A Guide to Holiday Let Security Deposits

When you first start letting out your holiday home in the Cotswolds, one of the key decisions you’ll face is whether or not to take a security deposit from your guests. Some owners include this as standard practice, while others actively choose to avoid it and the best choice for you will depend on your priorities, your property and your target market.

In this expanded guide, we’ll explain what a holiday let security deposit is, why some owners choose to take one (and why others don’t), how to assess when claiming a deposit may be appropriate, and alternatives you might consider.

What Is a Holiday Let Security Deposit?

A security deposit for a holiday rental is a sum of money collected from guests at the time of booking or check-in, held as a temporary guarantee against potential damage or extra cleaning costs. It is especially common in self-catered properties with high-value fixtures and fittings.

Typically, owners ask for an amount equivalent to a percentage of the total rental around 10–20% in many cases, although some properties may ask for a flat fee instead.

The Pros and Cons of Security Deposits

Security deposits can offer both advantages and disadvantages. Understanding both sides will help you choose the approach that’s right for your business.

Benefits of Taking a Security Deposit

There are valid reasons why many holiday let owners choose to take a deposit:

1. Financial Peace of Mind
A security deposit gives you a financial buffer against the costs of accidental or deliberate damage. Knowing you have funds set aside, just in case, can reduce stress and protect your bottom line.

2. Encourages Careful Guest Behaviour
When guests know there’s a deposit at stake, they may treat the property with more care. This psychological incentive can lead to fewer breakages and less wear and tear, which ultimately keeps repair bills down.

3. Covering Cleaning Costs
In some cases, you may use part of the security deposit to cover deep cleaning costs if guests leave the property excessively untidy. This can be useful if you don’t include premium cleaning in your base rate.

Drawbacks of Requiring a Security Deposit

Despite these advantages, there are also important downsides to consider:

1. It Can Discourage Bookings
Some guests are put off by the idea of tying up money in a deposit, especially if they are unfamiliar with the property or nervous about disputes. This could lead them to choose a competitor that doesn’t require a deposit.

2. Guests May “Tiptoe” Around Your Property
While a deposit can encourage better behaviour, it can also make guests feel nervous about fully enjoying their holiday. Some may feel anxious about cooking meals, using certain facilities or having guests over, which could impact their overall experience.

3. Increased Administrative Load
Taking and managing deposits adds extra work. Monitoring returns, handling disputes if deductions are necessary, and communicating with guests both before and after their stay. For many owners this extra admin overhead is simply not worth it.

When Is It Appropriate to Claim Against a Security Deposit?

If you do decide to take a deposit, it’s vital to be very clear about what would legitimately warrant claiming part or all of it. Not every mistake or minor mishap should lead to a deduction.

One simple way to think about potential claims is to categorise issues into three groups:

For incidental and minor damage such as a chipped mug or a scuff mark, it’s usually better to absorb the cost as part of normal maintenance or wear and tear. Guests tend to understand that everyday accidents happen, and petty deductions can hurt your reputation and discourage future bookings.

For more substantial or costly incidents such as a large stain on bedding requiring replacement, serious damage to high-value items, or additional deep cleaning you may have stronger grounds for withholding part of the deposit. But always balance this with the risk to goodwill and potential negative reviews.

Alternatives to Taking a Security Deposit

If you’re concerned about the downsides of deposits but still want protection, here are some alternatives:

Holiday Let Insurance
There are insurance policies specifically aimed at holiday let owners, covering damage caused by guests for a set period. These can sometimes take the place of a traditional deposit and may offer broader protection.

Damage Protection Plans
Specialised damage protection add-ons can be offered at booking. These typically cover accidental damage up to a certain amount and can be less off-putting for guests than a traditional deposit.

Transparent House Rules and Clear Communication
Sometimes simply setting clear expectations via your welcome guide, house manual and booking terms can reduce the risk of damage. Explaining care instructions for delicate features or items builds trust and understanding with guests.

Striking the Right Balance

There’s no single right answer to whether you should take a security deposit for your holiday let. It’s a commercial decision that should be based on your property value, your guests, and your tolerance for both risk and administrative work.

For many owners, especially those with high-end properties or valuable antiques and fittings, a deposit can be a helpful safety net. For others, particularly those seeking to maximise bookings and minimise friction, avoiding deposits and building trust through excellent service and competitive pricing may be the better strategy.

Whatever path you choose, the key is clear communication explain your policies, set expectations up front and treat guests fairly and professionally throughout their stay. This approach not only protects your property, but also your reputation and long-term profitability as a holiday let owner.

For more information about letting your cottage with us, complete the form below to request contact from our team. You’ll also receive a copy of our free Owner Guide.

Please Note: The information contained in this article was accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like to hear how. Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc). in this regard. If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA. 

As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area this is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.