Asking for money upfront is normal, sensible and — done clearly — rarely objected to. A deposit commits the client, covers your early costs, and means you’re never doing all the work before seeing any money. This guide explains how much to ask for, how to write a deposit invoice, how tax works on advance payments, and how to settle up on the final invoice.
Why take a deposit?
- Commitment. A client who has paid something is far less likely to disappear mid-project.
- Cash flow. You can buy materials or block out time without financing the client.
- Filtering. Clients who refuse any deposit on a large job are often the ones who pay late.
- Fairness. If the client cancels after you’ve reserved time, a deposit compensates you (subject to your terms and the law).
How much to ask for
There’s no universal rule, but common practice looks like this:
| Situation | Typical deposit |
|---|---|
| Small freelance job, new client | 50% upfront |
| Creative or web project, several weeks | 30–50%, rest at milestones |
| Custom goods made to order | 30–50% (or enough to cover materials) |
| Events, photography, venues | A booking fee or retainer, often non-refundable once the date is reserved |
| Home improvement / construction | Varies — some jurisdictions cap it, e.g. California limits down payments on home-improvement contracts to 10% or $1,000, whichever is less |
| Repeat client with good payment history | Sometimes none, or milestone billing only |
Agree the deposit in the quote or contract before invoicing it — see how to write a quote.
Deposit invoice vs. proforma vs. deposit receipt
- Deposit invoice — a real invoice from your normal invoice series, requesting the deposit amount.
- Proforma invoice — a preliminary document showing what the final invoice will look like; not a tax invoice. Some clients need one to release funds. See proforma invoice.
- Deposit receipt — confirms the deposit has been paid. Use our deposit receipt template.
Which you use depends partly on tax rules (below) and partly on what your client’s finance team needs.
What to put on a deposit invoice
- Your normal invoice header: number, date, your and the client’s details
- A clear description: “Deposit (40%) for website project per quote Q-2026-021”
- The total project value, for context
- The deposit amount, and tax if applicable
- Due date — usually short, since work starts on payment (“Due on receipt” or 7 days)
- Refund conditions, or a reference to them in your terms
- What happens next: “Work will be scheduled once the deposit is received.”
Example
| Description | Amount |
|---|---|
| Website project per quote Q-2026-021 — total value €10,000.00 (net) | |
| Deposit 40% | €4,000.00 |
| VAT 21% | €840.00 |
| Total due | €4,840.00 |
Due within 7 days. Deposit refundable only if Studio Nord cancels the project; see terms §6. (Names are illustrative.)
Tax on deposits
VAT/GST countries
In many VAT systems (including the EU and UK), receiving a payment before the supply creates a tax point for the amount received — meaning VAT is due on the deposit when it’s paid, and you may need to issue a VAT invoice for it. There are exceptions (e.g. some genuinely refundable security deposits, and special rules for certain goods and services), and details differ by country. This is a common reason to issue a proper deposit invoice rather than just a proforma. See how to charge VAT on invoices.
US sales tax
Sales tax generally attaches to the taxable sale itself rather than to an advance payment, but timing rules vary by state. If you collect sales tax, check how your state treats prepayments.
Tax treatment of deposits varies by country and transaction type. This is general information, not tax advice.
The final invoice: deduct the deposit
When the work is done, invoice the full value, then subtract what’s already been invoiced (and paid):
| Description | Amount |
|---|---|
| Website project per quote Q-2026-021 | €10,000.00 |
| Less: deposit invoiced on INV-2026-0040 | −€4,000.00 |
| Net amount | €6,000.00 |
| VAT 21% | €1,260.00 |
| Balance due | €7,260.00 |
Listing the deposit invoice number makes it easy for the client’s accounts team to reconcile — and ensures VAT isn’t charged twice on the same amount. If there were milestone invoices in between, list each one.
In BillKit’s invoice generator, you can record deposits already received using the “Amount paid” field so the balance due is calculated for you.
Refundable or non-refundable?
Spell it out in the contract and on the invoice or receipt:
- Non-refundable booking fees are common for date-specific services (photography, events) — but consumer protection laws may still limit what you can keep, especially if you cancel or can’t deliver.
- Refundable deposits should state the conditions and timeline for refund.
- If you refund a deposit that was invoiced, issue a credit note against the deposit invoice.
Handling objections
- “We don’t pay deposits.” Offer milestone billing instead: smaller first milestone, invoiced at a defined early deliverable.
- “Our finance team needs an invoice first.” That’s what the deposit invoice is for — or a proforma if they need approval before you issue a tax invoice.
- “Can we pay it after the first draft?” Then the first draft is the first milestone — price and schedule it as such.
Checklist
- Deposit amount and refund terms agreed in writing
- Deposit invoice issued from your normal invoice series
- Description references the quote and total project value
- Tax treatment checked for advance payments
- Short due date; work scheduled on receipt
- Receipt sent when paid (if the client wants one)
- Final invoice deducts the deposit and references its invoice number
For more ways to protect cash flow, see how to get paid faster.