It will also cap security deposits at one month's rent and a week's rent for holding deposits.
The action comes after the government found evidence that the level of fees charged by agents is often not clearly or consistently explained, leaving many tenants in the dark about the true costs of renting a property.
Client money protection schemes give landlords and tenants confidence that their money is safe when it is being handled by an agent.
Letting agents could face prosecution or a fine of up to £30,000 if they breach a proposed ban on letting fees.
Details of the long-awaited ban on tenants' fees, first mooted a year ago, have now been released with the Government estimating they could save tenants an average of £327 when they take on a new rental agreement.
Almost a year after the government announced plans to ban letting agent fees paid by tenants there is still no date for it coming into effect.
A consultation has also been launched by the government today, on making membership of client money protection schemes mandatory for letting and managing agents that handle client money. This carries a maximum £30,000 penalty as an alternative to prosecution.
In its response to a consultation on the ban, the Residential Landlords Association (RLA) warned that "any ban on fees paid by tenants will be passed back to landlords", who are already struggling under a higher tax and regulatory burden.
Amend the Consumer Rights Act 2015 to specify that the letting agent transparency requirements should apply to property portals such as Rightmove and Zoopla.
Overall more than 4,700 responses to the consultation were received from a range of individuals and representative bodies from across the sector.
'This Government is determined to make sure the housing market works for everyone.
He said: "Our tenants fee bill will be first published in draft to ensure full scrutiny of our proposals by parliament and stakeholders before introducing the legislation formally". That disparity can lead to tenants paying hundreds of pounds in fees that are far from transparent, substantially raising the costs involved in renting, and causing nasty surprises for new tenants who think they've found a home that suits their needs and budget.
Since it was announced in the Autumn Statement previous year, the government held a consultation on the proposals to ban letting agent fees, which the RLA contributed to.
The ban would mean that tenants in England will no longer have to pay anything other than rent and a refundable deposit.