What’s the difference between TDS Custodial and TDS Insured?

What’s the difference between TDS Custodial and TDS Insured?

Who holds the money during the tenancy. The Tenancy Deposit Scheme (TDS) runs both, and either one meets your legal duty to protect a deposit in England or Wales (GOV.UK).

• TDS Custodial: you pay the deposit to TDS. It holds the money in a designated account kept only for tenancy deposits, and repays it at the end of the tenancy (TDS Custodial Scheme Rules, rule 2.4).
• TDS Insured: you or your agent keep the deposit, pay TDS a fee to protect it, and repay your tenant yourself at the end (TDS).

You can tell which one a deposit is in from its reference. TDS Custodial references look like EW1234567, while TDS Insured certificate codes are short strings of letters and numbers (TDS).

How much does each cost?

TDS Custodial is free (TDS). TDS funds it from the interest earned on the deposits it holds (rule 2.5).

TDS Insured carries a fee. For a private landlord, TDS listed these on 19 October 2026, including VAT, per deposit (TDS):

• £19.94 for a deposit of £499.99 or less
• £27.14 for a deposit of £500 or more

TDS describes landlords’ Insured fees as pay as you go, per deposit, for the life of the tenancy agreement (TDS). NRLA members get lower rates. Letting agents, housing associations and corporate landlords take a yearly subscription instead, based on an agreed number of deposits.

The dispute service is free under both. TDS Custodial doesn’t charge for disputes about assured periodic tenancies (rule 10.7).

What happens at the end of a TDS Custodial tenancy?

TDS doesn’t contact anyone when the tenancy ends. You, your agent or your tenant apply to TDS for the deposit to be repaid (rule 8.1). The steps follow in order:

1. You tell your tenant in writing, promptly after the tenancy ends, which deductions you propose and why you believe you’re entitled to them (rule 8.4).
2. One of you submits a repayment request to TDS.
3. TDS asks the other side to agree, partly agree or disagree within 30 working days, and whether they consent to the dispute service (rule 8.8).
4. If there’s no response after 15 working days, the side who asked can use TDS’s procedure for an absent party (rule 8.9).

TDS pays out when both sides agree, an adjudicator decides or a court orders it, or through the absent-party procedure. Until then, the money stays in the scheme.

What happens at the end of a TDS Insured tenancy?

You hold the money, so you repay your tenant directly once you agree the amount. If you can’t agree, your tenant can raise a dispute with TDS Insured (TDS):

• They must first ask you for the deposit back and give you at least 10 days to respond.
• They must try to resolve it with you directly first.
• TDS only considers disputes sent within 3 months of the end of the tenancy.

Once a dispute is raised, the scheme can direct you to pay the amount in dispute to it within 10 days of its direction (Housing Act 2004, Schedule 10, paragraph 6). The schemes’ joint guide says the dispute can still go ahead if you don’t pay it in, and you’re expected to follow the adjudicator’s decision (joint guide). Keep the full deposit available for the whole tenancy.

Is the dispute process the same for TDS Custodial and TDS Insured?

Largely, yes. Under both, an independent adjudicator decides on the written evidence, and the decision is final and binding. The timetable is the same:

• Your evidence: 5 working days from TDS’s invitation (Custodial) or 5 working days (Insured).
• Your tenant’s response: 5 working days (Custodial) or 5 working days (Insured), after they’ve seen your evidence.

What differs is where the disputed money sits. Under Custodial, TDS already holds it. Under Insured, you pay it in. The steps and evidence for a TDS dispute are in the TDS dispute guide.

Who gets the interest on the deposit?

Under TDS Custodial, interest has been payable to tenants since 1 September 2023 (TDS). TDS sets the rate each month and publishes it, and it was 0.96% for October 2026. The interest is paid to the tenant with the deposit, and isn’t returned to the landlord or letting agent.

Under TDS Insured, the money is in your account. TDS has said it’s usual for the landlord or agent to keep any interest, and that the tenancy agreement should say who’s entitled to it (TDS, 2019).

Can I switch between TDS Custodial and TDS Insured?

Not from Custodial to Insured. TDS doesn’t permit a deposit to move from any custodial scheme, including its own, into TDS Insured (rule 7.6). A deposit in a custodial scheme stays in a custodial model unless that scheme’s rules and the law allow otherwise.

TDS Custodial also only accepts deposits for assured periodic tenancies in England or Wales (rule 3.1).

Which suits which landlord?

TDS doesn’t say one is better. Its own guide lists the factors to weigh (TDS):

• Cost: Custodial is free, Insured has a small fee per deposit.
• Control: with Insured, you hold the funds and manage the return yourself.
• Simplicity: Custodial is hands-off, with the scheme holding and releasing the money.
• Number of properties: TDS says larger portfolios may suit Insured for cash flow, and smaller landlords might prefer Custodial for its simplicity and zero cost.

Where next?

How TDS compares with DPS and mydeposits is on Which deposit scheme is best for a small landlord? and in the guide TDS vs DPS vs mydeposits. If a TDS dispute has started, the deadline calculator works out your evidence date from TDS’s email. A deposit dispute pack arranges your evidence under TDS’s headings, ready for you to submit.