A Landlords’ Guide to Deposit Protection Schemes in the UK

 
01/12/2025

Navigating tenancy deposits can feel like a maze for both new and experienced landlords but getting it right is essential. In the UK, deposit protection schemes are a legal requirement for most private rentals, and they’re designed to safeguard tenants’ money while giving landlords a clear, fair framework to rely on.


In this guide, we explain how the deposit protection schemes work, what your obligations as a landlord are, and how to stay compliant.

 

What is a “Deposit Protection Scheme”- and why does it matter?

When letting out a property, landlords take a security deposit from the tenants. This deposit acts as a financial safeguard against unpaid rent, damage, or other breaches of the tenancy agreement. If the tenancy started on or after 6th April 2007 and is an assured shorthold tenancy (AST), the deposit must legally be placed in a government-approved protection scheme.

 

These schemes ensure that tenants get their money back at the end of the tenancy (provided they meet the tenancy terms), while also giving landlords a fair, regulated process to recover costs if there are legitimate deductions to be made.

 

In England and Wales, the three main schemes are:

  • Deposit Protection Service (DPS)

  • MyDeposits

  • Tenancy Deposit Scheme (TDS)

If your property is in Scotland or Northern Ireland, there are separate regional schemes.


Custodial vs. Insured: The two ways to protect a deposit

When choosing how to register a tenant’s deposit, landlords have two approaches: custodial or insured.

  • Custodial scheme: The protection scheme holds the deposit money for the duration of the tenancy. This is free of charge (to landlord or agent).

  • Insured scheme: The landlord (or letting agent) keeps the deposit in their own account, and pays the scheme a fee to insure it.

 

Each approach has pros and cons.

  • Custodial is simple and removes the temptation for landlords to misuse the funds.

  • Insured can be more flexible but may require careful accounting and trust between parties.

 

What landlords must do, and when

If you take a deposit from a tenant under an AST in England/Wales, then:

  • You must place the deposit into a government-approved scheme within 30 days of receiving it.

  • You must provide your tenant with the “prescribed information” within the same 30-day period. This includes: property address, deposit amount, which scheme is used (with contact details), landlord/agent name and contact details, the process for getting the deposit back, reasons for possible deductions, what to do if a dispute arises, etc.

  • If the tenancy ends and there is disagreement about deductions, the deposit remains protected by the scheme until the dispute is resolved.

  • Once the tenant and landlord agree on the amount to be returned (or after a scheme-mediated resolution), the deposit must be returned to the tenant within 10 days.

The deposit protection requirement applies even if someone else (e.g. parents or guarantor) pays the deposit on behalf of the tenant.


Note: a “holding deposit” (an initial payment to reserve a property before the tenancy begins) does not have to be protected. But once a formal AST starts, and the holding deposit becomes part of the tenancy deposit, it must be protected by a scheme.

 

What happens at the end of tenancy - and how disputes work

When the tenancy comes to an end, and assuming the tenant has met their obligations (paid rent, bills, left property in good condition, etc.), the deposit should be returned within 10 days of agreement.


If there are any disagreements (e.g., landlord claims damage, unpaid rent or cleaning costs), the dispute resolution service provided by the scheme will step in. The deposit stays protected while the issue is sorted, giving both parties a fair process.

 

Because the scheme is independent, it can help landlords avoid excessive disputes, and helps tenants feel secure that they’re not losing their money unfairly.

 

What if the landlord fails to protect the deposit?

Failing to protect a deposit (or provide the prescribed information) is a serious breach of UK rental law. The consequences can be costly - tenants may be entitled to compensation, often amounting to the deposit value or more.

 

Practical tips for landlords

To make sure you stay compliant and avoid headaches:

  • As soon as you receive the deposit, register it with a government-approved scheme. Don’t wait.

  • Provide the prescribed information to the tenant immediately (address, amount, scheme name/contact, your/agent’s contact, how to reclaim deposit, deduction rules, etc.).

  • Keep clear records: tenancy agreement, deposit receipt, inventory / condition report, communications - especially if you anticipate possible deductions.

  • Be transparent with tenants about what deductions are possible, and document any damages or issues carefully.

  • When the tenancy ends, aim for a quick, fair resolution. Use the scheme’s dispute-resolution mechanisms if needed.

  • Consider whether a custodial or insured scheme works better for your business model, and be consistent.

 

For landlords, using a government-approved tenancy deposit scheme isn’t just about ticking a legal box. It’s one of the simplest ways to build trust, avoid disputes, and keep your lettings running smoothly.


If you’d prefer to leave the admin, compliance, and day-to-day management to the experts, Prop Home can take the weight off your shoulders, get in touch to find out more about our services.

 
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