How to Send a Deposit Invoice and Get Paid Upfront (2026)

Most freelancers and tradespeople lose money not on the work itself but on the money they float. You spend days on a project before seeing a penny, then chase the full invoice for weeks afterwards. A deposit invoice -- a request for part of the fee before you begin -- solves both problems at once. This guide covers what a deposit invoice is, how much to ask for, how to structure it correctly, and the tax rules that apply.

What is a deposit invoice?

A deposit invoice is an invoice for a portion of the total project fee, issued before work starts. The client pays it upfront; you begin the work; you send a second invoice for the balance on completion. It is a real, legally valid invoice -- not a quote or a proforma -- and it creates an obligation to pay just like any other invoice. Some businesses call it an advance payment invoice or an upfront payment invoice; the terms mean the same thing.

A deposit serves two purposes. First, it puts cash in your hands from day one, so you are not financing the client's project with your own money. Second, it filters out uncommitted clients: someone who will not pay 30% upfront is unlikely to pay 100% on delivery.

How much should you ask for?

There is no universal legal minimum or maximum for most freelance and service work -- the amount is what you and the client agree. In practice, the most common ranges are:

• 25-33% deposit -- typical for design, consulting, writing, or other creative services. Enough to cover initial costs without asking the client to pay the majority before they have seen anything.
• 50% deposit -- standard for larger projects, custom builds, or clients you have not worked with before. This is the most common structure in construction, software development, and event production.
• 100% upfront -- used for very small, quick-turnaround jobs (a single logo file, a short translation) where the time between invoice and delivery is hours, not weeks.

One exception worth knowing: in California, contractors doing residential home improvement work are legally prohibited from collecting a deposit of more than 10% of the contract price or $1,000 -- whichever is less -- before starting the job. This applies to licensed contractors under the Contractors State License Board (CSLB) rules. Other US states and other countries have their own rules, so if you are in a regulated trade it is worth checking local legislation.

How to structure a deposit invoice

A deposit invoice should be clearly labelled so both parties know exactly what it covers. Include:

1. 1A distinct invoice number. Number your deposit invoices in the same sequence as your other invoices (e.g. INV-047) or use a sub-numbering system (INV-047a for the deposit, INV-047b for the balance). Either works; pick one and stick to it.
2. 2Clear description. Write something like "Deposit -- 50% of total project fee for [Project Name]" as the line-item description. Avoid just writing "Deposit" with no context.
3. 3The full project value. Show the total agreed fee and the deposit amount separately, so the client can see what the balance will be. Example: Total project: $4,000 -- Deposit (50%): $2,000 -- Balance due on completion: $2,000.
4. 4A due date. Specify when the deposit must be paid before you start -- "Payment due before work commences" or a specific date. Make it concrete.
5. 5Your payment details. Bank account, PayPal, or Wise -- whatever the client will use to pay. Put it on every invoice, including the deposit.

UK VAT rules on deposits

If you are VAT-registered in the UK, deposits have specific tax point rules you must follow. HMRC's guidance on VAT: instalments, deposits, and credit sales is clear:

• The tax point for a deposit is whichever comes first: the date you issue a VAT invoice for it, or the date you receive the payment. You account for VAT in the return for that period -- not when the project finishes.
• When the client pays the balance, a second tax point is created at that stage. You account for VAT on the balance in the return covering that later date.
• If the client cancels and you keep a forfeit deposit (i.e. they lose it), VAT is still due on the money you retain. You cannot reclaim the VAT just because the work was never done.
• A returnable deposit (security for hired goods, fully refunded when goods are returned safely) is different -- no VAT is due unless you keep it.

For non-VAT-registered freelancers -- those below the UK VAT threshold of GBP 90,000 in taxable turnover -- none of the above applies. Your deposit invoices carry no VAT.

What to do when the deposit is paid

Mark the deposit as paid in your records immediately. When the project is complete and you send the final invoice, reference the deposit explicitly: list the total project fee, then deduct the deposit already received, so the balance due is unambiguous. Keep both invoices -- the deposit and the final -- because together they tell the complete story of the transaction for your accounts and, if needed, for tax purposes.

If the client tries to back out mid-project, your contract determines whether the deposit is returnable. If your contract says it is non-refundable after work begins, you are entitled to keep it -- and the forfeit-deposit VAT rule above means you still owe HMRC the VAT component if you are registered. Write the refund policy into your contract before you take any money, not after a dispute starts.