Tenancy deposit protection for landlords: costs, records and tax

acrenvo.com/guides/deposit-protection-costs-and-records, last reviewed 20 October 2026

Hannah is fictional, but her week will feel familiar. She has just agreed a new tenancy on her one-bedroom flat, the tenant’s parents have paid the deposit, and she has a month to get the paperwork right. She also wants to understand where the deposit sits in her accounts, because it is money she may have to give back, and she is now keeping digital records under Making Tax Digital (MTD) for Income Tax. This guide covers deposit protection for landlords in England, and how it touches money and records.

The deadline to protect a deposit

Deposit protection runs from the day you receive the deposit. Protect a tenancy deposit and give the prescribed information within 30 days of receiving the deposit. The deadline is not calculated from the tenancy start date. The duty comes from the Housing Act 2004, which says that “the initial requirements of an authorised scheme must be complied with by the landlord in relation to the deposit within the period of 30 days beginning with the date on which it is received”.

It applies however the deposit was paid. GOV.UK says: “You must use a TDP scheme even if the deposit is paid by someone else, like a rent deposit scheme or a tenant’s parents.” So Hannah’s clock started on the day the money from the tenant’s parents reached her. A holding deposit is different: “If you’ve received a holding deposit from your future tenants (money to ‘hold’ a property before an agreement is signed), you do not have to protect it.” But GOV.UK adds: “Once they become tenants the holding deposit becomes a deposit, and you must protect it.”

How much a landlord can ask for, as a deposit or a holding deposit, is a separate rule, and the guide to what a landlord can charge a tenant explains the limits.

What changed on 1 May 2026

GOV.UK’s page on deposit protection was last updated on 12 May 2017, and we read it again on 20 October 2026. It still describes the duty in terms of assured shorthold tenancies, and it carries this notice: “The rules about private renting are changing on 1 May 2026.” That date has now passed, so the Act itself is the better guide to which tenancies are covered.

Since 1 May 2026, for tenancies other than social housing, section 213 of the Housing Act 2004 has said: “Any tenancy deposit paid to a person in connection with an assured tenancy must, as from the time when it is received, be dealt with in accordance with an authorised scheme.” Before that date the same sentence said a shorthold tenancy. The 30-day deadline did not change.

What happens if a deposit is not protected changed on the same day. Section 215 used to stop a landlord giving a section 21 notice, and it now says: “Where a tenancy deposit has been paid in connection with an assured tenancy, the court may make an order for possession of the dwelling-house let on the assured tenancy only if the tenancy deposit is being held in accordance with an authorised scheme.” The section sets out a few exceptions, so read it in full on legislation.gov.uk if possession is in view, and the guide to the Renters’ Rights Act explains the wider changes. We read both sections on 20 October 2026.

The information you must give your tenants

Protecting the money is the first part of the duty, and telling your tenants about it is the second. GOV.UK says: “Within 30 days of getting their 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 your 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

A copy of what you sent, and the date you sent it, is the record that shows you met the deadline.

What deposit protection costs

The cost depends on which kind of scheme you use, and GOV.UK describes both: “All TDP schemes offer you 2 options:”

• the scheme hold the deposit for free - known as a ‘custodial’ scheme
• you or the agent holds the deposit and you pay the scheme to insure it - known as an ‘insured’ scheme

GOV.UK gives no figure for what an insured scheme charges, so that cost varies and we do not state one. Its page lists the approved schemes for England and Wales, and we do not name, rank or link any of them.

How deposits and scheme fees are treated for tax

GOV.UK’s guidance on working out rental income does not say whether a fee for an insured scheme can be deducted. What it gives is a general rule: “You can deduct expenses from your rental income when you work out your taxable rental profit as long as they are wholly and exclusively for the purposes of renting out the property.” If you are unsure how that applies to a scheme fee, HMRC or a tax adviser can tell you.

GOV.UK does say something specific about deposits you keep. When part of a deposit pays for damage, the repair and the deposit offset each other: “You can only claim expenses incurred for repairs in excess of the amount of the deposit that you kept.” At the end of the tenancy the rest goes back: “The deposit must be returned to your tenants within 10 days of you both agreeing how much they’ll get back.”

If a court orders you to pay your tenants for failing to protect a deposit, HMRC’s manual page on fines is the place to start. It says: “A customer can’t deduct the cost of a fine incurred as a result of their breach of the law.” For payments that settle a claim, the same page says: “Where liability was admitted or proved, a deduction is due if the payment was restitutionary (that is, made good the loss to the other party), but not if it was punitive (that is, in the nature of a fine or penalty).” GOV.UK does not say which side of that line a deposit order falls on, so it is one to discuss with a tax adviser.

One email a month lists the MTD software price changes we have checked and any changes to HMRC’s list of software. If that would be useful, you can sign up for the monthly price-changes email at the end of this page.

Recording deposits under Making Tax Digital

Under MTD, scheme fees and repair costs are recorded in the same way as your other property costs. GOV.UK says: “When you create records of your income or expenses, you will need to record the:”

• amount
• date when the income was received or expenses incurred
• category (the type of category you use depends on the type of business you have)

It adds: “Making Tax Digital for Income Tax uses the same categories of income and expenses as Self Assessment.” GOV.UK’s MTD guidance does not say how to record a deposit you hold, so ask your software provider or a tax adviser how to show it. Keep the scheme’s confirmation, the information you gave the tenants and any agreement about deductions with the rest of your records. For tax purposes, GOV.UK says: “You will need to keep your digital records for at least 5 years after the 31 January submission deadline for a tax year. This is the same amount of time you need to keep records for Self Assessment.” The guide to MTD digital records explains what each record needs.

If your property is outside England

This guide covers England. GOV.UK says the same schemes cover England and Wales, and it also says: “There are separate TDP schemes in Scotland and Northern Ireland.” Wales has its own tenancy law, so check the Welsh rules before relying on the changes described above.

The other recurring checks

• Gas safety checks for landlords: costs, records and tax
• Electrical safety reports (EICR) for landlords: costs, records and tax
• Energy Performance Certificates for landlords: costs, records and tax
• Property licences for landlords: costs, records and tax
• Smoke and carbon monoxide alarms for landlords: records and tax

The compliance tracker keeps the dates for all of these checks together, property by property.

Questions about deposit protection