A buyer’s guide to gifted deposits

If you are buying a property, every little helps – especially when it comes to finding enough money for a deposit. Just how much purchasers rely on a cash injection was revealed in 2024, when analysis by Uswitch found 37% of UK first-time buyers were only able to amass a deposit thanks to financial help from family or friends. 

The amount of money gifted or loaned by the Bank of Mum and Dad is staggering. An estimated £9.4 billion was helpfully put forward in 2023, with a report run by This Is Money suggesting parents could gift as much as £30 billion over the next three years to help their children buy a home. 

If you are relying on financial help when saving for a deposit, these are the key considerations:

• Not every mortgage lender will accept deposit help

If you have a friend or relative who’s in a position to help with your deposit, you’ll need to declare this to any mortgage adviser you’re using, or a lender if you’re going direct. Not all lenders will accept a gifted deposit and almost all will refuse the money if it is a loan from a relative. 

• Your relationship to the gift giver matters 

Each lender will have its own criteria, so you must check the small print. Some will only accept gifted deposits from blood relatives or parents, others will be more accepting of help from god parents, friends and more distant relatives.

• Your gift giver can’t have any interest in the property

Mortgage lenders will want to know if the gift giver is acting impartially. That means they must not be named on the property deeds or be part of the mortgage application.

• You’ll need a gifted deposit letter

A lender who does accept a gifted deposit will want a letter that clarifies the position of the cash donor and the buyer. Many lenders have a preset form to fill in as part of the mortgage application process. Your gift giver will be expected to share their details, the amount they are gifting and the source of their funds, together with signing a declaration that the money is a gift and not a loan, and that they have no stake or personal interest in the property being bought. 

• Prepare to pay inheritance tax on a gifted deposit 

In some, but not all, gifted deposit instances, the recipient may have to pay inheritance tax on the money. A friend or relative can gift up to £3,000 annually tax free (or £6,000 if they are using unused allowance from the previous year) but deposit gifts can be substantially more. If the donor lives for seven years after the gift was given and/or the estate’s total is under the inheritance tax threshold, tax may not be due. Large deposit gifts should always be made in tandem with financial advice. 

We are available to help buyers find and purchase a property. Contact us for advice and a list of available properties.