Deposit protection schemes – a guide for landlords

This article was updated in April 2026 to include information about the Renters’ Rights Act.

For landlords up and down the country, taking a deposit from a tenant is an important part of securing your investment and protecting your property against damage. But understanding your rights as a landlord and balancing them with the rights of your tenant can be a little trickier to get to grips with.

So let’s open the door on everything you need to know about deposit schemes.

Who has to pay a deposit?

There is no legal requirement for a landlord to take a deposit at the start of a tenancy. However, as a landlord in the UK, you’re entitled to request a deposit from tenants before they move into your property, and most landlords will do so.

Generally speaking, there are two kinds of deposits a tenant may pay before beginning their tenancy:

A holding deposit

This is paid by a prospective tenant to hold the property before they’ve signed a tenancy agreement. By taking the deposit, you, as the landlord, agree to take the property off the market and go on to let the property to the tenant if everything goes to plan.

If you take a holding deposit from a tenant to guarantee them the property, then you should either promptly return the deposit once the tenancy agreement is signed, or deduct it from the amount being asked for the security deposit.

You can only keep the holding deposit if the prospective tenant fails their right-to-rent checks. Holding deposits can be up to one week’s rent.

This type of deposit doesn’t have to be held in a deposit protection scheme.

A security deposit

This deposit is to cover the potential cost of damage to the property by the tenant, unpaid bills at the end of the tenancy and rent arrears.

By law, this type of deposit must be put into, or insured by, a deposit protection scheme.

Deposit protection schemes in the UK

By law, any security deposit taken from a tenant for a tenancy agreement must be placed in, or insured by, a tenancy deposit protection (TDP) scheme within 30 days of receiving the money.

Exactly which TDP scheme you use will depend on where in the UK your property is located.

England and Wales

In both England and Wales, there are three authorised schemes to choose from:

• Deposit Protection Service
• My Deposits
• Tenancy Deposit Scheme

Scotland

Similarly, in Scotland, there are three authorised deposit schemes, which are:

• Letting Protection Service Scotland
• Safe Deposits Scotland
• My Deposits Scotland

Northern Ireland

Finally, in Northern Ireland, there are two schemes which are specific to the country:

• My Deposits Northern Ireland
• Tenancy Deposit Scheme Northern Ireland

It is up to you as the landlord to choose which protection scheme you wish to use, but you must choose one of the authorised ones to comply with the law.

Custodial vs insured schemes

With each TDP scheme in the UK, you have the option to choose either a “custodial” or an “insured” scheme to protect your tenant’s money.

• Custodial: This is where you, the landlord, hand over the deposit to the protection scheme, which holds it for you for free
• Insured: You keep hold of the money and pay the protection scheme to insure its value. This will usually cost between £15 and £30 per deposit, depending on the sum of money being insured.

There are benefits and drawbacks to each type of scheme, and you’ll have to choose whether you value keeping hold of the money yourself enough to pay the cost of insuring it.

Whatever you choose, however, it has to be one of the two types. You can’t just keep hold of the deposit without insuring it.

How much should a landlord charge for a deposit?

Under the terms of the Tenant Fees Act 2019, deposits in England are limited to the equivalent of:

• One week’s rent for a holding deposit
• Five weeks’ rent for a security deposit (for annual rent up to £50,000)
• Six weeks’ rent for a security deposit (for annual rent above £50,000)

You’re not allowed to request a deposit from your tenants beyond these limits. While these are the maximum deposits, a standard deposit is often the equivalent of one month's rent.

Returning a deposit

Once a tenancy ends, you must return your tenant’s deposit promptly. For insured protection schemes where you have held the money from a deposit yourself, you must return the deposit within 10 days.

For custodial schemes where the money is held by the deposit protection agency, the landlord and tenant must agree on how much of the deposit is to be returned. Anywhere between 0% to 100% of the deposit can be returned.

Once you know how much will be returned to your tenants, you’ll need to inform the scheme administrator. They’ll usually release the funds back to the tenant within two days.

What are the reasons for deducting money from a deposit?

To deduct money from a tenant’s deposit, the onus is on the landlord to prove that a deduction is necessary and justified.

Circumstances where a deduction is justified include when:

• Rent is left unpaid at the end of the tenancy
• Bills are left unpaid at the end of the tenancy
• The landlord’s contents have been stolen or damaged by the tenant
• The property itself has been directly damaged by the tenant
• The tenant has left items in the property and hasn’t arranged for them to be picked up
• The property has become damaged due to negligence by the tenant

You can’t deduct money from a deposit for general deterioration of the decor or furnishings over time, as this is known as “fair wear and tear”.

If the wear and tear is excessive and caused by tenant neglect, for example, leaving a window wide open during a storm, causing water damage to the carpets, then you’re entitled to deduct the cost of repair from the deposit.

What happens in the event of a dispute?

If, as a landlord, you can’t agree with the tenant on the cost of any damage or cleaning that you intend to deduct from the deposit, then each TDP scheme has a free dispute resolution service that will help both sides reach an agreement.

If you don’t want to use the dispute resolution service, then your tenant has the right to make a claim against you in a county court (otherwise known as “small claims court”). You have a right to make a counterclaim if you believe that the tenant's demands are unreasonable.

You may also like:

• A landlords guide to inspecting your property
• A guide to your responsibilities as a landlord
• Your rights as a landlord