This is a practical guide, not legal advice. If you are drafting terms for a large business or handling a live dispute, take proper advice. For a salon, garage, clinic or trade business setting a sensible deposit policy, this covers what you need.
How much to take
Ten to twenty per cent of the service price is the normal range and is easy to defend as proportionate.
Go higher when your exposure is higher: a first-time client with no history, an appointment that blocks a chair or a ramp for hours or a service where you have already bought materials. Colour corrections, large tattoos, bridal work and specialist parts orders all justify a bigger deposit.
Whatever you set, apply it consistently. Charging some customers and not others is the fastest way to make a policy indefensible.
Refundable or non-refundable?
The honest answer is that "non-refundable" is not a magic phrase. Under UK consumer protection rules a term in your standard contract can be challenged if it causes a significant imbalance to the detriment of the consumer. A deposit you keep because the customer gave you no notice and you lost the slot is reasonable. A deposit you keep because they cancelled three weeks out and you refilled the appointment is not.
The workable model is a notice window. Cancel with more than 24 or 48 hours notice and the deposit is refunded or moved to the new appointment. Cancel inside the window or fail to turn up and you keep it. That is easy to explain, easy to apply and stands up.
State it before the customer pays, not after. A policy that first appears on the receipt has not been agreed to.
VAT on deposits
If you are VAT registered, a deposit generally creates a tax point when you receive it. In practice that means VAT is usually due in the period you took the deposit, not the period you did the work.
If you keep a deposit because the customer did not turn up, the VAT treatment can differ depending on whether the payment is treated as consideration for a supply or as compensation. This is genuinely fiddly and the treatment has shifted over the years, so ask your accountant how to handle retained deposits rather than assuming.
Whatever the answer, make sure your system records deposits separately from final payments so the figures are actually available at quarter end.
Chargebacks and disputes
Occasionally a customer will dispute a retained deposit with their bank. You will be asked for evidence.
What wins these: a record that the policy was shown before payment, a timestamped booking confirmation, the reminder messages you sent and a clear log of when the customer cancelled or failed to attend. If your booking system keeps all of that automatically, a chargeback is a five minute job. If it does not, it is an afternoon of screenshots and a likely loss.
Respond within the deadline the card provider gives you. Missing it loses the case regardless of the merits.
A deposit policy that holds up
- Set a proportionate amount, typically 10 to 20 per cent
- Show the policy before the customer pays
- Use a clear notice window, 24 or 48 hours
- Refund or transfer the deposit when notice is given
- Keep it when notice is missed, and never charge the full price
- Apply the rule to everyone, every time
- Record deposits separately for VAT
- Keep booking, reminder and cancellation logs for disputes
Keep reading
- Money
What to put on an invoice
The details a UK invoice must carry, what changes once you are VAT registered, how invoice numbering has to work and how long to keep the records.
- Running your business
How to reduce no shows
What actually cuts no shows in a UK service business: deposits, reminder timing, cancellation windows and waitlists. With the rules on charging a no show fee legally.
- Choosing software
Switching booking software without losing clients
A step by step plan for moving to new booking software: what to export, how to run both systems in parallel, when to switch your links and how to tell your regulars.