Gifted deposit: how it works and what lenders require

Buying your first home can be challenging, especially when saving for a deposit. Help from family can make things easier, but mortgage lenders will usually require certain legal checks before the money can be used. Whether you are buying your first property or moving home, understanding the process can help reduce  delays. You can also review the costs involved in conveyancing , or speak to a residential conveyancing solicitor for support.

Key Takeaway: Understanding your deposit

A gifted deposit is a cash sum given by a family member or another approved donor  that you use to pay for some or all of a mortgage deposit.

It must be a genuine gift. This means there is no agreement for you to pay the money back, and the person giving the money cannot have any legal rights or stake in the property you are purchasing.

This guide explains how to declare these funds and meet your lender’s requirements.

How a gifted deposit mortgage works

For many buyers, help from family can make a big difference.

For example:

• A buyer wants to purchase a £250,000 home.
• With a 5% deposit, they would need £12,500.
• A parent or relative gives them an extra £12,500.
• This increases the deposit to 10%.
• As a result, the buyer may qualify for better mortgage rates or access more suitable properties.

This is commonly called a gifted deposit mortgage, where part or all of the deposit is provided as a genuine gift from a family member.

The UK government also supports buyers with smaller deposits through the Mortgage Guarantee Scheme . Since July 2025, the scheme has been permanently available  and helps lenders continue offering 91% to 95% loan-to-value mortgages.

This means eligible buyers can:

• Buy a property with as little as a 5% deposit.
• Access more mortgage options.
• Enter the property market sooner.

Who can provide a gift deposit?

Lenders have their own rules on who can provide  a gifted deposit.

They usually accept gifts from:

• Parents, step-parents and parents-in-law.
• Siblings and siblings-in-law.
• Grandparents and step-grandparents.
• Aunts and uncles, depending on lender policy.
• Partners living with the applicant.
• Children, including stepchildren and adopted children.

They usually do not accept gifts from:

• Family friends.
• Employers.
• Property developers or landlords.
• Cousins and non-blood relatives, unless the lender agrees.
• Foster children.

Example:

• Sarah buys a flat with a 5% deposit.
• Her parents gift her £15,000.
• The lender accepts it because it is from immediate family and properly documented.

If the money came from a friend or developer, it would likely be refused or trigger extra checks .

Writing a clear gifted deposit letter

To prove the money is not a loan, you must provide a gifted deposit letter, also called a declaration letter. This confirms the money is a genuine gift and does not need to be repaid.

Key points:

• The donor usually signs the letter.
• It confirms the money is a non-repayable gift.
• The donor has no legal claim on the property.
• The wording must meet lender requirements.

Although you may find a gifted deposit letter template online, your conveyancing solicitor will usually provide the correct version required by your lender, as part of the property purchase process .

Anti-money laundering checks by your conveyancer

Your solicitor must verify the source of the gifted funds to comply with anti-money laundering requirements , which are strictly enforced in the UK property sector.

The donor usually provides ID, such as a passport or driving licence, and proof of address, such as a utility bill or bank statement .

They must also show where the money comes from, for example a property sale, shares, inheritance, or savings supported by bank statements.

Understanding the gifted deposit tax implications

Receiving a cash gift does not usually trigger income tax, but it can have Inheritance Tax implications.

Key points:

• No income tax is paid on the gift itself.
• The UK applies a 7-year rule for Inheritance Tax.
• If the donor survives 7 years, no Inheritance Tax is usually due on the gift.
• If they die within 7 years, Inheritance Tax may apply depending on the estate and available allowances.

Example:

• Sally gave £100,000 to a friend.
• She died 3 years later.
• The gift may be considered under Inheritance Tax rules.
• Tax may be due only if the available nil-rate band and exemptions are not enough to cover it.

Allowances include:

• £3,000 annual gift exemption.
• £5,000 wedding gift allowance from a parent.
• The £325,000 nil-rate band, depending on the wider estate and previous gifts.

Taper relief may reduce the tax rate depending on how long the donor survives after making the gift.

Problems with not declaring gifted deposit funds

Honesty is essential when applying for a mortgage. A gifted deposit must always be declared to the lender.

Key points:

• It must be disclosed upfront.
• A false declaration can lead to refusal.
• Bank statements are checked.
• Large transfers raise questions.
• Non-disclosure can cause rejection.

Example: if a buyer claims the deposit is savings but it comes from family, the lender will likely decline the application if this is discovered .

FAQs

What is a gifted deposit?

It is money given by a close relative or another approved donor to help you buy a property, with no expectation of repayment and no rights over the home.

Which mortgage lenders accept gifted deposits?

Most major UK lenders do, but the rules vary. Many prefer gifts from close family such as parents, grandparents, siblings, or children. Gifts from friends or employers are often not accepted.

How do I declare a gifted deposit?

You must inform your lender or broker early in the application. Your solicitor will then arrange a signed declaration confirming the money is a genuine gift and not a loan.

A cash gift from family can help you buy a home or improve your mortgage deal. You need to follow key rules, including declaration letters, AML checks, and the 7-year inheritance tax rule. Being honest with your lender and working with a solicitor helps keep the process simple and legal.

This guide provides general information only and does not constitute legal advice.

Need help with a gifted deposit? 

If your lender requests complex documents or you need help verifying your deposit, Justifit UK’s  network of specialist solicitors can support you. They can help you understand your rights as a buyer and complete your purchase securely.

KEY TAKEAWAYS: 

• Strict lender rules: A family gift must be accompanied by a formal declaration letter proving the money is not a loan and grants no property rights to the giver.
• Mandatory security checks: Conveyancing solicitors are legally required to verify the identity of the gift giver and trace the source of the funds to comply with anti-money laundering laws.
• Tax considerations: While cash gifts are generally tax-free initially, the seven-year rule means Inheritance Tax may apply if the giver passes away within seven years of making the gift.