Gifted Deposit: How the Bank of Mum and Dad Actually Works

A gifted deposit is now the single biggest source of help for UK first-time buyers, and it’s not particularly close. If you’re relying on money from parents, grandparents, or another family member to get onto the ladder, you’re in good company, but there are rules your lender will expect you to follow.

We see this come up constantly, so here’s what you actually need to know before the money moves.

What Counts as a Gifted Deposit?

Any money put towards your deposit with no expectation of repayment and no claim on the property. That’s the test lenders apply, and it’s stricter than it sounds.

The documentation has to say “gift”, not “loan” or “advance”. If it implies repayment in any way, your lender will treat it as a debt rather than a gift, which gets factored into your affordability and can significantly reduce what you’re able to borrow.

Will Lenders Actually Accept a Gifted Deposit?

Yes, in the vast majority of cases. Most lenders are comfortable with a gifted deposit from parents, grandparents or siblings, and many will also accept one from a partner or wider family with the right paperwork.

Gifts from friends rather than family are accepted by fewer lenders and usually mean more scrutiny. As with any part of your application, lenders will still assess what you can comfortably afford on top of the deposit itself. Our guide on mortgage affordability covers how that figure is actually calculated.

The Paperwork Your Lender Will Want

More than you’d expect, mostly because of anti-money-laundering rules rather than anything to do with the mortgage itself. You’ll typically need a signed gifted deposit letter confirming it’s a genuine gift, proof of ID and address for whoever’s giving it, evidence of where their money came from, and a record of the transfer landing in your account.

Timing matters too. Lenders prefer to see the money sitting in your account as settled savings rather than a large, unexplained inflow the week before you apply. Letting it season for a few weeks before your application avoids unnecessary questions.

Could a Gifted Deposit Affect Inheritance Tax?

For most families, no. But it’s worth understanding the rule that could apply. Each person has a £3,000 annual gifting allowance that’s immediately outside their estate, and any unused allowance can be carried forward one tax year.

Gifts above that are treated as “potentially exempt transfers”. They only become taxable if the person who gave the money dies within seven years and their total estate exceeds the nil-rate band, currently £325,000. For most gifts in the range typical first-time buyers receive, this rarely results in any tax being due, but for larger sums it’s worth a conversation with a tax adviser. You can read the full rules on gov.uk.

What If More Than One Person Is Gifting?

That’s fine, and increasingly common. Parents and grandparents can both contribute, each providing their own signed gift letter. Every gift is treated individually for both the lender’s anti-money-laundering checks and any inheritance tax consideration.

So Should You Use a Gifted Deposit?

If it’s available to you without straining the giver’s own finances, most buyers find it makes sense. It’s one of the most common ways people avoid the exact mistake we cover in our piece on the biggest first-time buyer mistake, which is starting the property search before the financial side is actually sorted. Getting a mortgage agreement in principle in place early, with your gifted deposit paperwork ready, puts you in a much stronger position once you find the right home.

Not Sure Where You Stand?

Whether the gift is coming from one parent, two, or grandparents as well, a quick conversation costs nothing and could save you a lot of back-and-forth later. Get in touch with our team and we’ll walk you through exactly what your lender will need.

Frequently Asked Questions

What documents do I need for a gifted deposit?

A signed gift letter confirming the money is a gift and not a loan, proof of ID and address for the person gifting it, evidence of where their funds came from, and confirmation the money has reached your account.

Do I pay tax on a gifted deposit?

No, there’s no tax for you as the recipient. The only consideration is inheritance tax for the person giving the gift if they die within seven years and their estate is above the nil-rate band.

Can grandparents give a gifted deposit?

Yes. Grandparents are widely accepted by lenders on the same terms as parents, with the same paperwork required.

How early should the gift be in my account before I apply?

Ideally a few weeks to a few months. Lenders are more comfortable seeing the funds as established savings rather than a last-minute transfer, which can trigger additional anti-money-laundering checks.

Can more than one person gift towards my deposit?

Yes. Multiple gifts are common, for example from both parents or from parents and grandparents together. Each gift needs its own signed letter.

What if the money is actually meant to be repaid eventually?

Then it isn’t a gifted deposit and shouldn’t be documented as one. If there’s any expectation of repayment, tell your broker, as it will be treated as a loan and factored into your affordability calculation.