Holding deposit vs tenancy deposit: what's the difference?

A holding deposit and a tenancy deposit are both upfront payments a tenant makes, but they do entirely different jobs and follow different rules. A holding deposit, capped at one week’s rent, reserves a property while the landlord runs referencing and Right to Rent checks, and it is refundable in most circumstances. A tenancy deposit, capped at five or six weeks’ rent, is held throughout the tenancy as security against damage and unpaid rent, must be protected in a government-approved scheme, and is returned at the end minus any agreed deductions. Confusing the two, or handling the holding deposit incorrectly, is one of the most common early-tenancy disputes. This guide explains how the two differ, when a holding deposit must be refunded, and how the payment sequence works under the Renters’ Rights Act from 1 May 2026. For the formal definitions, see the dictionary entries on the holding deposit and the tenancy deposit.

This article reflects the law in England as at June 2026, under the Tenant Fees Act 2019 and the Renters’ Rights Act 2025, which commenced on 1 May 2026. Figures are checked against GOV.UK guidance on the Tenant Fees Act.

The difference at a glance

The clearest way to hold the distinction is that a holding deposit secures the property before the tenancy, while a tenancy deposit secures the landlord during and after it. They differ on amount, timing, purpose, refundability, and whether they must be protected.

Both caps come from the Tenant Fees Act 2019, and any amount charged above them is a prohibited payment that must be refunded. The tenancy deposit cap is set against annual rent, so a property at £1,200 a month carries a maximum holding deposit of about £277 (one week) and a maximum tenancy deposit of about £1,385 (five weeks).

What a holding deposit does

A holding deposit reserves the property while the landlord completes checks, and it commits both sides for a short, defined window. It demonstrates that the applicant is serious, and it compensates the landlord for taking the property off the market during referencing and Right to Rent verification. It is capped at one week’s rent, and once a landlord accepts a holding deposit from one applicant, they must stop marketing the property to others while that application is decided.

The default deadline for entering into the tenancy is 15 days from the day the landlord receives the holding deposit, unless both parties agree a different deadline in writing. A holding deposit does not need to be protected in a deposit scheme, because it is a short-term payment rather than security held across a tenancy.

What a tenancy deposit does

A tenancy deposit is security the landlord holds for the life of the tenancy against damage beyond fair wear and tear, unpaid rent, and other breaches. It is capped at five weeks’ rent where annual rent is below £50,000, or six weeks’ where it is £50,000 or more, and it is returned at the end of the tenancy minus any deductions that are agreed or determined.

Unlike the holding deposit, a tenancy deposit must be protected in one of the three government-approved schemes within 30 days of receipt, and the tenant must be served with prescribed information in the same window. The mechanics of the schemes, the difference between custodial and insured protection, and which to choose are covered in our guide to the tenancy deposit protection schemes and the DPS, TDS and myDeposits comparison. The step-by-step of protecting a deposit correctly sits in our guide to protecting a tenancy deposit.

Is a holding deposit refundable?

A holding deposit is refundable in most circumstances, and a landlord can keep it in only four situations defined by the Tenant Fees Act 2019. The deposit must be returned within seven days where the landlord decides not to proceed, where the tenancy agreement is signed (at which point it is returned or, with the tenant’s written consent, applied towards the first month’s rent or the tenancy deposit), or where the 15-day deadline passes without a signed agreement through no fault of the tenant.

A landlord may retain the holding deposit only where the prospective tenant withdraws, fails a Right to Rent check, provides false or misleading information that is material to the letting decision, or fails to take reasonable steps to enter into the tenancy despite the landlord’s own reasonable efforts. Even with valid grounds, the landlord must give the tenant written reasons within seven days of the decision; without those written reasons, the deposit must be refunded regardless. In the applications landlords process on August, the retention disputes that escalate are almost always the ones where no written reason was given, rather than ones where the underlying ground was weak.

Do you get your holding deposit back if you fail referencing?

Whether a failed reference costs you the holding deposit depends entirely on why it failed. If an applicant fails through no fault of their own, for example an employer confirms a lower salary than the applicant honestly believed, or a previous landlord discloses something the applicant could not have anticipated, the deposit must be refunded, because the failure did not involve false information. If the applicant fails because they knowingly misrepresented a material fact, such as overstating income or concealing adverse credit, the landlord can lawfully keep it. The line is deliberate misrepresentation, not an honest mistake or information the applicant did not have.

What happens to the holding deposit when the tenancy goes ahead

Once the tenancy agreement is signed, the holding deposit is either returned or, with the tenant’s written consent, credited towards the first month’s rent or the tenancy deposit. It is never simply absorbed: the tenant has to agree in writing to it being applied, and the landlord should record that agreement. This is the point at which the two deposits connect, and getting the paperwork right here prevents the most common “where did my holding deposit go” query at the start of a tenancy.

How the Renters’ Rights Act changes the payment sequence from 1 May 2026

Since the Renters’ Rights Act 2025 came into force on 1 May 2026, a landlord cannot require more than one month’s rent in advance, and cannot demand rent before the tenancy agreement is entered into. The deposit caps themselves are unchanged, but the order and timing of payments now matter more. The compliant sequence is: the tenant pays the holding deposit of up to one week’s rent; the landlord completes referencing and checks; both parties sign the agreement; the tenant pays the tenancy deposit of up to five weeks’ rent; and the tenant pays the first month’s rent, with any holding deposit credited against it.

Deposit protection also carries more weight under the new regime. With Section 21 abolished and all possession now running through Section 8 grounds, a court will generally not grant possession unless the tenancy deposit is protected and the prescribed information was served, or the deposit has been returned. Protecting late no longer bars possession outright once the deposit is in a scheme and the information served, but it can still expose the landlord to a penalty of one to three times the deposit. For the wider picture, see the Renters’ Rights Act tenancy landscape hub and the rules on rent in advance.

Keeping the evidence straight

Most deposit problems are evidence problems, not legal ones. For a holding deposit, the records that matter are the date it was received, the agreed deadline, and any written reasons for retention. For a tenancy deposit, it is the scheme confirmation, the prescribed information, and a dated check-in record of the property’s condition. Storing each against the property and tenancy record, timestamped, means that if either deposit is ever questioned the answer is already to hand; August’s document management feature is built for exactly this. If a tenancy deposit deduction is later disputed, our guide to handling deposit disputes fairly covers the adjudication route.

Frequently asked questions

Is a holding deposit the same as a tenancy deposit? 

No. A holding deposit (up to one week’s rent) reserves the property before the tenancy is signed and is usually refundable. A tenancy deposit (up to five or six weeks’ rent) is security held during the tenancy, must be protected in an approved scheme, and is returned at the end minus agreed deductions.

Can a landlord keep my holding deposit? 

Only in four situations under the Tenant Fees Act 2019: the tenant withdraws, fails a Right to Rent check, provides false or misleading material information, or fails to take reasonable steps to enter the tenancy. The landlord must give written reasons within seven days, or refund it.

Can the holding deposit be put towards the tenancy deposit or first month’s rent? 

Yes, once the tenancy agreement is signed and the tenant agrees in writing. Otherwise it must be refunded within seven days.

How long does a landlord have to refund a holding deposit? 

Seven days from the date the agreement is signed, the date the landlord decides not to proceed, or the date the deadline for agreement expires, whichever applies.

Does a holding deposit have to be protected in a scheme? 

No. Only the tenancy deposit must be protected, within 30 days, with prescribed information served. You can manage notices, deposit records and prescribed information in one place. Start for free with August.

Disclaimer: This article is a guide and not intended to be relied upon as legal or professional advice, or as a substitute for it. August does not accept any liability for any errors, omissions or misstatements contained in this article. Always speak to a suitably qualified professional if you require specific advice or information.