Cancellation and kill fees for freelancers: how to set one that holds

Yes, you can charge a cancellation fee, as long as the client agreed to it before they cancelled, usually in the contract or proposal they accepted. A kill fee is the same idea under its publishing name. In England and Wales a court is far more likely to hold a client to it if it's the price of a real right to cancel and the amount is in proportion to what the cancellation costs you; with a private client it also has to be fair.

Private clients also get a 14-day right to cancel when they book by email, phone or online.

What a kill fee and a cancellation fee are

The kill fee comes from magazines: an editor commissions a piece, decides not to run it, and the writer gets an agreed part of the fee instead of nothing. Freelancers now use the term for any agreed payment when a client ends a project early. A cancellation fee is the wider version: it also covers a client pulling out before you've started.

Why the fee has to be agreed before they cancel

A contract holds both sides to what they agreed when they made it. A fee you first mention after the client has pulled out was never part of that deal, so you can ask for it but can't make them pay.

Without an agreed term, you're left arguing about what the cancellation cost you, and proving it. So put the fee where the client says yes: the signed contract or the accepted proposal. Our guide on whether you need a contract covers getting terms agreed, including by email.

When a cancellation fee is enforceable

English law won't enforce a penalty, a sum that exists to punish a client for breaking the contract. The leading case is Cavendish Square Holding v Makdessi, decided by the Supreme Court in 2015. Two parts of it matter.

First, the rule only applies to money due because someone broke the contract. If the contract doesn't oblige the client to go ahead, and simply says what they pay if they don't, that payment can't be a penalty (paragraph 14). So write the clause as an option the client can take, with a price. The court looks at what a clause does, not what it's called (paragraph 15), so a punishment labelled "fee" is still a punishment.

Second, where the rule does apply, the old question was whether the sum was a "genuine pre-estimate of loss". The court said the law had got stuck on that distinction (paragraph 31). The test now is whether the sum is out of all proportion to your legitimate interest in the client keeping their side of the deal (paragraph 32). That interest can be wider than the money you lose, but punishing the client isn't one.

Could you explain the number? A fee that lines up with work done, time you can't refill at short notice and costs you've already paid out is in proportion. The full price for a job cancelled two months ahead is the kind of number a client will challenge.

Stage the fee by how far in the work is

The closer the cancellation is to the start date, or the further into the work, the more it costs you, so the more the fee can be.

The law sets no figures here. Pick your own, and be ready to explain each one by what you'd lose at that point.

Payment for work done, and the deposit

Your clause should cover work done up to the day they cancel, plus approved expenses. The cancellation fee then covers the time you held for them and can't sell again.

A deposit makes this practical: money you already hold doesn't need chasing. Treat it as money on account, though. In the same case, the Supreme Court said a deposit kept after a client breaks the contract can still be a penalty (paragraph 16). The safer pattern is to set the deposit against what's owed under your clause and refund anything over. Our guide to asking for a deposit covers how much to take.

Private clients and the 14-day right to cancel

If your client is buying for themselves rather than for a business, they're a consumer, and two sets of rules sit on top of your contract.

The first is the right to cancel. When the contract is made by email, phone or online, or in person away from your business premises, the Consumer Contracts Regulations let the client cancel without a reason and without a cancellation fee. For a service, the window ends 14 days after the day the contract is made (regulation 30). You mustn't start work in it unless they expressly ask, and for a deal made away from your premises that request has to be on something durable, like an email (regulation 36).

If they asked you to start and then cancel, they pay for what you've supplied up to when they tell you, in proportion to the total price. If they didn't ask, or you never gave them the cancellation information, they pay nothing for that period, and missing information can stretch the window by up to 12 months (regulation 31). Some bookings, such as leisure services for a specific date, fall outside the right: see regulation 28.

The second is fairness. After the 14 days, your fee can apply, but an unfair term doesn't bind a consumer (Consumer Rights Act 2015, section 62). The Act's list of terms that may be unfair includes keeping a client's money when they pull out without offering the same back if you pull out, and charging a disproportionately high sum for services not supplied. So keep the fee close to work done and real costs, and make it work both ways.

Example cancellation clause wording

Wording to adapt for a business client, written as a right the client can use, with a price:

Cancellation by the Client. The Client may cancel the project at any time by written notice (email is enough). If the Client cancels, the Client will pay (a) for all work done and approved expenses up to the date of the notice, and (b) a cancellation fee of [X]% of the fee for the work not yet done, if the notice arrives less than [N] days before the agreed start date or after work has begun. The Freelancer will set any deposit paid against these amounts and refund any balance.

For a private client, put the cancellation notice first, and say how to cancel:

Your right to cancel. You may cancel this contract within 14 days of the day it was agreed, without giving a reason. If you ask the Freelancer to start within those 14 days and then cancel, you will pay for the work done up to the time you tell the Freelancer, in proportion to the full price. The cancellation fee in clause [X] applies only after those 14 days.

Fill the brackets with numbers you could defend line by line, and if a large sum turns on the clause, have a solicitor check it.

The bottom line

Decide what a cancellation costs you before the client says yes, and write it as the price of cancelling: work done, plus a share of what's left. Take a deposit and set it against that. With private clients, give the 14-day notice, get any request to start early in writing, and keep the fee close to real costs. If a client still won't pay what they agreed, our guide to sorting out a freelance dispute covers the next steps.