Holding Deposits Explained: A Landlord's Guide for England (2026)

The holding deposit explained in one line: it is a small, refundable payment a prospective tenant gives you to take a property off the market while you reference them, and in England it is one of the most tightly regulated payments a landlord can ask for. Get the cap, the paperwork or the deadlines wrong and a payment meant to protect you can turn into a fine, a banning-order risk and a rent repayment order claim. This guide sets out exactly how holding deposits work in England in 2026, what the Tenant Fees Act 2019 lets you do, and the handful of rules that catch landlords out.

The Renters’ Rights Act 2025, in force since 1 May 2026, changed a great deal about how tenancies run, but it left the holding-deposit rules in the Tenant Fees Act 2019 untouched. The cap, the deadlines and the refund rules below are the current law for assured tenancies in England.

Holding deposit explained: what it actually is

A holding deposit is a payment a prospective tenant makes to reserve a property while you carry out referencing, Right to Rent checks and the other pre-tenancy steps. In return, you agree to stop marketing the property and not to accept a holding deposit from anyone else for the same property during the agreed period.

It is not the same as a tenancy (security) deposit. The two are easy to confuse, so it helps to keep them firmly apart in your head:

• A holding deposit is paid before the tenancy, is capped at one week’s rent, and is intended to be credited toward the first rent or the tenancy deposit once you sign.
• A tenancy deposit is paid at the start of the tenancy, is capped at five or six weeks’ rent, and must be protected in a government-approved scheme within 30 days.

The Tenant Fees Act 2019 makes a holding deposit one of the very few “permitted payments” a landlord or agent in England is allowed to take from a tenant. Almost everything else, admin fees, referencing fees, inventory fees, “renewal” fees, is banned. If you are asking a tenant for any money before the tenancy starts, it must fit inside one of the permitted-payment boxes, and for a reservation payment that box is the holding deposit.

The one-week cap: how much you can take

A holding deposit in England is capped at one week’s rent. You cannot take more, and you cannot take a second holding deposit on the same property while one is still in play.

The statutory formula for converting a monthly rent into a weekly figure is fixed, and it is where landlords most often slip:

Weekly cap = (monthly rent × 12) ÷ 52

Do not simply divide the monthly rent by four. Dividing by four overstates the weekly figure and pushes you over the legal cap, which makes the whole payment a prohibited payment. Always annualise first, then divide by 52, and round down to be safe.

Worked example

Say the advertised rent is £1,300 per calendar month.

1. Annualise: £1,300 × 12 = £15,600 per year
2. Weekly figure: £15,600 ÷ 52 = £300 per week
3. Maximum lawful holding deposit: £300

If you had instead divided £1,300 by four, you would have asked for £325, £25 over the cap, and an unlawful payment. On a £1,300 home the difference looks trivial, but the consequence is not: an over-cap holding deposit is treated as a prohibited payment, exposing you to a financial penalty of up to £5,000 for a first breach (and up to £30,000 as an alternative to prosecution for a repeat offence).

For a deeper walkthrough of the maths and the rounding traps, see our guide to the holding deposit one-week cap.

The 15-day rule and the “deadline for agreement”

Once you accept a holding deposit, a clock starts. Unless you and the tenant agree a different date in writing, you have 15 days from the day the deposit is received to either enter into the tenancy or deal with the money. This 15-day window is called the deadline for agreement.

Within that period one of three things must happen:

1. The tenancy goes ahead, and the holding deposit is applied toward the first rent or the tenancy deposit (with the tenant’s written consent).
2. The tenancy does not go ahead through no fault of the tenant, and you refund the deposit in full.
3. The tenancy does not go ahead because of something the tenant did (see below), and you may be entitled to retain some or all of it, but you must tell the tenant in writing, with reasons.

If the deadline passes and you have neither signed the tenancy nor told the tenant in writing why you are keeping the money, you must refund the holding deposit in full within seven days of the deadline. Silence is not an option: doing nothing is itself a breach.

When you can keep a holding deposit (and when you cannot)

This is the part landlords get wrong most often. You can only retain a holding deposit in a narrow set of circumstances, and the burden is on you to justify it.

You may keep the holding deposit if:

• The tenant provides false or misleading information that you are reasonably entitled to rely on in deciding whether to let, for example, lying about their income, employment or rent arrears history.
• The tenant fails a Right to Rent check because they do not in fact have the right to rent in England (note: not because you failed to do the check properly).
• The tenant withdraws from the property of their own accord.
• The tenant fails to take all reasonable steps to enter into the tenancy when you have done the same, for example, repeatedly ignoring requests to sign or to provide referencing documents, before the deadline.

You may not keep the holding deposit if:

• You decide not to proceed for your own reasons.
• The tenant pulls out because you tried to change the agreed terms (a higher rent, a different deposit, extra clauses) after taking the money.
• You failed to give the tenant the legally required information about the property and the tenancy before they handed over the deposit.
• The reason for the tenant failing a Right to Rent check is your own administrative error.

Even where you are entitled to retain the money, you must serve a written notice within seven days of deciding not to proceed (or of the deadline for agreement, whichever is sooner), setting out why you are keeping it. No notice, no lawful retention.

Holding deposit vs tenancy deposit at a glance

For the full picture on the security deposit side, read tenancy deposit protection in England explained.

The information you must give before taking a holding deposit

A holding deposit only “sticks” if the tenant entered into it on a properly informed basis. Before you accept the money, make sure the prospective tenant has, in writing:

• The address of the property and the proposed rent.
• The length of the holding period / the deadline for agreement (or confirmation it is the default 15 days).
• The conditions on which you may retain the deposit.
• Confirmation the holding deposit will be credited toward the first rent or tenancy deposit if the let proceeds.
• The referencing and Right to Rent steps you will carry out.

Putting this in a short, signed holding deposit agreement is the cleanest way to evidence it. If a dispute ever lands in front of a council enforcement officer or the First-tier Tribunal, the agreement and a dated receipt are your defence.

Issue a receipt and keep records

There is no statutory “receipt form”, but issuing a written receipt the moment you take the money is best practice and protects you. A good receipt records the amount, the date received, the property, the tenant’s name, the deadline for agreement and the conditions for retention. Our holding deposit receipt template walks through every field, and you can pair it with a free holding deposit agreement template so the agreement and the receipt say the same thing.

If you want to compare what is on the market before you commit to one document, our roundup of the best holding deposit templates for UK landlords sets out what separates a genuinely Tenant Fees Act-compliant template from a risky free download.

A worked end-to-end example

Priya advertises a flat at £1,300 pcm and a prospective tenant, Marcus, wants it.

1. Day 0, Priya gives Marcus a written holding deposit agreement stating the rent, the property, a 15-day deadline, and the retention conditions. Marcus pays £300 (the lawful one-week cap). Priya issues a dated receipt and stops marketing the flat.
2. Days 1-10, Priya runs referencing and the Right to Rent check. Everything checks out.
3. Day 12, Marcus signs the tenancy. With his written consent, the £300 is credited toward his first month’s rent, so he pays the £1,300 first-month rent minus £300 = £1,000, plus his five-week tenancy deposit, which Priya protects within 30 days.

Now change one fact. Suppose on Day 8 the referencing reveals Marcus had concealed a recent CCJ for rent arrears that he was specifically asked about. Priya can decline to proceed and retain the £300, but only if she serves Marcus written notice within seven days explaining that he gave misleading information she was entitled to rely on. If instead Priya simply changed her mind because she found a higher-paying applicant, she would have to refund the full £300 within seven days of the deadline.

How Tenancy Pilot fits in

Holding deposits fail on the boring details: the wrong weekly figure, a missing deadline, no written reason for keeping the money. Tenancy Pilot’s document generators are built to produce a compliant holding deposit agreement and receipt with the one-week cap calculated for you and the statutory information pre-filled, so the paperwork is right the first time. Its compliance tracking then keeps an eye on the 15-day deadline so a refund or an agreement never slips past the clock.

Frequently asked questions

Is a holding deposit refundable? Yes, by default. Unless one of the narrow statutory exceptions applies, the tenant withdrew, gave misleading information, failed a Right to Rent check, or failed to take reasonable steps to enter the tenancy, you must refund a holding deposit in full. If you decide not to proceed for your own reasons, it is fully refundable.

How much can a landlord take as a holding deposit in England? No more than one week’s rent. Calculate it as monthly rent × 12 ÷ 52, not monthly rent ÷ 4. Taking more makes the whole sum a prohibited payment and exposes you to a penalty of up to £5,000.

How long do I have to return a holding deposit? If the tenancy does not go ahead and you are not entitled to keep the money, you must refund it within seven days of the deadline for agreement (the default deadline is 15 days from when you received the payment), or within seven days of deciding not to proceed if that is sooner.

Can I keep a holding deposit if the tenant fails referencing? Only if the tenant failed because they gave you false or misleading information you were reasonably entitled to rely on, or failed a Right to Rent check, or did not take reasonable steps to proceed. A simple low credit score, where the tenant was honest, does not on its own let you retain the money, and you must always give written reasons within seven days.

Does a holding deposit have to be protected in a deposit scheme? No. Only the tenancy (security) deposit must be protected in a government-approved scheme within 30 days. A holding deposit sits under the Tenant Fees Act 2019, not the deposit-protection rules, so there is no scheme requirement for it, but once it is credited toward the tenancy deposit, the resulting deposit must be protected.

What happens if I get the holding deposit rules wrong? Taking an over-cap or prohibited payment, or failing to refund on time, can lead to a financial penalty of up to £5,000 for a first breach and up to £30,000 (as an alternative to prosecution) for a repeat. Repeat breaches can also count toward a banning order and feed into a rent repayment order claim. See our guide to landlord fines in England 2026.

Coming soon

Tenancy Pilot is launching soon, with document generators that build a compliant holding deposit agreement and receipt, the one-week cap worked out for you, the statutory information pre-filled, and the 15-day deadline tracked automatically. Join the waitlist to be first in when it goes live.

Disclaimer: This article is general information for England landlords and is not legal advice. The law changes and individual circumstances vary. Always check the current rules on GOV.UK and legislation.gov.uk, and consult a qualified solicitor before acting on anything that affects your legal position.