What People Get Wrong About Gifted Deposits
Help from family is one of the most common ways first-time buyers put a deposit together. The money itself is seldom the problem. What trips people up is the paperwork, the timing and the assumptions about what lenders will accept. These are the mistakes that cause the most delays, and what to do instead.
Assuming Any Family Money Counts as a Gift
A gifted deposit is money a relative hands over to help cover the deposit on a property, most often from a parent or grandparent. Two features define it: the donor, as the person giving the money is known, has no expectation of getting it back, and they hold no stake or legal interest in the property. If either of those is missing, it is not a gift in the sense lenders use the word.
Before you build family money into your plans, agree exactly what it is. An outright gift and an informal loan look identical on the day the money arrives, and very different to a lender a few weeks later. Get the arrangement in writing from the start.
Staying Quiet About Where the Deposit Came From
Lenders and conveyancing solicitors must check where purchase funds come from under anti-money laundering rules, the regulations designed to stop money from crime passing through property deals. Your conveyancer, the solicitor handling the purchase, needs evidence covering the whole deposit, not just the portion you saved.
In practice that means bank statements. Where savings built up gradually, statements covering around 12 months showing the money accumulating are usually expected. An inherited sum needs a document from the executors alongside statements showing the money arriving in your account. Leaving the gifted portion out of the picture rarely works, because a large unexplained sum arriving shortly before completion invites exactly the questions you are trying to avoid. Declare the gift when you apply, and keep the statements that show its journey. If your agreement in principle was based on savings alone, our guide to what a mortgage agreement in principle tells you explains what it does and does not confirm.
Leaving the Gift Letter Until the Last Minute
Most lenders ask for a gifted deposit letter, sometimes called a declaration, signed by the donor or donors. At a minimum it should state the name of the person receiving the money, who it has come from and how much it is, and confirm that no repayment is expected and that the donor will hold no interest in the property.
Your lender or conveyancer can check the wording covers everything they need, so ask early rather than producing a letter at exchange. A vague letter that leaves out the no-repayment confirmation will come back with queries, and queries cost time at the stage when a purchase can least afford delay.
Handy tip
Ask the lender what their gift letter must include before you make an offer, and work through our checklist for what to sort out before you make an offer on a house. Sorting the letter early beats scrambling during conveyancing.
Assuming Anyone Can Be the Donor
Gifted deposits usually come from close family: parents, step-parents, grandparents, siblings and in-laws. Some lenders are cautious about money from friends or distant relatives. Others accept it, as long as it is a genuine gift, there is no repayment and the donor will not live in the property or hold any interest in it. Rules differ between lenders, so check before the money moves, not after.
Two further points catch buyers out. If the funds are coming from abroad, the lender may need to run extra checks, which takes longer. And the donor will need to provide identification themselves, typically photographic ID and proof of address, because their identity has to be verified alongside yours.
Treating a Loan as a Gift, or Repaying the Money Quietly
A lender wants to know the deposit is free of any future claim. If part of it is really a loan, that changes the affordability assessment, the check a lender makes on whether you can keep up the repayments, and it weakens the lender’s position if the property ever had to be sold. Declaring it is not optional.
Loans must be backed by official paperwork, and many lenders do not accept an unsecured repayable loan, including one from a bank or other financial institution, towards a mortgage deposit at all. A private promise to pay a relative back after completion creates the same problem: it contradicts the letter your donor signed. If repayment is part of the plan, say so from the outset. Our guide to how lenders work out how much you can borrow explains what goes into the sums.
Ignoring the Tax Position of the Person Giving the Money
The UK does not levy a tax on gifts as such, so a buyer owes nothing when a gifted deposit lands in their account. The tax question sits with the donor, and it concerns Inheritance Tax, the tax that can apply to the value of someone’s estate when they die. Gifts made less than seven years before someone dies may be taxed, depending on who received them and their relationship to the giver. The tax year runs from 6 April to 5 April, and the allowances below can reduce what counts towards the estate. Anyone planning a large gift should consider speaking to a solicitor or tax adviser first.
| Allowance or rule | What it means |
|---|---|
| Annual exemption | £3,000 of gifts each tax year can be given without being added to the estate, to one person or split between several |
| Carrying it forward | Unused annual exemption can be carried forward, but only for one tax year |
| Small gifts | Up to £250 per person each tax year, as long as no other allowance has been used on that person |
| Spouses and civil partners | No Inheritance Tax on gifts between them, with no limit |
| Selling below market value | If a property is sold to a relative for less than it is worth, the difference in value counts as a gift |
Overlooking How the Gift Shows Up in the Property Records
The paper trail does not stop with the lender. When money towards the deposit is paid by the seller rather than the buyer, HM Land Registry, which keeps the official register of property ownership in England and Wales, treats it as a discount and records the net price. A sale stated at £300,000 that includes a £30,000 deposit paid by the seller is registered as £270,000.
Conveyancers must also tell lenders when a discount or incentive forms part of the purchase, because it can influence how much the lender advances. Getting this wrong is common enough that HM Land Registry sent 2,035 requisitions, which are formal requests for more information, about discounts and incentives between 1 April 2023 and 31 March 2024. If a developer or a relative is contributing, make sure everyone states the same figures throughout.
Assuming a Small Deposit Rules You Out
Family help is common, but it is not the only route to a small deposit. The government’s Mortgage Guarantee Scheme, permanently available from July 2025, supports mortgages with deposits as small as 5% across the UK for eligible first-time buyers and home movers. It does this by guaranteeing participating lenders against part of their potential losses on loans between 91% and 95% loan-to-value. Loan-to-value, usually shortened to LTV, is the size of the mortgage as a percentage of the property’s value. A gift can lift you into a lower LTV band, which generally widens the choice of deals, but a 5% deposit no longer means no options. Our guide to deposits and loan-to-value explains how the bands work.
- What to Check on Your Credit File Before a Mortgage Application: tidy up your file before the lender looks at it.
- A Timeline for Exchange and Completion: What Happens and When: when the deposit funds actually need to be in place.
What to know
- A gifted deposit is money given with no expectation of repayment and no stake in the property; anything else is a loan and must be declared.
- Lenders usually want a signed gift letter naming the receiver, the donor and the amount, plus ID and bank statements to verify the source of funds.
- Gifts usually come from close family, and some lenders are cautious about friends or distant relatives, so check the rules before the money moves.
- A gift towards a deposit is not taxed when it reaches the buyer, but Inheritance Tax can apply to gifts made less than seven years before the donor dies.
- The Mortgage Guarantee Scheme, permanently available from July 2025, supports mortgages with deposits as small as 5% across the UK.
Your questions
Do I pay tax on a gifted deposit?
A gift towards a deposit is not taxed when it reaches the buyer, so nothing is owed at that point. The donor should consider Inheritance Tax, because gifts made less than seven years before their death may be taxed.
Who can give me a gifted deposit?
Gifted deposits usually come from parents, step-parents, grandparents, siblings and in-laws. Some lenders accept money from friends as long as it is a genuine gift and the donor takes no interest in the property, but rules vary, so check with the lender first.
Can I pay a gifted deposit back later?
Not if it has been declared as a gift, because a private repayment arrangement contradicts the letter the donor signed. If the money must be repaid, it is a loan and has to be declared, and many lenders will not accept unsecured loans from banks or financial institutions towards a deposit at all.
Does receiving a gift affect my first-time buyer status?
Receiving money does not, but a previous acquisition of a dwelling anywhere in the world, including by gift or inheritance, means a purchaser does not count as a first-time buyer for stamp duty relief purposes.
This guide explains how UK borrowing works in general terms and isn’t financial advice. Rates, rules and lender criteria change, so check the details with the lender, GOV.UK or the Financial Conduct Authority before you decide. For advice on your own circumstances, speak to an FCA-authorised mortgage or financial adviser. If you borrow against your home, it may be repossessed if you do not keep up repayments.
