Every landlord in England who takes a tenancy deposit must protect it in one of three government-approved schemes. But which one should you choose? The Deposit Protection Service, MyDeposits, and the Tenancy Deposit Scheme each work differently, and the right choice depends on your circumstances. Here is a detailed comparison.
How Deposit Protection Works
There are two models of deposit protection: custodial and insurance-based. In a custodial scheme, you hand the deposit over to the scheme and they hold it for the duration of the tenancy. At the end, the scheme releases the deposit based on agreement between you and the tenant, or following adjudication. In an insurance-based scheme, you keep the deposit in your own account and pay a fee for protection. If there is a dispute and the adjudicator awards money to the tenant, you must pay it.
Deposit Protection Service (DPS)
The DPS is the only scheme that operates primarily as a custodial service. It is free to use until the end of the season. You transfer the deposit to the DPS and they hold it in a secure account. At the end of the tenancy, you and the tenant agree how the deposit should be split. If you cannot agree, the DPS provides free alternative dispute resolution.
- **Cost:** Free (custodial)
- **Who holds the deposit:** The DPS holds it
- **ADR:** Free, included
- **Best for:** Landlords who want zero upfront cost and do not mind handing over the deposit
The main advantage is that it costs nothing. The disadvantage is that you do not have access to the deposit money during the tenancy.
MyDeposits
MyDeposits is an insurance-based scheme. You keep the deposit in your own account and pay a fee for each deposit you protect. Fees start from around £16 to £25 per deposit. MyDeposits also offers a custodial option, though the insurance option is more popular with individual landlords.
- **Cost:** From around £16-£25 per deposit (insurance); free (custodial)
- **Who holds the deposit:** You hold it (insurance) or MyDeposits holds it (custodial)
- **ADR:** Free, included
- **Best for:** Landlords who prefer to hold the deposit themselves and are happy to pay a small fee
The advantage is that you retain the deposit money. The disadvantage is the annual fee, which must be renewed each year the tenancy continues.
Tenancy Deposit Scheme (TDS)
TDS offers both insurance-based and custodial options. The insurance-based option works the same way as MyDeposits — you hold the deposit and pay a fee. Fees start from around £20 to £28 per deposit depending on the membership type. The custodial option is free.
- **Cost:** From around £20-£28 per deposit (insurance); free (custodial)
- **Who holds the deposit:** You hold it (insurance) or TDS holds it (custodial)
- **ADR:** Free, included
- **Best for:** Landlords who want a choice between custodial and insurance under one provider
TDS is well-established and widely used by both individual landlords and letting agents.
ADR Process Differences
All three schemes offer free alternative dispute resolution, and the basic process is the same: both parties submit evidence in writing, an independent adjudicator reviews it, and a binding decision is made. There are minor differences in online portals and response times, but these are not significant enough to choose one scheme over another. What matters far more is the quality of the evidence you submit.
Which Should You Choose?
If cost is your main concern and you do not mind someone else holding the deposit, choose the DPS custodial scheme. If you prefer to keep the deposit in your own account and are willing to pay a modest annual fee, choose MyDeposits or TDS insurance. If you want the flexibility to switch between custodial and insurance, TDS offers both under one roof. All three schemes are equally valid in the eyes of the law. Using any of them satisfies the requirement under the Housing Act 2004. No scheme is better or worse for dispute outcomes — the adjudicator's decision is based on the evidence, not which scheme you use.
One Important Rule
Whichever scheme you choose, you must protect the deposit within 30 days of receiving it and serve the tenant with the prescribed information within the same period. Failing to do either can result in the tenant claiming compensation of one to three times the deposit amount. Non-compliance also prevents you from gaining possession on most grounds — only Ground 7A (severe anti-social behaviour or criminal behaviour) and Ground 14 (anti-social behaviour) are exempt from this restriction. You can rectify the breach at any time by protecting the deposit and serving the prescribed information, but until you do, your ability to recover the property is severely restricted.
Take Action
Choose a scheme, protect your deposit, and make sure all your compliance documents are in order. Generate your complete document pack for £29.99 to get prescribed information templates and all 14 essential landlord documents. Check your deposit is within legal limits using our Deposit Cap Calculator and see the full picture in our Landlord Compliance Checklist 2026.