A guide to tenancy deposits
For landlords, understanding how tenancy deposits work and your legal responsibilities around them can help you stay compliant and reduce the risk of disputes.
In this guide, we’ll cover:
- What’s a tenancy deposit?
- Why do landlords need to protect tenants’ deposits?
- How long can landlords hold a deposit after a tenancy ends?
- What are a landlord’s responsibilities with tenancy deposits?
- How much can a landlord charge for a deposit?
- What deposit protection scheme should landlords use?
- Do landlords have to use a tenancy deposit scheme?
- How are tenancy deposits affected by the Renters’ Rights Act?
What’s a tenancy deposit?
A tenancy deposit offers landlords financial security if there’s damage to the property, missing items, or unpaid rent. It may also apply if the property isn’t returned in the same condition, beyond fair wear and tear.
If, at the end of a tenancy, a tenant has broken the terms of the tenancy agreement, a landlord can deduct part, or all, of the deposit to cover the costs.
Why do landlords need to protect tenants’ deposits?
Landlords must protect tenant deposits in a government-approved scheme within 30 days of receiving them. This is a legal requirement under the Housing Act 2004.
Protecting deposits also helps keep tenants’ funds safe and aims to make sure they’re returned fairly at the end of the tenancy.
How long can landlords hold a deposit after a tenancy ends?
At the end of a tenancy, it’s advised landlords should return the deposit within 10 days of the amount being agreed with the tenant.
If you plan to make deductions, you should set out those deductions and the reasons behind them as part of agreeing the amount to be returned.
If a dispute arises over deposit deductions that you can’t resolve between yourselves, you can use your deposit scheme provider’s alternative dispute resolution (ADR) service to reach an outcome.
It’s also worth noting that a landlord can only deduct money from a tenant’s deposit under specific, legally permitted circumstances.
What happens to your deposit if you’re under an AST?
If your tenancy deposit is currently held under an Assured Shorthold Tenancy (AST), it’s useful to understand how changes under the Renters’ Rights Act may affect you.
From 1 May 2026, most fixed term ASTs in England will automatically convert to periodic assured tenancies, so there will no longer be a fixed end date for these agreements.
If your tenancy agreement changes from an AST on that date, your existing deposit should remain protected under current rules. Landlords should not ask tenants to top up the deposit solely because of this change.
Some elements of the Act (such as a landlord ombudsman or private rented sector database) will be introduced later once secondary regulations are made.
What are landlords’ responsibilities with tenancy deposits?
Once you’ve received the deposit, you have 30 days to protect the funds and provide your tenant with the prescribed information.
This includes:
- The address of the rental property
- How much deposit has been paid
- How the deposit is protected
- The name and contact details of the tenancy deposit protection scheme and its dispute resolution service
- Your name and contact details, or those of your letting agent
- The name and contact details of any third party that’s paid the deposit
- Why you might keep some or all of the deposit
- How the tenant should apply to get the deposit back
- What the tenant should do if they can’t get hold of you at the end of the tenancy
- What the tenant should do if there’s a dispute over the deposit
Protecting the deposit and providing the prescribed information are both important steps. If you don’t do this, your tenant can apply to the court for the return of the deposit.
They may also be awarded compensation of up to three times the deposit amount.
How much can a landlord charge for a deposit?
Under the Tenant Fees Act, any tenancy begun or renewed after 1 June 2019 can only be charged a deposit up to a maximum of five weeks’ rent where the annual rent is below £50,000.
For tenancies where the annual rent is £50,000 or more, this rises to a maximum of six weeks’ rent.
This cap helps keep deposits fair for tenants while still giving landlords a suitable level of financial protection.
As a landlord, it’s worth calculating this carefully before requesting a deposit, as asking for more than the legal limit may lead to penalties.
What deposit protection scheme should landlords use?
A tenancy deposit scheme is a government-approved system that protects the security deposit a tenant pays at the start of a tenancy. It helps ensure the money is kept safe and fairly returned when the tenancy ends.
In England, landlords can protect deposits using any one of three approved schemes:
- Deposit Protection Service (DPS): A government-approved scheme that offers both free custodial protection, where the scheme holds the deposit, and a paid insured option, where the landlord holds it.
- MyDeposits: A government-authorised scheme mainly used by landlords and letting agents, offering insured protection and a custodial option.
- Tenancy Deposit Scheme (TDS): A scheme used by many letting agents and landlords, offering both custodial and insured protection.
Each scheme has its own process for raising disputes and returning deposits, so it’s worth reviewing the options to find one that is suitable for your needs.
Do landlords have to use a tenancy deposit scheme?
Yes. In England, landlords who take a tenancy deposit for an Assured Shorthold Tenancy (AST) must protect it in a government-approved tenancy deposit protection scheme within 30 days of receiving it.
They must also provide the tenant with the prescribed information about where the deposit is held and how it’ll be handled.
If a landlord fails to protect the deposit correctly, they may face financial penalties and may be restricted from regaining possession of the property until the issue is resolved.
It’s also worth noting that landlords aren’t legally required to take a deposit at all.
Some choose deposit-free alternatives, though these come with their own considerations around risk and protection.
You can find more information here.
How are tenancy deposits affected by the Renters’ Rights Act?
Tenancy deposits themselves are not currently expected to change directly under the Renters’ Rights Act. However, the type of tenancy agreement they relate to may change.
Key changes from 1 May 2026 include:
- The removal of fixed-term ASTs, with tenancies moving to a periodic structure
- The removal of Section 21 ‘no-fault’ evictions
- Greater reliance on Section 8 grounds for possession
Landlords should keep up to date with official guidance as further details are confirmed.
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- Over 25 years of experience providing landlord insurance
- An in-house customer service and claims team based in Nottingham
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Find out more about our cover options.
Tenancy deposit FAQ
Below are some frequently asked questions about legal responsibilities for tenants and landlords.
Please note that these frequently asked questions are not a substitute for the policy wording. For full terms and conditions, please see the policy documentation.
What’s a tenancy deposit scheme?
A tenancy deposit scheme is a government-approved system in the UK that protects the security deposit a tenant pays when renting a property. It helps ensure the money is kept safe during the tenancy and returned fairly when it ends.
Do landlords have to take a deposit?
No. There’s no law requiring a landlord to take a deposit. Some landlords choose not to, though many do as it provides a layer of financial protection against damage or unpaid rent.
Where does a tenancy deposit go?
If you take a deposit, it must be protected in one of the three government-approved tenancy deposit protection schemes within 30 days of receiving it. These are the Deposit Protection Service (DPS), MyDeposits, and the Tenancy Deposit Scheme (TDS).
What happens to a deposit when the tenancy ends?
The deposit should be returned within 10 days of the amount being agreed between landlord and tenant. If there are deductions, the reasons should be clearly explained. If the tenant disputes any deductions, the scheme’s ADR service can help resolve the matter.
Can a landlord hold a deposit without using a scheme?
No. In England, landlords who take a deposit for an Assured Shorthold Tenancy must protect it in a government-approved scheme. Failing to do so can result in financial penalties and may affect your ability to regain possession of the property.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon or refrain from acting upon information in this publication without first seeking specific legal and or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Just Landlords accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.
