Gifted Deposits Explained. Can First-Time Buyers Use Gifted Deposits?

Apr 11, 2024
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.

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 

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 Parent Power 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.