What Landlords Need to Know: Deposits and Tenancy Deposit Schemes

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This guide covers England. Deposit rules differ in Wales, Scotland and Northern Ireland, and this guide does not cover them.

Last updated: 10 August 2026.

In England, a tenancy deposit is capped at five weeks' rent where the annual rent is below £50,000, or six weeks' rent where the annual rent is £50,000 or more. You must protect it in one of three government-approved schemes and serve the prescribed information within 30 days of receiving it. Since 1 May 2026, missing that deadline also blocks a possession order under most section 8 grounds.

The rules in brief:

Deposit cap: five weeks' rent below £50,000 annual rent; six weeks' rent at £50,000 or more; no statutory cap above £100,000 annual rent
Holding deposit cap: one week's rent
Protection deadline: 30 days from receiving the deposit, in one of three government-approved schemes
Prescribed information: served on the tenant within the same 30 days
Rent in advance: no rent at all before the tenancy agreement is signed, then at most one month's rent before the tenancy starts
Cost of getting it wrong: a court order to pay the tenant one to three times the deposit, and no possession order under most section 8 grounds until you put it right

Navigating the legal requirements for tenancy deposits can be a challenge for landlords and tenants alike. Changes to the Tenant Fees Act and the arrival of the Renters' Rights Act 2025 have only added to the confusion. In this article, get clarity on the key aspects of deposit protection schemes. What are deposit limits? What expenses can you deduct from the deposit at the end of the tenancy? What do you need to know about tenancy deposit schemes? And how can you put an end to deposit disputes?

How much can landlords charge for a deposit?

In England, the Tenant Fees Act 2019 caps a tenancy deposit at five weeks' rent where the annual rent is below £50,000 and six weeks' rent where the annual rent is £50,000 or more. Properties with an annual rent of more than £100,000 are not covered by the Tenant Fees Act, so the statutory cap does not apply to them.

One week's rent means the annual rent divided by 52. On a property let at £1,300 a month, the annual rent is £15,600, one week's rent is £300, and the maximum deposit is £1,500.

The Renters' Rights Act 2025 did not change these caps. Anything you take above the cap is a prohibited payment. A council can require you to repay it to the tenant and issue a civil penalty of up to £5,000 for a first breach, rising to up to £30,000 or prosecution for the same breach committed again within five years.

Are landlords required to collect a deposit?

No. A landlord or agent is not legally required to take a tenancy deposit, though it is generally advised. The deposit serves as a safety net in case of damages or missed rent payments. Landlords who engage the services of an agent or property company may be obliged by that agreement to collect one.

Taking a deposit is optional. Protecting a deposit you have taken is not. Once you accept the money, every rule below applies to you.

Tenancy deposit vs a holding deposit

A holding deposit reserves the property while you run reference checks and is capped at one week's rent. A tenancy deposit is security against damage, unpaid rent and breaches of the agreement, and is capped at five or six weeks' rent depending on the annual rent.

You do not have to protect a holding deposit in a scheme. Once the tenant moves in and the holding deposit is applied to the tenancy deposit or the first month's rent, it becomes a deposit and must be protected. You can only put a holding deposit towards the tenancy deposit or first month's rent with the tenant's consent, and only once a tenancy agreement has been signed.

When should the landlord collect the deposit?

You can ask a prospective tenant for a holding deposit or a tenancy deposit before the tenancy agreement is signed. You cannot ask for rent before it is signed. Once you receive the tenancy deposit, you have 30 days to protect it in a government-approved scheme and 30 days to serve the prescribed information.

In practice, deposits are usually paid after the tenancy agreement is signed and before the tenant moves in. Count the 30 days from the day you receive the money, not from the day the tenancy starts.

Piggy bank representing a tenant deposit

About tenancy deposit schemes

A tenancy deposit, also known as a security deposit, is a payment made by a tenant before occupying a rental property. It must not exceed five weeks' rent, or six weeks' rent where the annual rent is £50,000 or more, and is usually paid along with the first month's rent once the tenancy agreement is signed.

In England, a deposit taken on an assured tenancy must be held in one of three government-approved tenancy deposit protection schemes for the whole of the tenancy. At the end of the tenancy it is returned to the tenant, less any deductions you and the tenant agree. Where there are damages or rent owed by the tenant, the deposit can be used to cover those costs.

Do you need to use a tenancy deposit scheme?

Yes. If you take a deposit on an assured tenancy, or on an assured shorthold tenancy that started on or after 6 April 2007, it must be protected in a government-approved deposit protection scheme. This is a legal requirement, not best practice.

These schemes safeguard the deposit during the tenancy and provide impartial adjudication if you and your tenant disagree about deductions.

If you fail to protect a deposit, a tenant can apply to the county court. The court must order the deposit repaid to the tenant or paid into a scheme within 14 days, and must order you to pay the tenant a sum of between one and three times the deposit amount. Since 1 May 2026, when section 21 no-fault evictions were abolished, you also cannot obtain a possession order under most section 8 grounds until the breach is put right.

Within the same 30 days, you must give the tenant the prescribed information. This is written information about the deposit and where it is held, and must cover:

The address of the rented property
How much deposit was paid
How the deposit is protected
The name and contact details of the scheme and its dispute resolution service
Your name and contact details, or your letting agent's
The name and contact details of any third party who paid the deposit
Why you would keep some or all of the deposit
How the tenant applies to get the deposit back
What the tenant should do if they cannot contact you at the end of the tenancy
What the tenant should do if there is a dispute over the deposit

On a custodial scheme, the scheme's custodial terms and conditions must also be included in the prescribed information.

What are the government tenancy deposit schemes?

There are three government-approved tenancy deposit protection schemes you can use in England: the Deposit Protection Service, MyDeposits and the Tenancy Deposit Scheme. All three offer the same two options, and the protection the tenant receives is the same whichever you choose.

Deposit Protection Service (DPS)

Custodial option: yes
Insured option: yes
Who holds the deposit: the scheme on the custodial option, you or your agent on the insured option
Cost to the landlord: free on the custodial option; a fee set by the scheme on the insured option
Website: depositprotection.com

MyDeposits

Custodial option: yes
Insured option: yes
Who holds the deposit: the scheme on the custodial option, you or your agent on the insured option
Cost to the landlord: free on the custodial option; a fee set by the scheme on the insured option
Website: mydeposits.co.uk

Tenancy Deposit Scheme (TDS)

Custodial option: yes
Insured option: yes
Who holds the deposit: the scheme on the custodial option, you or your agent on the insured option
Cost to the landlord: free on the custodial option; a fee set by the scheme on the insured option
Website: tenancydepositscheme.com

In plain terms: on a custodial scheme the scheme holds the deposit for free until the tenancy ends. On an insured scheme you or your agent keep the money and pay the scheme to insure it. The 30-day protection deadline, the prescribed information requirement and the free adjudication service are identical either way. Current fees for the insured option are set by each scheme, so check the scheme's own website before you choose.

Whichever you use, the deposit must be registered within 30 days of receiving the money from the tenant, and the tenant must be given the prescribed information within the same 30 days.

Rent in advance: the one-month limit

Since 1 May 2026 you cannot ask for, encourage or accept any rent before the tenancy agreement is signed. Once it is signed, and before the tenancy starts, you can ask for the first month's rent if the tenant pays monthly, or up to the first 28 days' rent if they pay more frequently than monthly. This is separate from the deposit, which you can still ask for before the agreement is signed.

Once the tenancy has started, you cannot require rent before the due date in the tenancy agreement. Any clause in the agreement requiring rent in advance has no effect. A tenant may still choose to pay early if they want to.

A council can issue a civil penalty of up to £5,000 for a first breach and require you to repay the unlawful payment to the tenant. Commit the same breach again within five years and the penalty rises to up to £30,000, or the council can prosecute. The rules apply to assured periodic tenancies in England and do not apply to tenancy agreements signed, or advance rent paid, before 1 May 2026.

For a fuller walkthrough, see our guide to the rent in advance rules under the Renters' Rights Act.

What happens if you don't protect a deposit correctly

Getting the deposit wrong now costs you two things: money, and your ability to end the tenancy.

The money. A tenant, or a former tenant, can apply to the county court. The court must order whoever holds the deposit to repay it to the tenant or pay it into a custodial scheme within 14 days, and must order you to pay the tenant a sum of between one and three times the deposit amount within 14 days.

The possession bar. Since 1 May 2026, to use most possession grounds you have to show that the deposit was protected in a government-approved scheme, that you complied with that scheme's requirements, and that you gave the tenant the prescribed information. A court will only grant a possession order if one of the following is true:

You protected the deposit in a government-approved scheme, complied with the scheme's requirements and gave the tenant the correct information
You returned the deposit to the tenant in full, or with deductions the tenant agreed
The tenant challenged you in court over the deposit protection requirements and the case has been decided, settled or withdrawn

The bar does not apply to grounds 7A or 14, the antisocial behaviour grounds. And it is not permanent: returning the deposit puts you back in a position to seek possession, which is why acting quickly matters more than arguing about it.

One more trap. It is illegal to take a deposit in any form other than money. If you accepted an item such as a car or a watch, you must return it before you can obtain possession on any ground.

If you are behind on any of this, our Renters' Rights Act information sheet guide sets out the wider compliance picture.

When do landlords need to return the tenant's deposit?

The deposit must be returned within 10 days of you and your tenant agreeing how much they get back. The clock starts when you agree the figure, not when the tenancy ends and not when the tenant asks.

If you hold the deposit on an insured scheme, return it directly to the tenant within those 10 days. You do not need to wait for a request.

For deposits held in a custodial scheme, the tenant can request the money directly from the scheme using the details you gave them in the prescribed information. The scheme will then contact you or your agent to approve the release.

If you and the tenant are in dispute, the deposit stays protected in the scheme until the issue is settled. On an insured scheme you or your agent must hand the disputed amount to the scheme to hold.

What costs can be deducted from the tenant's deposit?

You can deduct for loss you have actually suffered because of something the tenant did or failed to do. You cannot deduct for the ordinary cost of owning and maintaining the property.

Usually permitted deductions

Damage to the property caused by the tenant, their guests or their pets
Indirect damage from the tenant's negligence, such as damp from never ventilating a bathroom
Missing or damaged furnishings and fittings
Cleaning to return the property to its condition at check-in
Removal and disposal of belongings left behind
Unpaid rent and unpaid bills the tenant was responsible for

Not permitted deductions

Fair wear and tear, such as worn carpets or scuffed paintwork from normal use
Repairs to the structure of the property
Replacing or repairing appliances that have simply reached the end of their life
Redecorating or repainting as a matter of course between tenancies
Anything that is part of your own repairing obligations as a landlord
Betterment, meaning charging the full cost of a brand new item to replace an old one

Evidence you need

A detailed check-in inventory and schedule of condition, dated and signed
A matching check-out inventory with dated photographs or video
Invoices or quotes for the actual work, not estimates you have made up
A rent statement showing amounts due and amounts received, for any arrears claim
Written correspondence showing you told the tenant about the issue

Tenants must treat the property with care and report issues to you. Unless a repair is needed solely because of the tenant's negligence, the cost of that repair is yours. If you do deduct, give the tenant an itemised breakdown of every deduction and the reason for it.

How to deal with and prevent tenancy deposit disputes

If you want to make deductions, tell the tenant first and put the deductions and your reasons in writing. If you cannot agree, use the free dispute resolution service provided by your deposit protection scheme.

The scheme's adjudicator will consider evidence from both sides, such as property photos and videos, correspondence, and inventory and check-out reports, and reach a decision. If either party is unhappy with the outcome, they can take the case to court.

To avoid disputes, keep proper records of the property's condition. That means a thorough inventory before move-in, mid-term inspections, and a check-out inventory. For your claim to succeed, these documents need to prove the damage is real and attributable to the tenant. Without them, the chances of a scheme siding with you are low. In the case of rent arrears, an accurate record of all rent collected is essential, and if a tenant falls behind our guide on what to do if a tenant is not paying rent sets out your options. All of this can be managed in one place with Landlord Studio.

Frequently asked questions

How much deposit can my landlord take?

In England the deposit is capped at five weeks' rent where the annual rent is below £50,000, and six weeks' rent where the annual rent is £50,000 or more. One week's rent means the annual rent divided by 52. Properties with an annual rent above £100,000 are not covered by the Tenant Fees Act 2019, so the statutory cap does not apply to them.

Is the tenancy deposit scheme a legal requirement?

Yes. If you take a deposit you must protect it in one of three government-approved schemes within 30 days of receiving it, and serve the prescribed information within the same 30 days. Taking a deposit is optional. Protecting one you have taken is not.

How does a tenancy deposit scheme work?

Every scheme offers two options. On a custodial scheme the scheme holds the money for free until the tenancy ends. On an insured scheme you or your agent hold the money and pay the scheme to insure it. Both give the tenant the same protection and the same free adjudication service if you disagree about deductions.

What is the new law for landlords in 2026?

Part 1 of the Renters' Rights Act 2025 came into force on 1 May 2026. Section 21 no-fault evictions are abolished, you cannot ask for or accept any rent before the tenancy agreement is signed, and a court will not grant possession under most section 8 grounds unless the deposit was properly protected and the prescribed information served.

What happens if a landlord doesn't protect a deposit?

The tenant can apply to the county court. The court must order the deposit repaid or paid into a scheme within 14 days, and must order the landlord to pay the tenant between one and three times the deposit amount. Since 1 May 2026 the landlord also cannot obtain a possession order under most section 8 grounds until the breach is put right.

Sources and further reading

Every figure on this page is taken from government sources. Rules change, so check the original before you act on it.

This guide is general information for landlords in England, not legal advice. Get advice from a qualified professional on your own circumstances.