Tenancy deposit schemes: choosing the right option

In England and Wales, landlords must protect a tenant’s money deposit in a government approved tenancy deposit protection (TDP) scheme for the relevant tenancies, and do it within 30 days of receiving the deposit. Your choice is not between different legal rules, it is mainly whether you use a custodial scheme (the scheme holds the money) or an insured scheme (you or your agent holds it).

What are tenancy deposit schemes (TDP schemes) and when do they apply?

Tenancy deposit protection (TDP) schemes are government backed schemes that protect tenants’ deposits. The official guidance explains that these schemes ensure tenants will get their deposit back if they meet the tenancy terms, do not damage the property, and pay rent and bills.

The GOV.UK landlord guidance says you must use a TDP scheme if you rent out your home on an assured shorthold tenancy that started after 6 April 2007.

The GOV.UK tenant guidance also states that a landlord must protect the deposit if the tenant rents their home on an assured periodic tenancy (APT), and that APTs replaced assured shorthold tenancies on 1 May 2026.

If you are unsure which tenancy type applies to your let, it is worth checking the latest GOV.UK guidance because the rules about private renting are changing on 1 May 2026.

Which tenancy deposit schemes are approved in England and Wales?

GOV.UK lists the approved schemes you can use in England and Wales. They are:

• Deposit Protection Service
• MyDeposits (including deposits that were held by Capita)
• Tenancy Deposit Scheme

GOV.UK also makes clear that there are separate TDP schemes in Scotland and Northern Ireland. The England and Wales schemes above are the ones referenced for properties in England or Wales.

Custodial vs insured: what is the difference in how the money is held?

All TDP schemes offer two options, and this is the key choice for most landlords and letting agents.

• Custodial scheme, the scheme holds the deposit for free.
• Insured scheme, you or your agent holds the deposit, and you pay the scheme to insure it.

Both options still involve using an approved scheme and meeting the same core deadlines set out on GOV.UK, such as protecting the deposit within 30 days and returning it within 10 days once you agree the amount to be repaid.

What are the key deadlines landlords must meet?

GOV.UK sets out a few timing rules that come up again and again with deposit compliance and deposit returns.

• Within 30 days of getting the deposit: you (or your letting agent) must put the deposit in a TDP scheme.
• Within 30 days of getting the deposit: you must also give the tenant specific information about how their deposit is protected.
• Within 10 days of agreement at the end of the tenancy: the deposit must be returned within 10 days of you both agreeing how much the tenant will get back.

If there is a dispute, the deposit stays protected in the scheme until the issue is settled.

What information must you give tenants within 30 days?

As well as protecting the deposit, you must provide the tenant with prescribed information. GOV.UK lists what must be included. Within 30 days of receiving the deposit, you must tell your tenants:

• the address of the rented property
• how much deposit they’ve paid
• how the deposit is protected
• the name and contact details of the tenancy deposit protection (TDP) scheme and its dispute resolution service
• your (or your letting agency’s) name and contact details
• the name and contact details of any third party who paid the deposit
• why you would keep some or all of the deposit (for example, because the tenants damaged the property and you need to fix it)
• how to apply to get the deposit back at the end of the tenancy
• what to do if they cannot get hold of you at the end of the tenancy
• what to do if there’s a dispute over the amount of deposit to be returned at the end of the tenancy

This matters even if someone else pays the deposit, such as a tenant’s parents or a rent deposit scheme, because the deposit still must be protected in a TDP scheme.

What happens at the end of the tenancy, and what if you cannot agree?

When the tenancy ends, the normal route is simple. Once you both agree how much the tenant will get back, the deposit must be returned within 10 days.

If you do not agree, GOV.UK explains that the deposit remains protected in the scheme until the issue is settled.

What is different if you use an insured scheme?

If you are in an insured scheme and there is a dispute, GOV.UK states that you or the agent must give the deposit to the TDP scheme, and the scheme will hold it until the issue is settled.

How deposit disputes are handled through the scheme

Each approved TDP scheme offers a free dispute resolution service. GOV.UK describes it as a way to resolve disagreements about how much deposit should be returned.

The tenant guidance also explains how the service works in practice:

• You do not have to use the dispute resolution service, but if you do, both landlord and tenant have to agree to it.
• Both sides will be asked to provide evidence.
• The decision made about the deposit will be final.

If a tenant cannot contact the landlord and the deposit is held by one of the approved schemes, the tenant may be able to raise a dispute to get their deposit back. GOV.UK notes there may be a limit on the time to raise a dispute and advises contacting the scheme as soon as possible.

Special cases landlords often miss: holding deposits, third party deposits, and valuable items

Some situations look like a standard deposit but have different rules in GOV.UK guidance.

Holding deposits

GOV.UK explains that you do not have to protect a holding deposit (money paid to hold a property before an agreement is signed). Once the person becomes a tenant, the holding deposit becomes a deposit, and you must protect it.

Deposits paid by a third party

You must use a TDP scheme even if the deposit is paid by someone else, such as a rent deposit scheme or the tenant’s parents. You must also include the third party’s name and contact details in the information you give the tenant within 30 days.

Valuable items instead of money

The GOV.UK landlord guidance states that if you receive a valuable item as a deposit instead of money (for example a car or watch), you do not have to put it in a TDP scheme. The tenant guidance also says that if the tenant does not rent the home on an APT, the landlord can accept valuable items as a deposit instead of money, and the items will not be protected by a scheme.

What happens if a deposit is not protected when it should be?

GOV.UK sets out what tenants can do if a landlord does not use a TDP scheme when they have to, and what the county court can order. The landlord guidance states that tenants can apply to a county court at any time during the tenancy.

If the court finds the deposit was not protected, GOV.UK says it can order the landlord to either repay the deposit to the tenant or pay it into a custodial TDP scheme’s bank account within 14 days. The court may also order the landlord to repay the tenant up to 3 times their original deposit within 14 days of making the order.

GOV.UK also states that at the end of the tenancy, the court may decide the tenants do not have to leave the property when the tenancy ends if the landlord did not use a TDP scheme when they should have.

The tenant guidance adds practical detail about making a claim, including that the tenant can apply using Form N208 and that the court fee is £387, which the tenant can claim back from the landlord if they win. It also says it can be quicker and cheaper to write to the landlord rather than going to court.

Whichever scheme option you choose, keeping the protection date, the tenant information, and any end of tenancy agreement details together helps you stay organised. You can also keep a simple compliance checklist on our site at /landlord-compliance-check.