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What is Retained deposit income?
Last verified 31 October 2026
Retained deposit income is the part of a tenant's deposit that you keep at the end of a tenancy, which HMRC treats as property income. The part you refund is not income.
Why it matters to landlords
HMRC's manual says a deposit that is not refunded at the end of the tenancy is included as income at that point, to the extent it has not already been recognised. For landlords on the accruals basis, deposits are generally deferred and matched against the costs of services or repairs. For cash basis landlords, deposits may count as property business receipts.
Any part of a deposit that exceeds the relevant costs and is refunded is excluded from receipts. The repair or cleaning bill you pay is a separate expense, so the two should be recorded separately. Keep the deposit protection details with the tenancy records, because the deduction and the dispute may both depend on the inventory.
Example
Luca holds a £1,150 deposit. At the end of the tenancy he keeps £400 for cleaning and £150 for unpaid rent and refunds £600. The £550 he keeps is income in the tax year the tenancy ends. The £400 cleaning bill he pays is a separate expense. The £600 refunded is not income.
Allowable Expenses for Landlords (2026) →