Tenancy and Holding Deposits

Renting out or moving into a UK property means dealing with two types of deposit: the holding deposit and the tenancy deposit.

They serve different purposes and are handled in different ways. Understanding the difference helps landlords stay compliant and reassures tenants their money is safe.

Key takeaways

• Tenancy deposits are capped at 5 weeks' rent in England and Wales (or 2 months in Scotland)
• Tenancy deposits must be protected in a government-approved scheme within 30 working days
• Holding deposits in England and Wales are capped at 1 week's rent
• Holding deposits are not protected by schemes and refund terms should be agreed upfront
• Scotland does not permit holding deposits from potential tenants

What is a tenancy deposit?

A tenancy deposit, sometimes called a security deposit, is money paid by the tenant at the start of the tenancy. It's held for the duration as protection typically against:

• unpaid rent
• damage beyond fair wear and tear

How much can be charged?

Maximum tenancy deposit amounts:

• England and Wales: up to 5 weeks' rent if annual rent is under £50,000, or 6 weeks if above
• Scotland: up to 2 months' rent
• Northern Ireland: no cap, but 1 month is typical

Protection requirements

In England, Wales, and Scotland, tenancy deposits must be placed in a government-approved protection scheme within 30 working days (14 days in Northern Ireland).

The tenant must be told in writing which scheme holds the deposit.

At the end of the tenancy, the deposit is returned in full unless deductions are made for rent arrears or damage. Any disputes are resolved by the protection scheme.

What is a holding deposit?

A holding deposit is money paid by a potential tenant to reserve a property while references are checked and contracts prepared.

It shows the tenant is serious about renting and gives the landlord confidence to pause marketing while the application progresses.

Important

In Scotland, potential tenants cannot be asked to pay a holding deposit. Only tenancy deposits can be taken.

How much can be charged?

In England, a holding deposit cannot be more than 1 week's rent (Tenant Fees Act 2019). Similar limits apply in Wales under the Renting Homes (Wales) Act.

When is it refundable?

The deposit may be returned if the landlord withdraws, but is unlikely to be returned if the tenant:

• withdraws from the tenancy
• fails any referencing or right-to-rent checks (see our Tenant Checks Made Simple guide)
• provides misleading information

If the tenancy proceeds, the holding deposit can be put towards the first month's rent or the tenancy deposit.

Important difference

Unlike tenancy deposits, holding deposits are not protected by government-approved protection schemes.

Before paying a holding deposit, landlords and tenants should clarify:

• what the holding deposit is for
• when it is refundable
• how long the property will be held