What is the Construction Act?
The Housing Grants, Construction and Regeneration Act 1996(commonly called "the Construction Act") is a UK law designed to fix the chronic problem of late payment in the construction industry. It was significantly strengthened by the Local Democracy, Economic Development and Construction Act 2009.
The Act gives subcontractors specific, enforceable rights around payment. It applies to virtually all construction contracts in England, Wales, and Scotland (with separate but similar provisions for Northern Ireland).
Your key rights under the Act
Right to payment on timeSections 109–110
Every construction contract must provide for stage payments. If the contract doesn’t specify payment terms, the Scheme for Construction Contracts applies automatically — meaning payment is due 30 days after your invoice.
Right to a Payment NoticeSection 110A
The payer must issue a Payment Notice within 5 days of the Payment Due Date, stating how much they will pay and why. If they don’t, they lose the right to pay less than the invoiced amount.
Right to issue a Default Payment NoticeSection 110B
If no Payment Notice is received within the 5-day window, you can issue a Default Payment Notice. The full invoiced amount becomes the “notified sum” — payable in full with no right of set-off.
Right to suspend workSection 112
If payment is not received by the Final Date for Payment, you can suspend work after giving 7 days’ written notice. You’re entitled to an extension of time and additional costs.
Right to adjudicationSection 108
Any party can refer a dispute to an adjudicator at any time. The adjudicator must reach a decision within 28 days (extendable to 42 days with your consent). The decision is binding.
The Scheme for Construction Contracts
The Scheme is a set of default rules that fill in the gaps when a construction contract is missing key terms. If your contract doesn't specify payment dates, notice periods, or dispute resolution procedures, the Scheme kicks in automatically.
Key Scheme defaults:
Payment Due Date: 30 days after the invoice date
Payment Notice: Must be issued within 5 days of the due date
Final Date for Payment: 17 days after the due date
Pay Less Notice: Must be issued at least 7 days before the Final Date
Interest: 8% above the Bank of England base rate on late payments
2026 changes: the toughest crackdown yet
In March 2026, the UK Government announced the "toughest crackdown on late payments in over 25 years." Key changes include:
Retention payment ban
Main contractors will no longer be able to withhold retention money from subcontractors.
60-day payment cap
Large firms paying smaller firms must pay within 60 days — no exceptions.
Stricter enforcement
The government will actively monitor and penalise firms that don’t comply with payment regulations.
Who is covered?
The Act covers almost all construction contracts, including subcontracts, in England, Wales, and Scotland. The main exceptions are:
- Contracts with residential occupiers (homeowners commissioning work on their own home)
- Contracts that don't relate to construction operations as defined in the Act
- Certain PFI contracts (limited exemptions)
If you're a subcontractor working for a main contractor — even on a residential project — you are almost certainly covered.