What are the client money rules for letting agents?

Get client money controls wrong and your agency risks paying the wrong person or being unable to explain a shortfall. Check the protection arrangements that apply where you operate, then make sure your records show who owns the money you hold. This guide is information, not legal or financial advice.

Which national rules apply?

Do not assume the same protection arrangements apply wherever your agency operates. Keep client money protection (CMP) and tenancy deposit protection as separate checks.

• England: property agents covered by the regulations who hold client money must belong to an approved or designated client money protection scheme. 
• Scotland: if your agency handles client money, you must keep adequate records, use separate and dedicated client bank accounts and hold client money protection insurance unless you can demonstrate equivalent or greater protection through another body or membership organisation.
• Northern Ireland: HMRC states that letting agents do not have to join a CMP scheme.

What money should your controls cover?

Start with money your agency holds for someone else. Rent awaiting payment to a landlord, a tenancy deposit and a maintenance float all need clear ownership in your records. Money passing through your agency is not automatically money your business can spend.

The practical mistake is recording a receipt without recording whose money it is. Identify the client, property and purpose when it arrives, not when someone asks for it back.

Is your bank account set up correctly?

Check the account itself, not just its nickname in your software. In England, agents must hold client money with an FCA-authorised bank or building society (GOV.UK).

In Scotland, client money must be in separate, dedicated client accounts with an FCA-authorised bank or building society, separate from business or private accounts (Scottish Government).

Ask the bank to confirm the account designation in writing. Keep that confirmation with your account documents, and review who can authorise payments. 

Do your records explain the bank balance?

A healthy-looking bank balance is not enough. Use a three-way reconciliation: compare the bank statement, your cashbook and the total of the individual client ledger balances. The cashbook records money moving in and out; client ledgers show who owns it.

1. Match bank movements to recorded receipts and payments.
2. Compare the bank statement balance with the cashbook balance, accounting for outstanding payments and receipts that have not yet appeared on the bank statement.
3. Compare the cashbook balance with the total held for individual clients.
4. Investigate differences and retain the explanation and correction.

Illustrative example: a rent receipt appears on the bank statement and in the cashbook, but has not been allocated to the landlord’s ledger. The bank balance looks right, yet your records do not show who owns that receipt. See our reconciliation guide for practical help.

Are you confusing CMP with deposit protection?

Keep CMP and tenancy deposit protection as separate checks. For applicable deposits in England, protection is required within 30 days of receipt, so CMP membership is not a substitute for completing that task (GOV.UK).

In England, you must also give the prescribed deposit information to the tenant and any relevant person within 30 calendar days beginning with receipt. A relevant person is someone who paid the deposit on the tenant’s behalf under arrangements with the tenant.

In Wales, applicable deposit scheme requirements must be met and the information related to deposit protection provided within 30 days of payment (Welsh Government).

In Scotland, an applicable deposit must be paid to an approved tenancy deposit scheme within 30 working days of the tenancy beginning. The landlord must also give the tenant the required deposit information within 30 working days of the tenancy beginning (Scottish Government).

In Northern Ireland, applicable deposits must be protected within 28 days of receipt (nidirect). The required written information must be provided within 35 days of payment (nidirect).

Record the property’s nation, tenancy start date, receipt date, protection confirmation and information sent. Do not let a software status replace checking the underlying evidence.

What evidence should you have ready?

Prepare an evidence folder before your next review. Ask your CMP provider or independent reviewer for their document list.

• Account designation and bank confirmation.
• CMP membership documents, renewal reminders and certificates.
• Bank statements, reconciliations and client ledger balances.
• Explanations for mismatches and evidence of corrections.
• Payment permissions and deposit records.

For applicable agents in England, also check that your CMP certificate is prominently displayed on your website and at relevant public-facing offices (GOV.UK).

Frequently asked questions

Does a holding deposit count as client money?

In England, a holding deposit received by an agent to secure a tenancy is client money (GOV.UK). Include it in your client money controls rather than treating it as agency income.

Must every letting agency reconcile monthly?

In Scotland, letting agents must reconcile client-money transactions at least monthly. Do not treat that as a universal UK statutory timetable.

Can Northern Ireland agents ignore deposit protection if CMP membership is not compulsory?

No. In Northern Ireland, an applicable tenancy deposit must still be protected in an approved scheme within 28 days of receipt (nidirect).

The Letting Partnership provides outsourced client accounting and client money compliance services to letting agents. For help reviewing your arrangements, explore TLP Comply CMP and Deposit HealthChecks.

Talk to our team