Gifted Deposits

A gifted deposit is money given to you (usually by a family member) that you use towards the deposit on a property, without the giver having any legal claim on the property or expecting repayment. In 2026, the Bank of Mum and Dad is the UK's ninth-largest mortgage "lender" — roughly 40% of first-time buyers receive some family help.

This guide covers exactly who can gift, how much, how the lender verifies it, the gifted deposit letter requirements, and the inheritance tax implications for the giver.

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Who Can Legally Gift a Deposit?

Lenders accept gifts from close family members almost universally. Less-close relationships get treated differently:

Always accepted (all lenders):

Parents (including step-parents)
Grandparents
Children (adult children gifting to parents is rarer but possible)
Siblings
Spouses and civil partners

Usually accepted with extra checks:

Aunts, uncles, cousins
Long-term partners not married/civilly partnered
In-laws

Rarely accepted:

Friends
Employers or business partners
Anyone outside the family unit

The underlying principle lenders apply: the gift must be genuinely a gift, not a loan in disguise, and the giver must have no financial claim on the property afterwards.

How Much Can Be Gifted?

There's no legal cap on the gift amount. Lenders don't mind whether the gift is £5,000 or £500,000 as long as:

The giver can evidence the funds came from legitimate sources
The giver signs a gifted deposit letter
The giver has no claim on the property

Practical tax consideration: gifts above £325,000 from a single person may have Inheritance Tax implications for the giver (see below), but that's a tax question, not a lender question.

Multiple givers are fine. Both parents gifting £20,000 each = a £40,000 gift. Parents plus grandparents = typically three separate gifted deposit letters.

The Gifted Deposit Letter

This is the document every lender requires. It's signed by the person (or people) making the gift and contains specific declarations.

Standard contents:

The giver's full legal name and address
Their relationship to the buyer
The exact amount being gifted
Confirmation that it is an unconditional gift, not a loan
Confirmation that the giver will have no legal interest in the property
Confirmation that the funds are from the giver's own legitimate sources
Confirmation that the giver has no right to repayment
Date and signature

Your mortgage broker or solicitor will provide a template, or the lender may have their own required form. Some lenders want the letter witnessed by an independent person (not you or your solicitor).

Critical to get right: the letter must say "gift" — if it says "loan" or "advance" or anything implying repayment, the lender will treat it as a debt and factor it into affordability, which can kill the application.

How Lenders Verify the Gift

Expect the underwriter to ask for:

From the giver:

Bank statements showing the funds (typically last 3 months)
Source of funds explanation if the money recently arrived from elsewhere — e.g. sale of another property, inheritance, pension lump sum
Evidence that the giver can afford the gift (especially if it's large relative to their assets)
The signed gifted deposit letter
Sometimes a certified copy of the giver's ID and proof of address

From you:

Evidence the gifted funds have landed in your account before completion
Your own bank statements showing the gift credit

Timing: the gift should ideally land in your account 1-3 months before application. Last-minute gifts can look like money laundering and trigger enhanced scrutiny.

Inheritance Tax — The Giver's Consideration

This is the most-missed implication of gifted deposits.

Standard Inheritance Tax rules (2026):

Everyone has a £325,000 Inheritance Tax "nil-rate band"
Additional £175,000 "residence nil-rate band" when passing a main home to direct descendants
Gifts made in the 7 years before death are included in the estate value for IHT purposes

The 7-year rule:

Gifts within 3 years of death — taxed at the full 40% IHT rate
Gifts 3-4 years before death — taxed at 32%
Gifts 4-5 years before death — taxed at 24%
Gifts 5-6 years before death — taxed at 16%
Gifts 6-7 years before death — taxed at 8%
Gifts over 7 years before death — not in the estate

Small gifts exemption (2026):

Anyone can gift £3,000 per tax year completely free of IHT concern ("annual exemption")
You can use the prior year's allowance if unused (so up to £6,000 first time)
Separate £250 small gifts allowance per person per year (up to any number of recipients)
Wedding gifts: £5,000 from parents, £2,500 from grandparents, £1,000 from others — IHT-free

Practical implication:

If a parent gifts £40,000 for your deposit and dies within 7 years, £34,000 of that (£40,000 minus the £3,000 × 2 years allowance, if unused) becomes potentially taxable. Whether actually taxed depends on the total estate value and the rest of the nil-rate band.

For high-value gifts, the giver should consider speaking to a financial advisor about IHT planning. For gifts under £50,000 from financially comfortable parents, it's almost always a non-issue.

Parents Gifting While Using Their Own Allowance

If parents are using their own £325,000 nil-rate band to gift a deposit, they can't then also bequeath the same funds — the allowance has been used. This matters if the estate is likely to breach £325,000.

Married couples get double the allowance (£650,000 combined) if one dies and leaves everything to the surviving spouse. Plus the residence nil-rate band on top. So for most middle-class parents, a £30-£50k deposit gift is well within allowances and creates no IHT problem.

Alternatives to a Pure Gift

Joint Borrower Sole Proprietor (JBSP) mortgages

Parents join the mortgage for affordability purposes but don't own the property. The property is in your name only; the parents are liable if you don't pay. Useful when you don't need cash, just higher borrowing.

Family deposit schemes

Some lenders (Barclays Family Springboard, Lloyds Lend a Hand) let a family member put money in a savings account as security for the mortgage, rather than gifting it. After 3-5 years of clean payments, they get the money back with interest.

Loan from family with formal agreement

A documented family loan is possible, but the lender will treat the loan amount as an additional debt in affordability calculations — which may reduce how much you can borrow. Most brokers recommend a gift over a loan unless the family really need the money back.

Inheritance advance

Some parents prefer to gift during their lifetime rather than leave inheritance, especially if they expect the money to be more useful now. Tax-wise, it can be better to gift (using allowances) than to leave everything in the estate.

Practical Tips

Start the conversation early. Don't assume parents will want to help until you've actually asked. Don't assume they can afford it without asking. Awkward conversations save later problems.

Get the funds transferred 1-3 months before application. Reduces scrutiny on the source of funds and keeps the application clean.

Keep the gift separate from your savings. Don't mix gifted funds with your own deposit savings in the same account — underwriters find it easier to trace clean transfers.

Always get a signed gifted deposit letter, even for small amounts. It's standard paperwork and lenders will ask.

Don't let the giver keep any claim on the property. If they want security, use a family deposit scheme or JBSP instead. "Gift with strings attached" can void the gift in the lender's eyes.

Speak to a tax advisor if the gift is large. For gifts over £50,000, a 30-minute conversation about IHT and allowances is worth it.

Frequently Asked Questions

Can I use a gifted deposit for a first-time buyer mortgage?

Yes. Gifted deposits are fully compatible with first-time buyer mortgages and first-time buyer stamp duty relief. The lender treats the gifted funds exactly the same as your own savings for deposit purposes.

Does the gift affect my mortgage affordability?

No, as long as it's a genuine gift with no repayment expected. The lender only factors in your own income and commitments. If the gift is disguised as a loan (even informally), lenders will reverse-engineer it as a debt and it will reduce what you can borrow.

Can grandparents gift a deposit?

Yes. Grandparents are universally accepted as gifters. The same rules apply — a signed letter, source of funds evidence, and no claim on the property. IHT implications depend on the grandparent's full estate.

Can my partner's parents gift me a deposit?

Usually yes. Most lenders accept gifts from in-laws or partner's parents with the same documentation as parents. A few stricter lenders may have different criteria, so your broker will place the application with an accommodating lender.

How long before the application should the gift arrive?

Ideally 1-3 months before. Funds landing the day before application can trigger money laundering checks, which delay things. Earlier is better — gives the underwriter a clean paper trail.

Is there a limit on how much can be gifted?

No legal limit from a lender perspective. The only practical limits are: the giver's ability to afford the gift, Inheritance Tax considerations for gifts over the nil-rate band, and the giver's own retirement / care planning. Gifts of £100,000+ are entirely normal; underwriters just want the paperwork to be clean.

What happens if the parents later want the money back?

If the gifted deposit letter said "gift" (as it should), they have no legal right to the money back. If you both want to formalise a repayment arrangement later, that's between you as a family — but it shouldn't be a condition of the original gift.

Written by a CeMAP qualified mortgage advisor

Last updated: April 2026