Paying a builder in cash is lawful, and no UK law caps the amount. That much is trade-neutral, and the general position is set out in full in the answer on whether you should pay a roofer in cash: the "£10,000 UK cash limit" does not exist, a cash discount is lawful while a price conditional on there being no invoice is not, and a private homeowner is not ordinarily liable for a trader's undeclared income. What follows is the part that only applies to building work, where the sums are larger and the money moves in instalments.
Scale is what makes building work different
A tap washer is settled once, on the doorstep, for less than a tank of petrol. A rear extension or a loft conversion is paid across weeks, sometimes months, and the totals are of a different order entirely.
Two thresholds start to bite at that scale that never trouble a small job. Section 75 of the Consumer Credit Act 1974 reaches a cash price of more than £100 and not more than £30,000, so a £24,000 kitchen and knock-through sits comfortably inside it while a whole-house refurbishment at £45,000 falls outside. The only way to find out which side of the line you were on is to have used a card at all. Separately, a business accepting cash of €10,000 or more in exchange for goods becomes a high value dealer and must register with HMRC for money laundering supervision before doing so. That duty belongs to the trader and you commit no offence at any amount, but a builder handling five-figure sums in notes who has never heard of the obligation is telling you something about how the business is run.
Every stage paid in cash is a stage you cannot prove
Citizens Advice recommends paying in stages, because it means problems can be put right before you make the final payment. That advice quietly assumes each stage leaves a record.
Pay a staged schedule in cash and the logic inverts. Instead of one undocumented payment you now have four or five, and the argument you are most likely to have on a long job is not "did I pay?" but "what was that payment for?" Each of first fix, second fix, materials and a variation agreed on site in week three is a separate figure, and cash gives you nothing to attach any of them to. The FMB advises that the written contract set out the cost and a schedule of payment. A schedule you cannot evidence against is a schedule in name only.
Keep a running written total instead, signed or acknowledged at each stage. It is the single cheapest thing you can do on a job that runs longer than a fortnight.
The materials deposit is the worst possible thing to pay in cash
Building deposits are legitimate and normal. The FMB says a 10% deposit is reasonable but not to pay more than 25%, and both it and TrustMark frame the payment the same way: a contribution towards materials the builder has to order, not payment for labour that has not happened yet.
That is precisely the payment cash ruins. It leaves before any work does, so there is nothing on site to point at if the builder never returns. It is often the largest single sum in the job. And it is the one payment where a card would do the most good, because putting any part of the price on a credit card brings the whole cash price within reach of a section 75 claim even if the firm stops trading. Citizens Advice separately suggests buying the materials yourself, so that at least you own them if something goes wrong. That is the same instinct expressed differently.
Deposits and stage payments are covered in more depth in the answer on whether a builder should ask for money up front. The short version here: whatever percentage you settle on, do not hand it over in notes.
Ask for a receipt, not a VAT invoice
This one is counter-intuitive and it comes up more on building work than anywhere else, because the sums are large enough that people reach for the most formal-sounding document they can name.
A VAT-registered trader is not legally required to give a private homeowner a VAT invoice. That duty runs only to VAT-registered customers. So demanding one can produce a stand-off over something the builder does not owe you, and a builder who declines is not necessarily hiding anything.
Ask for a receipt instead, for every payment including the deposit. The FMB is explicit that you should get receipts for all deposits paid. A receipt is what a small claims hearing wants to see, what a guarantee claim needs, and what your conveyancing solicitor will ask about years later when a buyer's surveyor queries the extension. It costs the builder nothing to write and it is the thing cash is least likely to leave behind.
On a job this size, the paperwork is worth more than the discount.