How Do Tenancy Deposit Protection Schemes Work?
A tenancy deposit protection scheme is a government authorised system that either holds your tenant’s deposit or insures it while you hold it, and settles any argument about deductions for free. In England and Wales you have 30 days from receiving the money to protect it and to serve the prescribed information.
Since 1 May 2026 the duty applies to every assured tenancy rather than the assured shorthold tenancies that used to exist. The three schemes, the 30 day deadline and the penalty all came through the reform unchanged.
What did change is the price of getting it wrong. The deposit is your first line of defence against damage and arrears, and landlord insurance is the second.
You have 30 days in England and Wales to protect the deposit and serve the prescribed information, and both halves have to happen for you to be compliant. A custodial scheme holds the money for free while an insured one lets you keep it for a fee, so pick on cash flow rather than price alone. Any deduction you want at the end has to be evidenced, which means a dated inventory and check-out report the free adjudicator can read. Scotland and Northern Ireland run their own timescales, so check the rules for the nation you let in.
Compare landlord insurance quotes for the risks a deposit will never stretch to cover.
- Which scheme should you use, and should it be custodial or insured?
- How much can you take now the rent in advance rules have changed?
- What do you have to do within 30 days?
- What happens to the deposit when the tenancy ends?
- How does the free adjudication service work?
- What happens if you miss the deadline now section 21 has gone?
- How do the rules differ in Scotland and Northern Ireland?
- Frequently asked questions (FAQs)
Which scheme should you use, and should it be custodial or insured?
Three schemes are authorised in England and Wales: the Deposit Protection Service, the Tenancy Deposit Scheme and mydeposits. All three offer a custodial model, where the scheme holds the money for free, and an insured model, where you keep the money and pay a fee per deposit.
How custodial protection works
You send the deposit to the scheme, it sits in the scheme’s account for the whole tenancy, and neither side can touch it until you both agree. The Deposit Protection Service charges nothing for custodial protection and pays out once the split is settled.
Custodial is the low-effort option. There is no fee to budget for, no renewal to forget, and no chance of the money being spent by mistake.
How insured protection works
You keep the deposit in your own account and pay a fee per deposit to the scheme, which insures the tenant against you failing to return it. mydeposits and the other two schemes all run this model, and the fee is charged per deposit rather than per property.
The catch arrives the moment a dispute is raised. You have to send the disputed money to the scheme before adjudication starts, so the cash flow advantage disappears at exactly the point you wanted it.
Comparing the three schemes
The Tenancy Deposit Scheme also runs separate arms in Scotland and Northern Ireland, which helps if you let across borders. Otherwise the three sit close enough together that most landlords choose on portal usability rather than price.
| Scheme | Models offered | Who holds the money | Cost to you | Where it operates |
| Deposit Protection Service | Custodial and insured | The DPS, or you on the insured model | Free custodial, fee per insured deposit | England and Wales |
| Tenancy Deposit Scheme | Custodial and insured | TDS, or you on the insured model | Free custodial, fee per insured deposit | England and Wales, plus separate Scottish and Northern Irish arms |
| mydeposits | Custodial and insured | mydeposits, or you on the insured model | Free custodial, fee per insured deposit | England and Wales, plus mydeposits Scotland |
If you run a portfolio, keep every deposit with one scheme. Chasing three portals through a check-out season wastes more time than any fee saving is worth.
Wales uses the same three schemes, but tenancies there are occupation contracts under the Renting Homes (Wales) Act 2016. The Renters’ Rights Act applies in England only.
How much can you take now the rent in advance rules have changed?
Five weeks’ rent, or six weeks where the annual rent is £50,000 or more. Since 1 May 2026 you also cannot require more than one month’s rent up front, so the deposit is now most of the cushion you get.
The five week and six week caps
The caps sit in Schedule 1 of the Tenant Fees Act 2019, and anything above them is a prohibited payment you have to repay. A holding deposit taken to reserve the property is capped separately at one week’s rent.
On a £1,200 a month tenancy, five weeks’ rent is £1,384. Multiply the monthly rent by 12, divide by 52, then multiply by five.
The cap covers the total deposit, so there is no separate pet deposit, parking deposit or key deposit on top. Pet damage comes out of the same five weeks as everything else.
The end of large rent in advance payments
Section 8 of the Renters’ Rights Act 2025 makes any tenancy term requiring rent in advance ineffective, apart from the initial rent covering the first 28 days. You can ask for one month’s rent before the tenancy starts, and nothing beyond that.
That removes the six months up front that landlords used to ask for from tenants with thin references or no UK credit history. Rent guarantee cover is the sensible replacement for that buffer.
Third party money is unaffected. A council rent deposit scheme or a guarantor can still fund the deposit, which matters if you let to tenants on housing benefit, and it must be protected in exactly the same way.
| Annual rent | Maximum tenancy deposit | Maximum holding deposit | Maximum rent before the tenancy starts |
| Under £50,000 | 5 weeks’ rent | 1 week’s rent | 1 month’s rent (28 days’ rent if the rental period is shorter) |
| £50,000 or more | 6 weeks’ rent | 1 week’s rent | 1 month’s rent (28 days’ rent if the rental period is shorter) |
What do you have to do within 30 days?
Two things: register the deposit with an authorised scheme, and give the tenant the prescribed information. Both deadlines run from the day you receive the money, not from the day the tenancy starts.
When the clock starts
Section 213 of the Housing Act 2004 requires the initial requirements of a scheme to be met ‘within the period of 30 days beginning with the date on which it is received’. Receipt by your letting agent counts as receipt by you.
For a bank transfer that is the day the funds clear into the account. Take a deposit six weeks before move-in and your deadline can fall before the tenant has the keys.
What the prescribed information must say
The information has to be served inside the same 30 days and it is prescriptive. Ten items have to appear.
- The address of the rented property and how much deposit was paid
- How the deposit is protected, and by which scheme
- The scheme’s name, contact details and 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 might 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
- What the tenant should do if there is a dispute over deductions
Each scheme publishes a template that covers all of it, so use theirs. Serve it by email and keep the sent item, because proving service is your job and not the tenant’s.
Which lets are caught, and which are not
Every assured tenancy is caught, including HMO lets where each tenant signs a separate agreement and pays a separate deposit. Protect each one individually or you have as many breaches as you have tenants.
Lodgers who share your own home sit outside the rules, and so do short stay and holiday lets, because neither arrangement is an assured tenancy. Company lets and tenancies at very high rents are also outside the scheme requirements.
What happens to the deposit when the tenancy ends?
You inspect against the inventory, propose deductions with evidence, and agree a split. Once you both agree the figure, the money has to be back with the tenant within 10 days.
The check-out sequence
- Inspect room by room against the signed check-in inventory and photograph everything you intend to claim for.
- Send an itemised proposal with an invoice or written quote against each line, not a single lump sum.
- Release the undisputed part immediately through the scheme portal rather than holding the whole deposit.
- Refer only the contested amount to adjudication, and only after you have tried to settle it directly.
Releasing the agreed portion early is the best way to stop a small argument becoming a formal dispute. Tenants who already have most of their money rarely fight over the last £80.
What you can and cannot deduct
You can claim for damage beyond fair wear and tear, missing items listed on the inventory, cleaning back to the check-in standard, and unpaid rent. You cannot claim betterment, so a five year old carpet is never replaced at full price and contents you own are valued net of their age.
| Deduction | Typical amount claimed | Evidence that wins it | Why landlords lose it |
| End of tenancy cleaning | £120 to £350 | Dated check-in and check-out photos plus the cleaner’s invoice | Claiming a professional clean when the property was not professionally cleaned at check-in |
| Walls and redecoration | £150 to £600 | The same wall photographed at both ends of the tenancy, plus a decorator’s quote | Asking for a full repaint of a room that was already due one |
| Carpet damage | £200 to £900 | The carpet’s age, original cost and a like for like replacement quote | No allowance made for the carpet’s remaining life |
| Missing or broken items | £50 to £400 | A signed inventory listing the item and its condition | The item never appeared on the inventory in the first place |
| Rent arrears | The outstanding balance | A rent statement that reconciles to the tenancy agreement | The arrears figure has never been put to the tenant in writing |
| Garden left overgrown | £80 to £250 | A tenancy clause making the garden the tenant’s responsibility | No clause in the agreement, or no check-in photo of the garden |
Those are typical amounts claimed rather than published averages. Every scheme decides on the evidence in front of it, so the same claim can succeed on one file and fail on another.
When the damage costs more than the deposit
Five weeks’ rent does not go far against a wrecked bathroom, and the cap applies whatever the damage. Malicious damage by a tenant sits under most landlord buildings policies, while one-off mishaps usually need accidental damage cover.
If the property cannot be relet while the repairs run, loss of rent cover picks up the void. Treat the deposit as a first excess rather than a repair fund.
How does the free adjudication service work?
Either side can refer the disputed amount to the scheme’s adjudicator, who reads both evidence files and issues a binding decision at no charge. The burden of proof sits on you, not on the tenant.
What the adjudicator wants to see
- A signed check-in inventory with dated photographs of every room
- A check-out report covering the same rooms in the same order
- Invoices or written quotes for each item you are claiming
- The tenancy agreement clause the claim relies on
- A rent statement, where part of the claim is arrears
Evidence that arrives after the scheme’s deadline is normally ignored. Each scheme sets its own window and it is measured in days rather than weeks.
Why landlords lose disputes they should win
Most losses are evidential rather than legal. The claim is fair, the paperwork is thin, and an adjudicator cannot award money for something nobody has proved.
The decision is final and there is no appeal, so the work has to happen before the dispute rather than after it. A legal expenses section on your policy is worth having for the possession claim that sometimes follows.
What happens if you miss the deadline now section 21 has gone?
Your tenant can ask the county court for a penalty of one to three times the deposit, on top of returning the money itself. Since 1 May 2026 an unprotected deposit also blocks a possession order on almost every ground.
The penalty the court can order
Section 214 of the Housing Act 2004 lets the court order a sum ‘not less than the amount of the deposit and not more than three times the amount’, payable within 14 days. On a £1,384 deposit that is £1,384 to £4,152, plus the deposit back.
Protecting it late does not undo the breach, because the breach happened when day 30 passed. A tenant can bring the claim during the tenancy or for up to six years after it ends.
The possession bar that replaced the section 21 rule
Section 26 of the Renters’ Rights Act 2025 rewrote section 215 of the Housing Act 2004. A court may now make a possession order only if the deposit is being held in an authorised scheme.
The only carve-outs are the antisocial behaviour grounds, 7A and 14, and cases where you have already returned the deposit or settled the tenant’s claim. Rent arrears, selling the property and moving back in are all blocked while the deposit sits unprotected.
This is a bigger problem than the old Section 21 restriction ever was. Section 21 was one route among several, whereas the new bar closes almost all of them at once.
How to fix a late protection
Protect the deposit now anyway, because the possession bar lifts once the money is held in a scheme. The penalty claim survives, but your possession routes come back.
Returning the deposit in full also clears the bar and caps your exposure. Neither step is cheap, and both beat holding a buy-to-let property you cannot recover while the mortgage runs.
How do the rules differ in Scotland and Northern Ireland?
Both nations run their own schemes on their own deadlines. Scotland gives you 30 working days from the start of the tenancy and its sanction is mandatory rather than discretionary.
Scotland
Deposits go to SafeDeposits Scotland, Letting Protection Service Scotland or mydeposits Scotland, and all three are custodial. Regulation 3 of the Tenancy Deposit Schemes (Scotland) Regulations 2011 gives you 30 working days from the beginning of the tenancy to pay it over and to serve the tenant information.
Regulation 10 says the tribunal must order a payment of up to three times the deposit where the duty has been breached. In England the court decides whether to award at all; in Scotland the only live question is how much.
Northern Ireland
Northern Ireland works to the Tenancy Deposit Schemes Regulations (Northern Ireland) 2012, with its own approved schemes and its own prescribed information set out in Schedule 1. The deadlines and the paperwork differ from England, so an English prescribed information pack will not do.
Enforcement differs too, because councils there can act rather than leaving it to the tenant to sue. Check the current nidirect guidance before you take a deposit on a Northern Irish let.
Frequently Asked Questions (FAQs)
Yes. Section 26 of the Renters’ Rights Act 2025 moved the deposit rules across to assured tenancies from 1 May 2026, so nothing about the duty has softened.
No, and you should refuse if the tenant asks. The deposit is security against damage and arrears, and you claim arrears from it through the scheme after the tenancy ends.
Yes. The statutory duty sits with the landlord, so ask your agent for the scheme certificate and the dated prescribed information every time.
No. Every assured tenancy is periodic now, and the original protection carries through as long as the same parties and the same property are involved.
No. The five week cap covers the total deposit, so pet damage has to be claimed from the same money as everything else.
One month’s rent, or 28 days’ rent where the rental period is shorter than a month. Anything further in advance is unenforceable under the Renters’ Rights Act 2025.
You can pursue the balance from the tenant in the county court, though recovery is often poor. An insurance claim for malicious or accidental damage is usually the faster route.
Ten days from the point you and the tenant agree the amount. If part of it is disputed, release the agreed portion and let the scheme hold the rest.
Yes. The claim can be brought during the tenancy or for up to six years after it ends, so a clean check-out is no protection against it.
Yes. A deposit funded by a parent, a guarantor or a council rent deposit scheme is protected in exactly the same way, and the third party’s details go in the prescribed information.
No. A non-refundable fee paid to a deposit replacement product is not a tenancy deposit, so there is nothing to protect and nothing to return.
Each scheme sets its own evidence window and then decides on the papers. Expect weeks rather than days, and expect the timetable to slip if either side files late.