advise a client to act, as though it’s already law. Treating a Bill as though it’s in force is the kind of mistake that costs a business credibility with the main contractors it still has to work with.

The part that’s easy to miss

Here’s what’s actually useful right now, separate from whether the Bill passes: the interest rate the Bill proposes, 8% above the Bank of England base rate, isn’t a new idea it’s introducing. It’s the existing statutory interest rate available under the Late Payment of Commercial Debts (Interest) Act 1998, which already applies to overdue commercial debts, including overdue retention, today.

Most subcontractors don’t add it. A release application that’s already six months overdue could reasonably include that interest on top of the principal sum, and most never do, either because nobody thought to, or because it felt like piling on for money that was already awkward to chase in the first place.

The Bill would make that interest automatic and expected. Right now, it’s available and mostly unclaimed.

What to actually do about it

Two things, neither of which depend on the Bill passing:

Know your release dates. If you can’t say, without checking old paperwork, exactly when retention on a given job should have come back, that’s the first gap to close, regardless of what Parliament does.

Add the interest when a claim is genuinely overdue. It’s already legally available. It doesn’t require new legislation, just someone to actually calculate it and include it in the ask.

Where this leaves you

The Bill is worth watching, and if it passes as drafted, it changes the maths meaningfully in your favour. But the interest most subcontractors are leaving unclaimed right now doesn’t need a new law. It needs someone to add it to the letter.

Want to see your own numbers? Send us your last ten completed jobs and we’ll show you exactly what’s claimable now, free.