Can My Parents Gift Me My Deposit?

Many first-time buyers rely on a gifted deposit to get on the property ladder. It’s a common and accepted way to boost your deposit without taking on extra debt, often unlocking better interest rates and a wider range of mortgage products. 

1. The Gifted Deposit Letter 

Lenders require a formal Gifted Deposit Declaration. This is a letter signed by your parents confirming the funds are a genuine, non-repayable gift and that they’ll have no legal interest or right to live in the property. It reassures the lender they have the primary claim on the home and that you’re not secretly repaying a hidden loan. 

2. ID and Anti-Money Laundering checks 

Anti-Money Laundering regulations have tightened. Your solicitor must verify the source of wealth for whoever is giving the gift. This typically involves: 

• Biometric Digital ID – your parents complete a secure identity check via smartphone, meeting HM Land Registry’s current standards 

• Source of funds – evidence of how the money was accumulated, such as six months of bank statements, proof of a house sale, or pension lump sum documents 

If your deposit is coming from an estate rather than a living relative, the requirements are slightly different, see our guide on using inheritance for a property deposit. 

3. Inheritance Tax considerations 

Most gifts are classed as Potentially Exempt Transfers. If your parents survive for seven years after making the gift, it falls outside their estate for Inheritance Tax purposes. 

They can also use their annual exemption to gift money entirely tax-free, regardless of the seven-year rule. At the time of writing, this exemption is £3,000 per year and can be carried forward for one year if unused, giving a potential £6,000 in one go. For larger gifts, it’s worth your parents keeping a record in case of future IHT assessments. 

4. Protecting the gift with a Deed of Trust 

If you’re buying with a partner or friend, your solicitor may recommend a Deed of Trust. This legal document ensures that if the property is sold, the gifted amount comes back to you before any remaining equity is split. It’s a sensible safeguard when deposit contributions are unequal, see our guide on protecting your deposit if you break up with your partner for more detail. 

Final Thoughts 

Using a gifted deposit is straightforward when handled correctly from the start. Our conveyancing team at Setfords advises first-time buyers and their families on all the legal requirements, helping your mortgage application move forward smoothly. 

Ready to move forward? Get your free conveyancing quote today. 

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