When renting a property in the UK, tenants are usually required to pay a tenancy deposit before moving in. This money acts as financial protection for the landlord in case the tenant breaches their tenancy agreement, while also safeguarding tenants by ensuring the deposit is held fairly and returned at the end of the tenancy if no deductions are needed.
In this guide, we’ll explain what tenancy deposits are, how deposit protection schemes work, what deductions can be made, and what happens if disputes arise.
What Is a Tenancy Deposit?
A tenancy deposit is a sum of money paid by the tenant to the landlord or letting agent at the start of a tenancy. It acts as a guarantee against:
- Non-payment of rent
- Excessive damage to the property
- Removal of items or furniture
The Tenant Fees Act 2019 caps deposits based on the property’s annual rent:
- Properties with annual rent under £50,000 → deposit capped at five weeks’ rent
- Properties with annual rent of £50,000 or more → deposit capped at six weeks’ rent
Deposits remain the property of the tenant and must be returned at the end of the tenancy, provided the tenant has met all obligations and no valid deductions are required.
Deposit Protection Schemes Explained
Since 2007, landlords in England and Wales have been legally required to protect deposits in a government-approved deposit protection scheme. These schemes ensure transparency, fairness, and financial security for both landlords and tenants.
There are two types of scheme:
- Custodial Schemes
- The landlord or agent pays the deposit into the scheme.
- The scheme holds the deposit securely until the tenancy ends.
- The deposit is refunded to the tenant (minus any agreed deductions).
- Insurance-Based Schemes
- The landlord or agent retains the deposit.
- A fee is paid to the scheme to insure the deposit.
- If a dispute arises, the scheme ensures the tenant is refunded any amount they are entitled to.
- Approved Deposit Protection Schemes
There are three government-approved deposit protection schemes in England and Wales, all offering both custodial and insurance-based options:
- Deposits must be registered within 30 days of receipt, and tenants must be provided with:
- The scheme’s name
- Contact details
- Information on how to reclaim their deposit at the end of the tenancy
Failure to protect a deposit can result in fines of up to three times the deposit amount and repayment in full to the tenant.
- Returning the Deposit
If tenants meet all their obligations and leave the property in good condition, the landlord must return the deposit within 10 days of the tenancy ending.
To ensure fairness:
- Tenants should keep the property clean and in good order.
- Landlords should maintain thorough records, including the inventory and any evidence of damage or arrears.
- When Can Landlords Make Deductions?
Landlords may make reasonable deductions if:
- Rent is unpaid
- Damage beyond fair wear and tear has occurred
- Items are missing
- The property is left dirty
- Utilities remain unpaid
- Gardens are not returned in an acceptable condition
- Examples of Common Deductions
- Cleaning – Only to restore the property to the same standard as at move-in.
- Damage – Not including fair wear and tear.
- Redecoration – Only if damage exceeds normal use.
- Gardening – Tenants must meet the responsibilities outlined in the tenancy agreement.
- Rent arrears – Outstanding rent can be claimed.
- Unpaid utilities – Must be backed up by invoices.
For more on how wear and tear is judged, see our Fair Wear and Tear in UK Rentals guide.
Deposit Disputes
Most deposits are returned without issue, but disputes can arise if landlord and tenant cannot agree on deductions.
Disputes are handled by the free resolution services provided by the deposit protection schemes. These services are impartial and avoid the need for costly court proceedings.
Top tip: Keep a detailed, signed inventory and schedule of condition at the start of the tenancy to minimise disputes. For guidance, see our Complete Guide to Inventories.
Deposit Use Clauses in Tenancy Agreements
Every tenancy agreement includes a deposit clause, which sets out:
- The circumstances under which deductions can be made
- How the deposit will be refunded
- How disputes will be resolved (via adjudication or court if necessary)
Alternatives to Traditional Deposits
In recent years, deposit replacement schemes have become an option for tenants. Instead of paying a refundable deposit, tenants pay a non-refundable fee (monthly or annually) to a third-party provider.
Benefits include:
- Lower upfront costs for tenants
- Faster property turnover for landlords
- Equivalent protection for landlords
However, it is always the tenant’s choice whether to pay a traditional deposit or opt for a deposit replacement product. Landlords cannot insist on one option over the other.
For a detailed breakdown, see Goodlord’s guide on how deposit replacement schemes work
FAQs
Under the Tenant Fees Act 2019, deposits are capped at five weeks’ rent for properties under £50,000 annual rent, and six weeks for those £50,000 or more.
Landlords must register a deposit in a government-approved scheme within 30 days of receiving it.
The tenant can apply to court. The landlord may be ordered to repay the deposit in full and fined up to three times its value.
No. Deductions can only be made for actual damage, not normal ageing. See our Fair Wear and Tear in UK Rentals guide for more detail.
We ensure deposits are registered in an approved scheme as part of tenancy management, but we do not provide licensing paperwork support.
Conclusion
Tenancy deposits are one of the most important parts of renting — protecting both landlords and tenants. With the right protection scheme, clear records, and fair communication, deposits can be handled smoothly from start to finish.
Need expert guidance on managing your rental property? Contact Fleming Lettings today.
