So, you’re a brand new landlord and your first tenants are moving into your property - congratulations! This is a huge and exciting step on your landlord journey.

One of the first things that will come up is a rental deposit. This is a payment that tenants will give to the landlord as a security measure, in case of any damage or missed rental payments.

Whilst some landlords believe it is ok to rent a property without taking a deposit, given that it’s your first time, we strongly recommend doing so.

If all goes well, when it comes to the end of the tenancy, your tenants will have paid their rent and left your property in an acceptable condition as per the terms of your lease agreement. This means you will simply return the deposit and let them be on their merry way. If there is any damage or missed payments, the deposit may not cover the expense entirely, but it will certainly give you some peace of mind.

Deposits are typically equal to the amount of 4-6weeks worth of rent. In some cases, it can be more or less than this, but it should not exceed more than 8 weeks worth.

You also have other legal obligations in terms of deposits, such as the Tenancy Deposit Scheme, which we will explore in this article.

What is the Tenancy Deposit Scheme?

After a high volume of disputes between landlords and tenants, the Tenancy Deposit Scheme was introduced.

Under this scheme, if a landlord receives a deposit for an Assured Shorthold Tenancy Agreement, they must be protected under one of three government-approved schemes. This means that once you, as a landlord, receive a deposit it must be submitted to a government-approved scheme within 30 days.

Failure to do so, and doing so incorrectly, could mean that may be liable to pay compensation of up to 3X the original amount of the deposit. Failure to protect a deposit can make it difficult to evict a tenant in certain circumstances as well.

It’s worth noting that you don’t need to protect a holding deposit under any scheme. If this person does become a tenant, however, their holding deposit must then be protected under a scheme. Typically this amount is taken as a contribution to the full deposit amount.

What Tenancy Deposit Schemes are available?

In England and Wales, you can register your deposit at one of the three following government authorised services:

  • Deposit Protection Service (DPS).
  • My Deposits.
  • Tenancy Deposit Scheme (TDS).

Each of these services will ensure that tenants receive their deposit within 10 days at the end of the tenancy after both parties have agreed on the amount that is to be paid.

What is the difference between the schemes?

Deposit Protection Service: The DPS was one of the first schemes introduced, and has been Government authorised since 2007. This is a custodial scheme and is the largest deposit protection provider in the UK. They have the choice of a free scheme or an insured scheme.

My Deposits: This is another Government authorised protection provider. This provider offers the choice of custodial, insured, and replacement options. This gives you some flexibility to choose a scheme that best suits your needs.

Tenancy Deposit Scheme: TDS is the only not-for-profit scheme, and was established in 2003. They offer custodial and insurance-backed schemes.

Which Scheme Should I Choose? To help with this, we will explain the different types of protection available.

Custodial Scheme: Custodial schemes are available to all landlords free of charge. You will simply need to create an account with your service of choice, register the deposit with the appropriate information, and transfer the deposit money. In this case, the protection provider holds onto the deposit.

Insured Scheme: An insured scheme allows you to hold onto the deposit, and pay a monthly fee (this will vary from service to service). This is typically the route taken by corporate landlords or those with a high number of properties in their portfolio.

Replacement Scheme: This is a flexible option for tenants who may not be able to afford a deposit upfront. This option gives tenants the chance to pay a monthly fee instead of a cash deposit. The landlord still receives the same protection that is offered by other schemes.

Which Scheme Should I Choose? The scheme that you choose will depend on a number of factors, so the first step is to do your research. Read as much as you can online, and if you know any other landlords, speak to them about which scheme they are currently using and what their experience has been.

Other things to consider are the costs involved, how their single claims process works and how often cases are found in favour of the landlord.


There you have it! Everything you need to know about the tenancy deposit schemes in the UK. It’s important that you understand this as much as possible for the sake of your tenants and to avoid compensation payments.