Pay less notice template (UK): payment notices, deadlines and examples

A pay less notice tells the person you owe that you'll pay less than the notified sum, and why. Under the Construction Act it must state the sum you think is due and how you worked it out. It must arrive by the deadline in your contract or, if the contract is silent, no later than 7 days before the final date for payment. Miss it, and you must pay the notified sum in full by the final date. Templates for all three notices are below.

What is a pay less notice?

It's the payer's formal notice that they intend to pay less than the notified sum. The notified sum is the figure in the payment notice (or in the payee's own notice, if the payer never sent one). Section 111 of the Housing Grants, Construction and Regeneration Act 1996, as amended in 2011, says the payer must pay the notified sum on or before the final date for payment, unless a valid pay less notice has been given in time.

Before October 2011 the same job was done by a "notice of intention to withhold payment", which is why you still hear people call it a withholding notice.

There are three notices: the payer's payment notice (what they think is owed), the payee's notice (yours, if the contract says so or the payer's never came) and the pay less notice. All three can state a sum of zero, as long as they give the sum and the basis for it.

Who sends which notice, and when?

The contract sets the dates. The Act only sets the rules the contract has to follow, and the Scheme for Construction Contracts fills any gap.

Two details trip people up. First, if you send a payee's notice in default, the final date for payment moves back by the number of days your notice was late. Send it the next day. Second, if your contract lets you apply for payment before the payer's notice is due, and you apply properly, that application counts as your payee's notice (s.110B(4)). A good application does double duty.

What are the default dates if the contract says nothing?

The Scheme for Construction Contracts (England and Wales) sets them. For stage payments, the valuation period is 28 days unless the contract says otherwise. The payment becomes due 7 days after the end of that period, or when you make your claim, whichever is later. The final date for payment is 17 days after the due date.

Here's how that plays out if your valuation period ends on 31 October and your claim is in by then. The dates are an illustration of the Scheme timings, not a rule for your contract.

Most written contracts set their own periods, so check yours before you rely on these. Put the contract's own dates in the diary the day you sign, one line per valuation.

What does a pay less notice need to include?

Two things by law: the sum the payer considers due on the date the notice is served, and the basis on which it's calculated. A usable pay less notice also shows:

• the contract, the job and the valuation or application it responds to
• the notified sum it's reducing
• each deduction on its own line, with the reason (defects, a disputed variation, contra charges)
• the sum that will be paid by the final date
• who it's from, and the date it was sent

Check your contract's notice clause for how notices must be served (email, post or by hand). A notice sent the wrong way can be argued to be no notice at all.

Pay less notice template

Copy this, fill in the brackets, and delete what doesn't apply.

Pay less notice

Section 111 of the Housing Grants, Construction and Regeneration Act 1996

From: [payer's company name and address]
To: [payee's company name and address]
Date of this notice: [date]

Contract: [contract name and date]
Project: [site address and job reference]
Payment: [valuation or application number], payment due date [date], final date for payment [date]

Notified sum: £[amount], as stated in [your payment notice / the payee's notice] dated [date]

We intend to pay less than the notified sum.

The sum we consider due on the date of this notice is £[amount].

Basis of calculation:
Gross value of work to date as applied: £[amount]
Less [item and reason, e.g. variation 4 not instructed, see email dated]: £[amount]
Less [item and reason, e.g. defective work at plot 12, photos attached]: £[amount]
Less retention at [x]%: £[amount]
Less previous payments: £[amount]
Sum due: £[amount]

Signed: [name, position]

Payment notice and payee's notice templates

The payment notice is the payer's. The payee's notice is yours, and it should carry the same working as your application.

Payment notice

Section 110A of the Housing Grants, Construction and Regeneration Act 1996

From: [payer or specified person] To: [payee] Date: [date]
Contract and project: [contract, site, job reference]
Payment: [valuation number], due date [date], final date for payment [date]

The sum we consider due at the payment due date is £[amount].
Basis of calculation: [gross value to date, less retention, less previous payments, as attached]

Signed: [name, position]

Payee's notice

Sections 110A(3) and 110B of the Housing Grants, Construction and Regeneration Act 1996

From: [your business name and address]
To: [payer's company name and address]
Date of this notice: [date]

Contract and project: [contract, site, job reference]
Payment: [valuation or application number], payment due date [date]

[If sent in default: No payment notice was received by [date], the last day for one under the contract.]

The sum we consider due at the payment due date is £[amount].

Basis of calculation:
Work to date as per the attached valuation: £[amount]
Agreed variations [numbers]: £[amount]
Less retention at [x]%: £[amount]
Less previous payments: £[amount]
Sum due: £[amount]

Signed: [name, position]

What happens if the pay less notice is late or never sent?

The payer has to pay the notified sum in full by the final date. They can still argue about the value later, but not by holding back money now. If they don't pay, you have two routes under the Act:

• Suspend. You can suspend any or all of your work after giving at least 7 days' notice stating your grounds. The payer is liable for your reasonable costs of suspending, and the time you're off site doesn't count against your programme.
• Adjudicate. Either side can refer a dispute to adjudication at any time. The adjudicator must decide within 28 days of the referral, unless the time is extended. If they decide more is owed than the payer's notice said, the extra is due within 7 days of the decision or by the original final date, whichever is later.

Retention sits inside these same rules, and so does chasing its release. That's covered in our guide to retention in construction. If a payer just ignores the lot, the same steps as chasing any unpaid invoice apply, and between businesses you can add late payment interest.

Do payment notices apply to homeowner jobs?

No. Section 106 says this part of the Act doesn't apply to a contract with a residential occupier, meaning work mainly on a house or flat that the customer lives in or plans to live in. Work for a developer or landlord on homes they don't live in generally falls inside it. For a kitchen or rewire at someone's own home, the payment terms are whatever you agreed. Put stage payments and due dates in the quote, and see our guide to deposits and stage payments for building work.

The dates on this page come from the Scheme for England and Wales. Scotland has its own Scheme for Construction Contracts, so check that one for Scottish jobs.

Why do subcontractors lose money on notices?

Because the windows are short and they land while you're on site. Send your notice late and your final date slides. Miss a pay less notice on your own subbies and you pay them in full, dispute or not.

Kade, Nexley's founder, spent 13 years in construction before he co-founded Nexley. The point, in his words, is to "take those jobs on with the absolute full confidence that you will not be caught up going back and forth with the main contractor, not get caught up taking on risks that you weren't aware of." Notices done on time are most of that.

Where Nexley fits

Nexley is practical AI for UK trades that works through WhatsApp. It handles the diary, invoicing and chasing, and document filing, and works with Xero or QuickBooks. Send a voice note when the contract lands and it can put every due date, notice deadline and final date in the diary. Tell it what's been done this period and it drafts your application or notice to your standard, for you to sign off before anything goes. When a final date passes unpaid, it chases, in your words. Anything it isn't sure of comes back to you on WhatsApp.

See how it keeps cash coming in on the cashflow and Xero page, what else it takes off your plate on the back office page, or try it free for 7 days, no card needed.

Common questions

Can a pay less notice be for zero?

Yes. The Act says it doesn't matter that the sum stated may be zero, as long as the notice gives the sum and the basis on which it was worked out.

How many days before the final date must a pay less notice be sent?

Whatever your contract says. If the contract doesn't set a period, the Scheme says no later than 7 days before the final date for payment.

Is a pay less notice the same as a withholding notice?

It does the same job. "Notice of intention to withhold payment" was the wording in section 111 before it was replaced from 1 October 2011. The current rules, with pay less notices, apply to contracts made since then.

Sources

This page is general guidance, not legal advice. For a large or disputed sum, get your contract and notices checked.

• Housing Grants, Construction and Regeneration Act 1996, payment sections 109 to 113 (110A payment notices, 110B payee's notice, 111 pay less notices, 112 suspension) (legislation.gov.uk)
• Housing Grants, Construction and Regeneration Act 1996, payment sections as enacted (original section 111, withholding notice) (legislation.gov.uk)
• Housing Grants, Construction and Regeneration Act 1996, section 106 (residential occupier) (legislation.gov.uk)
• Housing Grants, Construction and Regeneration Act 1996, section 108 (adjudication, 28 days) (legislation.gov.uk)
• Scheme for Construction Contracts (England and Wales) Regulations 1998, Schedule Part II (due dates, 17-day final date, payment notice, pay less notice, 28-day period) (legislation.gov.uk)
• Scheme for Construction Contracts (Scotland) Regulations 1998 (legislation.gov.uk)