Could Deposit Protection Rules Be Changing Again? What Self-Managing Landlords Need to Know

Government proposals could bring another change to the private rented sector - this time focused on how tenancy deposits are held and protected.

Recent industry reporting suggests insured tenancy deposit schemes could eventually be phased out in favour of custodial-only protection. If introduced, the change could affect millions of existing and future tenancies across England and Wales.

But before landlords panic, there’s an important point.

This is currently a proposed direction of travel rather than an immediate legal change and for many landlords the impact may be far smaller than headlines suggest.

At Personal Economy Lettings, all tenancy deposits are already held through a custodial protection route, meaning our landlords would not face operational disruption if these proposals eventually become law.

First Things First - What Is Deposit Protection?

If you take a tenancy deposit in England or Wales, the deposit must be protected within 30 days in a Government-approved tenancy deposit scheme.

Currently there are two main approaches:

Custodial Deposit Protection

The deposit money is transferred to an approved third-party scheme and held independently for the duration of the tenancy.

Insured Deposit Protection

The landlord or letting agent keeps the deposit funds and pays a fee to insure them through an approved scheme.

Both methods are currently legal and widely used.

So What Could Change?

Government commentary suggests insured deposit schemes may be removed in the future, requiring deposits to be held in custodial schemes only.

The stated reasons include:

• Greater protection of tenant funds

• Independent holding of deposits

• Reduced fraud and administration concerns

• Increased consistency across the rental market

Industry estimates suggest more than 2 million protected deposits currently sit within insured schemes, representing over £3 billion of protected funds.

That sounds significant, but importantly, no implementation timetable has been confirmed.

What Does This Mean For Self-Managing Landlords?

If you manage your own properties, now is a sensible time to review how your deposits are currently protected.

Ask yourself:

✓ Do I know which scheme my deposits sit in?
✓ Are deposits protected within the required timescales?
✓ Has prescribed information been served correctly?
✓ Are tenancy records and inventories complete?
✓ Would I know what to do if processes changed?

For many landlords, compliance risk doesn’t come from the deposit itself.

It comes from administration.

A missed deadline, missing paperwork, incorrect prescribed information or poor record keeping can become expensive later.

Why Personal Economy Lettings Already Uses Custodial Protection

This is one area where process matters.

At Personal Economy Lettings, deposits are already held using a custodial approach.

For our landlords that means:

• No need to hold tenant funds directly

• Clear separation of money handling

• Strong compliance processes

• Reduced administrative burden

• Independent dispute handling where needed

That doesn’t mean custodial is automatically “better” for every landlord today, but it does mean our systems already align with the direction the market appears to be moving.

A Thought From Lisa Bailey

“Most landlords don’t want more complexity, they want confidence that things are being handled properly. Deposit protection has always been about getting the basics right consistently. Good systems reduce stress and protect everyone involved.”

– Lisa Bailey, Personal Economy Lettings

Our View

This isn’t a story about panic.

It’s a reminder that landlord compliance continues to evolve.

Whether these proposals move forward or not, landlords who understand where their deposits sit, keep records organised and review processes regularly will put themselves in the strongest position.

And if you’re self-managing and want a second pair of eyes on compliance without handing over full control, that’s exactly what our Lettings PA service was designed to support.

Need help reviewing your deposit process?

Book a Clarity Call with Personal Economy Lettings.

0117 985 6703
personaleconomylettings.co.uk

Source inspiration: Industry reporting and Government guidance reviewed June 2026.