dierty tenants

Tenancy Types and Management

I have a couple living in my 2 bed house, they recently had a child and have really let the property go to pot.
I did an inspection 3 mths ago and found the house to be dirty and cluttered with furniture making it harder to see any damage being done.
I wrote to them after my visit warning them that i was unhappy and revisited one month later. I was slightly happier on arrival some effort had been made by the man of the house but no where near acceptable.
I told him my concerns to which he agreed and then put them in writing along with another inspection date which was today.
When i arrived today again a slight improvement had been made but not enough, the tenant knew that i was still unhappy and after a long discussion i said i would be back in 2 weeks for a final inspection and i would then make a decision on whether to serve notice on them to leave.
Please advise me as to what i can do to either get these tenants to buck up their ideas or get them to leave amicably.
They never pay their rent on time but i do always get it, except this month when it was paid in full on the correct day.
I hold a £525 deposit which i took before April 07 so does this mean that i can use this deposit to rectify any damage and cleaning etc that will be needed should they leave?
Sharon