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Gifted Deposits Explained

May 29, 2025
Gifted Deposits Explained
If you’re planning to buy a new home but are struggling to save for a deposit, your parents can help. They can gift you money to get onto the property ladder and access competitive mortgage rates. Learn more about what counts as a gifted deposit, how it works and its tax implications in our comprehensive guide.

What is a gifted deposit?

Gifted deposits refer to money given to you by, typically, your parents to help you buy a home. The amount can form part of the deposit or equate to it. Unlike loans, gifted deposits don’t need to be repaid, and the person gifting the money has no legal rights to or interest in the property.

How do gifted deposits work?

If you receive a gifted deposit from your parents, you should:

1. Inform your solicitor. Let your solicitor and mortgage broker know that your parents gifted the deposit.

2. Provide evidence of the gift. Your parents must provide your solicitor and mortgage broker with a Gifted Deposit Letter detailing how much has been given, any interest due and the repayment terms.

3. Provide proof of ID. You and your parents must provide proof of ID.

4. Include proof of funds. You must provide proof of funds, meaning where the money has come from. This includes bank statements from your parents outlining how they’ve reached that sum.

5. Ensure you receive a deed of trust. Your solicitor should draw up a deed of trust to determine what happens to the money in the future. This should cover whether the amount needs to be repaid and what happens if the property is sold.

 

Who Can Give a Gifted Deposit?

When it comes to using a gifted deposit for your home purchase, most lenders have specific rules about who the gift can come from. Generally, the closer the relationship, the more likely it is to be accepted.
 
Typically Accepted Gift Givers
 
Most lenders will accept a gifted deposit from the following individuals:
• Parents, step-parents, or parents-in-law
• Siblings, half-siblings, step-siblings, or brothers/sisters-in-law
• Grandparents or step-grandparents
• Aunts or uncles (if related by blood)
• Nieces or nephews
• Your partner (if living with you)
• Your children, stepchildren, adopted children, or sons/daughters-in-law
 
Usually Not Accepted
 
Gifted deposits from the following sources are typically not accepted by lenders:
• Family friends
• Cousins
• A property developer or your landlord
• Your employer
• Foster or guardian children
• Aunts or uncles who are not blood relatives
 

Is there a limit on how much can be gifted?

No, unless your mortgage lender claims otherwise. However, you may incur an inheritance tax if your deposit is too big.

What is a Gifted Deposit Letter?

Lenders may ask your parents to fill out a Gifted Deposit Letter. This confirms that the money isn’t a loan that requires regular repayments. It also ensures that if they repossess the house, your parents won’t have any legal rights to it. 

The Gifted Deposit Letter should include the following information:  

• Your parents’ names 
• Your name 
• The amount of money gifted 
• The source of the money  
• The nature of your relationship 
• Confirmation that it’s a gift that doesn’t require repayments 
• Evidence that your parents are financially able to support 

 

Why Bigger Deposits Are Better

While most mortgage lenders will accept a minimum deposit of 5%, putting down a larger deposit can offer significant advantages—both now and in the long run. Here’s why a bigger deposit works in your favour:
 
Lower monthly repayments: A larger deposit means you’ll need to borrow less. This typically results in more manageable monthly mortgage payments, reducing the financial strain on your budget.
 
Access to better mortgage deals: The more you can put down upfront, the more attractive you are to lenders. A higher deposit unlocks access to a wider range of mortgage products, often with lower interest rates—especially if you cross key thresholds like 10%, 15%, or 25%.
Improved chances of approval: A larger deposit shows financial stability, which can strengthen your mortgage application—particularly important for first-time buyers or those with limited credit history.
 
Greater flexibility and long-term savings: Lower interest rates and smaller loan amounts often mean you’ll pay less interest overall during the mortgage term, saving you thousands of pounds in the long run.
 
Even if you already have the minimum deposit saved, a gifted deposit from a family member can help you move into a stronger position. For example, boosting your deposit from 5% to 10% can reduce your borrowing costs and improve your chances of securing more favourable lending terms. 

Are there any tax implications on gifted deposits?

You can receive up to £3,000 yearly as a gifted deposit without having to pay tax. If your parents give you more money towards a deposit and they pass away within seven years, you must pay inheritance tax.

Can first-time buyers use gifted deposits?

Yes. You can apply for a mortgage using your gifted deposit if you’re a first-time buyer. Our guide to buying your first home includes helpful tips on the process.

At David Wilson Homes, we can help you get onto the property ladder even faster. With our Bank of Family scheme, whatever your family or friends contribute, we could match it up to a maximum of 5% of the purchase price.

Discover other homebuying offers to help you move. Browse our brand-new homes across the UK and call our Sales Advisers to reserve yours today.

Gifted Deposits FAQs

  • Not necessarily. While many lenders prefer gifted deposits from immediate family members (such as parents or grandparents), some may accept gifts from friends or other third parties. However, these gifts must be non-repayable, and the donor will typically need to provide a signed declaration confirming this.
  • Yes, it's possible to combine gifted deposits from multiple donors. Each donor must provide a separate gifted deposit letter, and lenders will require documentation to verify the legitimacy and source of each gift.
  • Generally, no immediate tax is due on a gifted deposit. However, if the donor passes away within seven years of making the gift, the amount may be subject to inheritance tax, depending on the value of the estate.
  • There is no legal limit to the amount that can be gifted. However, for inheritance tax purposes, individuals can gift up to £3,000 per year tax-free. Larger gifts may have tax implications if the donor dies within seven years.
  • Failing to declare a gifted deposit can be considered mortgage fraud, a serious offense with potential legal consequences. Lenders require full disclosure of all funds used for a deposit to assess affordability and comply with anti-money laundering regulations.
  • The majority of UK mortgage lenders accept gifted deposits, particularly from close family members. However, each lender has specific rules about who the gift can come from and what documentation is required, so it’s important to check with your lender or broker early in the process.
  • A gifted deposit is not subject to income tax or capital gains tax for the recipient. However, inheritance tax may apply if the donor dies within seven years of making the gift and their estate exceeds the inheritance tax threshold.

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