Accounting for Rental Protection Service (RPS) Deposit

Many months ago I asked the question how to tag a deposit received into our current account relating to a property we rent out, and how to tag the subsequent payment of that deposit from the current account to the Deposit Protection Service (DPS). I never received an answer at that time. Any advice please as, although there has been a similar question about such a deposit before on here, the answer to that was a little unclear too.

Hi @Softley

I’m not an accountant, so I always recommend checking with yours to be sure. I will however try my best to help!

I did find this post in regards to recording rental deposits:

I’m not familiar with the DPS scheme, are you able to elaborate on how this works please and I’ll see if I can advise you further?

The Deposit Protection Service (DPS) could be managed as a separate bank account. Any payments made to the Deposit Protection Service could then be tagged as a bank transfer to the DPS holding account. That way the collective balance will show as an asset on your balance sheet, i.e. at some point it will be repaid by the DPS when the tenancy comes to a close.

This asset should then be offset against a liability that would represent any bonds paid by the tenant to you as the agent. Again this could be defined in another bank account called something like “Client Deposits”.

The above should cover the basics, but I would recommend also getting a second opinion from your accountant on this.


There’s also a useful explanation here that works along the same lines:

More general info on Tenancy deposit protection.

The Deposit Protection Service is a Government Scheme where a deposit from a tenant is held for the duration of the tenancy and is then refunded by the DPS to the tenant less any agreed amount for damage etc. I have done what Glenn has suggested and set up a Bank Account (Account type - ‘Reserve Account’) and tagged my payment to the DPS of the amount of the deposit as a bank transfer from the current account to the new DPS Bank account. But I haven’t worked out yet what to do with the initial deposit payment from the tenant. I could do with an idiot’s step-by-step guide as to how to tag that.

It’s really just a case of having two bank accounts setup under the “Loan” category:

  • Rental Protection Scheme
  • Client Deposits

Then simply tag any payments on the current account as “Bank Transfers” into and out of these accounts, it shouldn’t be anymore complex than that.

Run it by your accountant but, that should more than cover the basics.

Okay, thanks Glenn, I now have a plus figure in the ‘DPS’ bank account and the same figure (only minus) in the ‘Tenants’ Deposits’ bank account.

That sounds right… Now when your tenant is repaid you can initiate a transfer from the DPS account to the client deposit account.

Thanks very much Glenn. That’s been a great help.

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I’m doing exactly the same thing - managing DPS deposits, but my accountant said not to use a bank account and has set me up an account 2300 and named it ‘DPS DEPOSIT’. So now when a deposit comes in from a tenant I tag it to 2300 (‘something else not on this list’). When I pay the deposit to DPS I again tag it 2300, leaving account balance at zero.

Previously, I was invoicing my tenants both the advanced rent and deposit together, which meant the deposit amount was showing up as income. So, I’m in the process of unpicking all the deposits and re-directing them into 2300, which is a dangerous task…


If you’re not vat registered you should still be able to do this going forward if you set it to allow the 2300 nominal on sales invoices. Then you can have two lines on the invoice, one for the advance rent to the normal income code and another for the deposit to 2300. The deposit will still be counted in the invoice total but it won’t show as income in your P&L.

Excellent, thank you @ian_roberts for pointing that out to me, it will make life a lot easier

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Sorry to open an old topic. But I have been following this method for a while, however I recently had to take most of the deposit to cover repairs. The repairs have all been tagged to repairs and renewals, but how do I show the money from DPS back into the account and then out again on repairs?

Do I tag the incoming as going into 2300 and all the associated repair costs as from this code too? Incidently the repairs cost more than the deposit too.