Buying your first home is exciting but saving up for a deposit can feel like climbing Mount Everest. With house prices rising faster than wages, many buyers are turning to the Bank of Mum and Dad (or even Nan and Grandad) for help. With inheritance tax laws changing last year, many parents and grandparents are now gifting money to reduce their tax liability and to see their children enjoy their wealth whilst they’re alive. This financial support is known as a gifted deposit – and it’s more common than you might think. 

 

In this guide, we’ll explain what a gifted deposit is, how it works, the rules lenders set, and what you need to know about gifted deposit letters, tax, and inheritance implications. 

A gifted deposit is money given (not loaned) by a family member or close relative to help you buy a property. Unlike a loan, this money doesn’t need to be repaid – which is why lenders need proof that it’s a true “gift” and it will not be repaid with interest. 

The most common sources of gifted deposits are: 

 

• Parents helping their children get on the ladder (the Bank of Mum and Dad) 

• Grandparents gifting part of their savings 

• Other family members, such as siblings or even godparents 

 

The money is a gift, the person giving you the money will not be named on the mortgage or title deeds and will have no financial interest in the property. 

 

According to recent studies, around one in three first-time buyers in the UK now rely on a gifted deposit. 

Yes – but with conditions. Most mortgage lenders accept gifted deposits, especially for first-time buyer mortgages, but they require clear evidence it’s a gift. Some lenders only allow immediate family (parents, grandparents, siblings) to provide the funds, while others may extend it to wider relatives. Lenders will want to know the origin of the money for anti-money laundering purposes to make sure its come from a legitimate source. 

 

If your gifted deposit is coming from a friend or unrelated party, fewer lenders will accept it. This is why it’s crucial to work with a mortgage adviser who can match you with the right lender. 

To make sure the money is truly a gift, lenders will usually ask for a gifted deposit declaration letter. 

This letter needs to confirm: 

 

• The giver’s full name and relationship to the buyer 

• The amount of money gifted 

• A statement confirming the money is a gift (not a loan) 

• Confirmation of where the money is coming from 

• Confirmation that the giver has no legal interest in the property 

 

The giver may also need to provide ID, proof of funds, and bank statements. Rather than a letter, some lenders have their own form to be completed with the relevant information above required and uploaded to your application. 

There’s no immediate tax on gifted deposits. However, the money may fall under Inheritance Tax (IHT) rules if the person gifting the money dies within 7 years of giving the gift. 

 

• If the gifter lives more than 7 years after giving the deposit → No tax applies. 

• If they die within 7 years → It may count towards their estate for inheritance tax purposes. 

 

This is why many parents and grandparents choose to gift money sooner rather than later to save on the inheritance tax liabilities and to give themselves the best chance of outliving the 7-year tax window. 

There’s no official limit on the size of a gifted deposit – it could be £5,000 or £100,000. However, lenders may treat larger gifts with more scrutiny. 

It’s worth noting: 

 

• Parents can gift up to £3,000 per year per person without it affecting inheritance tax rules. 

• Larger gifts may still be given but could fall under the 7-year inheritance rule. 

 

A gifted deposit can make all the difference in securing your dream home – especially for first-time buyers. But the rules can be complex, and not every lender treats gifted deposits the same way. 

 

That’s where we come in. At Green & Green Mortgages, we’ve helped countless clients in Hull and East Yorkshire secure mortgages using gifted deposits. We’ll guide you through the paperwork, find the right lender, and make sure the process runs smoothly. 

 

Thinking of using a gifted deposit? Get in touch today and let’s find the best mortgage for your situation.