Gifted Deposits Explained

Getting help from family towards a deposit is one of the most common ways people get onto the property ladder. Lenders are generally happy with it — as long as it's set up correctly and properly documented.

A gifted deposit is money given to you, usually by a close family member, to put towards buying a home, with no expectation of repayment. Lenders accept gifted deposits routinely, but they'll want a signed gift letter confirming the money is a genuine gift and not a loan.

---

Key Takeaways

• A gifted deposit is money given as a genuine gift, not a loan, towards your home purchase.
• Most lenders accept them but require a signed gift letter and evidence of where the money came from.
• The gift must not be repayable and the giver must have no stake in the property.
• There can be an inheritance tax angle if the person giving the gift dies within seven years.

---

What Is a Gifted Deposit?

A gifted deposit is a sum of money given to a home buyer to help fund their deposit, with no expectation that it will be paid back. It's most often provided by parents — sometimes called the "Bank of Mum and Dad" — but grandparents and other close relatives commonly help too.

The key word is gift. If the money has to be repaid, it's a loan, and that changes everything: a loan affects your affordability and most lenders won't accept a repayable "deposit". If you're still building your pot, our guide to the best way to save for a house covers how gifts and savings can work together.

What Lenders Need From You

Lenders accept gifted deposits all the time, but they'll want reassurance about two things: that the money is genuinely a gift, and that it comes from a legitimate source. Typically you'll need to provide:

• A gifted deposit letter (more on this below).
• Proof of the giver's identity and sometimes their address.
• Evidence of where the money came from — for example bank statements — as part of anti-money-laundering checks.

Some lenders prefer gifts to come from close family only, while others are more relaxed. A broker can point you towards lenders whose rules match your situation.

The Gifted Deposit Letter

The gift letter is the document that makes the arrangement work. It's a short signed statement from the person giving the money that usually confirms:

• The amount being gifted.
• That it's a genuine gift with no expectation of repayment.
• That the giver will have no legal interest or stake in the property.
• The relationship between the giver and the buyer.

This protects the lender, because it removes any hidden claim on the home. Your conveyancer or broker can usually provide a template. For the wider question of passing wealth or property to family, our guide can I give my house to my children? is a useful companion read.

The Inheritance Tax Angle

This is the part people most often overlook. A cash gift towards a deposit is normally treated as a "potentially exempt transfer" for inheritance tax. In simple terms:

• If the person who gave the gift lives for seven years after making it, the gift falls outside their estate for inheritance tax.
• If they die within seven years, the gift may be counted back into their estate, potentially adding to any inheritance tax bill.

This is known as the seven-year rule, and there's a tapering of tax on larger gifts made between three and seven years before death. It rarely stops families gifting a deposit, but it's worth being aware of — our detailed guide to the inheritance tax 7-year rule explains exactly how it works. For larger or more complex gifts, it's sensible to take tax advice.

How a Gift Affects What You Can Borrow

A bigger deposit doesn't just help you get accepted — it improves your loan-to-value, which can unlock lower interest rates and reduce your monthly payments. It's worth seeing how a larger deposit changes the numbers before you buy:

Remember that the deposit is only part of the picture. Lenders still assess affordability based on your income and outgoings, so a generous gift won't let you borrow more than your income supports.

Does a gifted deposit have to come from a parent?

Not necessarily. Many lenders accept gifts from parents, grandparents and other close family. Some will consider gifts from friends or more distant relatives, but the rules vary by lender.

Will a gifted deposit affect my mortgage application?

Positively, in most cases — a larger deposit improves your loan-to-value. You will need to document it properly with a gift letter and evidence of the source of funds.

Do I pay tax on a gifted deposit?

The buyer doesn't pay tax on receiving the gift. The main consideration is inheritance tax for the giver if they die within seven years of making the gift.

A gifted deposit can be one of the most powerful ways to get onto or up the property ladder. Keep it simple: make sure it's a genuine gift, get the letter signed, keep evidence of the money's source, and take tax advice if the sums are large.