Deposits
How to protect a tenancy deposit – step-by-step guide
If you take a deposit from a tenant in England, you are legally required to protect it in a government-approved tenant deposit scheme within 30 days of receiving it. Failure to do so can result in financial penalties of up to three times the deposit amount, and it can also prevent you from regaining possession of your property. This guide explains exactly what you need to do, in what order, and what happens if things go wrong.
Why landlords must protect deposits
The requirement to protect tenancy deposits was introduced by the Housing Act 2004 and applies to all assured shorthold tenancies (ASTs) in England and Wales. The rules exist to prevent landlords from making unfair deductions and to give tenants a clear route to dispute resolution.
If you fail to protect a deposit, or if you protect it late, a court can order you to repay the deposit to the tenant and pay compensation of between one and three times the deposit value. You will also be unable to serve a valid notice to end the tenancy until the situation is rectified. Since Section 21 notices are being abolished under the Renters’ Rights Act, the stakes around compliance are only increasing.
For more on how possession works under the new rules, see our guide to grounds for possession under the Renters’ Rights Act in 2026.
The three government-approved deposit protection schemes
There are three schemes approved by the government to protect deposits in England and Wales. All three are regulated and offer free dispute resolution. You can only use one scheme per tenancy, but you can use different schemes for different properties.
Deposit Protection Service (DPS)
The Deposit Protection Service (DPS) offers both a custodial option (where the deposit is held by the scheme) and an insured option (where you hold the deposit and pay a fee to insure it). The custodial service is free to use.
Tenancy Deposit Scheme (TDS)
The Tenancy Deposit Scheme also offers both custodial and insurance-backed options. It is widely used by letting agents as well as private landlords and is known for its clear adjudication process.
MyDeposits
MyDeposits is the third government-authorised scheme. Like the others, it handles both custodial and insured deposits and provides a free dispute resolution service if there is a disagreement about deductions at the end of a tenancy.
Custodial vs insurance-backed schemes
Before you choose a scheme, you need to decide which type of protection suits you.
• Custodial - you transfer the deposit to the scheme, which holds it for the duration of the tenancy. This is free but means you do not have access to the funds.
• Insurance-backed - you keep the deposit in your own account and pay a fee to insure it through the scheme. This gives you access to the money, but there is a cost involved, typically a one-off premium per tenancy.
Most private landlords with a small portfolio find the custodial route simpler and more cost-effective. Insurance-backed schemes are often preferred by letting agents who manage deposit funds on behalf of multiple landlords.
How to protect a deposit: step by step
Collect the deposit. In England, the maximum deposit you can take for a tenancy where the annual rent is under £50,000 is five weeks’ rent. For properties with an annual rent of £50,000 or above, the cap is six weeks’ rent. Make sure you issue a receipt.
Choose your scheme. Decide whether you want to use the DPS, TDS, or MyDeposits, and whether you want a custodial or insured arrangement. Register with the scheme if you have not already done so.
Protect the deposit within 30 days. You must protect the deposit and provide the tenant with prescribed information within 30 calendar days of receiving the funds. This deadline is strict. Late protection, even by a single day, makes you liable to a penalty.
Serve the prescribed information. You must give the tenant written details of how their deposit has been protected. This is a legal requirement and must be served on the tenant and any relevant person (for example, a guarantor or parent who paid the deposit).
Keep records. Save proof that you protected the deposit and served the prescribed information. You may need this if a dispute arises later or if you need to serve a notice to end the tenancy.
What is prescribed information?
Prescribed information is the set of details you must provide to your tenant within 30 days of receiving their deposit. It must include:
The address of the rental property.
The amount of the deposit and the date it was received.
The name and contact details of the scheme holding the deposit.
The scheme’s certificate or confirmation number.
What the deposit can be used for (repairs, cleaning, rent arrears and so on).
The process for returning the deposit at the end of the tenancy.
How to raise a dispute if you and the tenant disagree about deductions.
Most schemes provide a prescribed information template that you can complete and sign. You and the tenant both keep a copy. The tenant is not required to sign the document, but it is good practice to ask them to do so for your records.
If you use a letting agent, they may handle this on your behalf, but the legal responsibility remains with you as the landlord. Always confirm that the agent has complied.
What happens at the end of a tenancy?
When a tenancy ends, you have a choice: either return the deposit in full or propose deductions. Any deductions must be for specific, evidenced reasons such as damage beyond fair wear and tear, unpaid rent, or the cost of cleaning that the tenant is contractually responsible for.
The key to protecting yourself is a thorough inventory. A detailed check-in report, with photographs, is your best evidence if a dispute arises.
Read our guide on end-of-tenancy inventory checks and cleaning for a full breakdown of what to include.
If the tenant agrees to your proposed deductions, the scheme releases the funds accordingly. If the tenant does not respond within the scheme’s deadline (typically 14 days), you may be able to reclaim the deposit by default.
Note that any claim for betterment – meaning you cannot charge a tenant for improvements beyond restoring the property to its original condition – is not permitted. The deposit can only cover the cost of restoring the property to the condition it was in at the start of the tenancy, adjusted for fair wear and tear.
What if there is a dispute?
If you and your tenant cannot agree on deposit deductions, either party can refer the case to the scheme’s dispute resolution service. This is free and avoids the need to go to court.
The process is called adjudication. An independent adjudicator reviews the evidence submitted by both sides and makes a decision. The decision is binding, which means neither party can appeal it through the scheme (though court action remains an option if a party believes there has been a legal error).
To succeed in adjudication, you need strong evidence. The adjudicator will look for:
A detailed check-in report signed by the tenant at the start of the tenancy.
A check-in report or check-out report noting any changes in condition.
Invoices or quotes for any work carried out.
Photographs clearly showing the damage or condition issue.
Correspondence with the tenant about the issue during the tenancy.
Adjudication decisions are usually returned within 28 days. Once a decision is made, the scheme releases funds in accordance with the outcome.
Common mistakes landlords make with deposit protection
Even experienced landlords can fall foul of the rules. Here are the most common errors to avoid.
• Missing the 30-day deadline - the most frequent mistake. Set a reminder as soon as you receive any deposit payment.
• Failing to serve prescribed information - protecting the deposit is not enough on its own. You must also give the tenant the required written details.
• Not serving information on all relevant persons - if a parent or guarantor paid the deposit, they must also receive prescribed information.
• Letting the scheme lapse - if a fixed-term tenancy becomes periodic, the deposit protection continues, but you must ensure the scheme remains active. Some landlords mistakenly cancel their registration.
• Making deductions without evidence - claiming for damage you cannot prove will fail at adjudication. Document everything at the start and end of every tenancy.
• Charging for fair wear and tear - ordinary aging of a property (carpet thinning, paint fading) is not something you can deduct from a deposit. Only damage beyond what is expected is recoverable.
Tenancy deposits and the Renters’ Rights Act 2026
The Renters’ Rights Act 2026 does not change the core deposit protection rules, but it does affect the wider tenancy framework in ways that make compliance more important than ever.
The abolition of fixed-term tenancies means all tenancies will be periodic from the outset. This changes how tenancies end, but the obligation to protect a deposit within 30 days and serve prescribed information remains unchanged.
Because Section 21 (no-fault eviction) is being removed, landlords who have failed to protect a deposit correctly will have no straightforward route to end a tenancy without addressing the breach first. Courts are expected to scrutinise deposit compliance closely in possession proceedings under the new regime.
Can a landlord use a zero deposit scheme?
Some landlords and tenants choose to use a zero deposit scheme as an alternative to a traditional cash deposit. Under these arrangements, the tenant pays a small non-refundable fee in lieu of a cash deposit. If the tenant causes damage or leaves rent arrears, the landlord can make a claim against the scheme, which then pursues the tenant for repayment.
Zero deposit schemes are not mandatory, and many landlords prefer a traditional cash deposit because it provides more security and a more straightforward claims process. However, they can make a property more attractive to tenants who struggle to raise a large upfront sum.
Conclusion
Protecting a tenancy deposit correctly is one of the most fundamental compliance tasks for any landlord. The rules are straightforward, but the penalties for getting them wrong are severe. Register with a government-approved tenant deposit scheme, act within 30 days, serve the prescribed information, and keep clear records. If you do all of this, you will be well placed to handle any dispute that arises at the end of a tenancy.
Good documentation, particularly a thorough inventory, is what separates a successful deposit claim from an unsuccessful one. Invest time in this at the start of every tenancy and you will save yourself considerable difficulty later.
This article is intended for general informational purposes only and does not constitute legal, financial, or professional advice. Landlord and tenant law is subject to change, and the information in this article reflects the position at the time of writing. You should always seek independent legal or professional advice before taking any action in relation to your property or tenancy.
Author
August Team
The August editorial team lives and breathes rental property. They work closely with a panel of experienced landlords and industry partners across the UK, turning real-world portfolio and tenancy experience into clear, practical guidance for small landlords.
