Gifted deposits: how to use family money for your deposit

A gifted deposit is a sum given to you to use towards your deposit where the giver keeps no legal interest in the property and expects nothing back. That last part is what matters to a lender: if the money has to be repaid, it is a loan, and a loan changes your affordability and can sink the mortgage application.

Gifted deposits are fully compatible with first-time buyer mortgages and with first-time buyer Stamp Duty relief — receiving one does not affect your first-time buyer status. The gift can cover your whole deposit or just top up your own savings; both are normal.

Almost every lender accepts gifts from immediate family — parents, grandparents, and often siblings, and a spouse or civil partner. Beyond that it gets patchier: some lenders accept aunts, uncles, and cousins, while gifts from friends or an unrelated third party are accepted by only a minority. If your gift is coming from outside the immediate family, tell your broker up front so they can place you with a lender that allows it.

There is no cap on how much can be gifted for mortgage purposes — you could receive 100% of the deposit as a gift. The lender's concern is not the amount but the proof: they need to see who the money came from, that they could afford to give it, and that it is genuinely a gift.

The gifted deposit letter is a short document, signed by whoever is giving the money, that every lender will ask for. Its job is to prove the money is an unconditional gift. The single most important line is that the money is a 'gift' — if the wording implies a 'loan', 'advance', or any repayment, the lender treats it as a debt and factors it into affordability.

Your solicitor or broker can supply a template, but the letter should confirm the key facts below. The giver will usually also need to provide proof of identity and bank statements showing where the money came from, as part of anti-money-laundering checks.

Ideally, get the gifted funds into your own account at least 30 days before you apply, and 90 days is better. Lenders like to see the deposit 'seasoned' — sitting on your bank statements for a while — because it makes the source easy to verify and reassures them the money is not a last-minute loan.

Money arriving the week before completion is not fatal, but it invites extra questions and can slow things down while your solicitor and lender trace the source of funds. If a gift is on the way, move it early and keep every statement and transfer record.

There is no tax to pay on the gift itself. A cash gift from one UK individual to another is not income for you and creates no capital gains for the giver, so neither of you owes tax simply for making or receiving it.

The one thing to be aware of is inheritance tax (IHT). Under the '7 year rule', if the giver dies within seven years of making the gift, it can be counted as part of their estate. In practice most deposit gifts fall well within the giver's £325,000 nil-rate band, so no IHT arises. Everyone can also give away £3,000 a year under the annual exemption without it counting at all, and gifts made three to seven years before death benefit from taper relief on any tax due. This is general information, not tax advice — for larger gifts it is worth speaking to a financial adviser.