Using Inheritance for a Deposit

Yes, inheritance is a common and perfectly valid way to fund your first home deposit. With property prices remaining a challenge for first-time buyers, inherited funds can provide the boost needed to access better mortgage rates or increase your borrowing power. 

1. Proving the source of funds 

Under current Anti-Money Laundering regulations, your solicitor must create a clear paper trail for any large sums of money. For an inheritance, this is generally more straightforward than personal savings, but it requires specific documentation: 

• Grant of Probate – the legal document confirming the executors have authority to distribute the estate 

• Solicitor’s letter – a formal letter from the firm that handled the estate, confirming the amount you received as a beneficiary 

• Bank statements – showing the funds transferred from the estate’s executors or solicitors directly into your account 

2. ID and digital verification 

In line with HM Land Registry’s Digital Identity Standard, you’ll need to complete biometric verification via a smartphone app. This confirms your identity by scanning the cryptographic chip in your passport and matching it to a liveness facial scan, keeping the transaction secure and fraud-resistant. 

3. Inheritance vs gifted deposits 

If you’ve already received the inheritance and it’s been sitting in your account for some time, it’s treated as your own savings. However, if the estate is still being settled and the money will be paid directly toward the purchase, lenders may treat it more like a gifted deposit. In this case, the executors may need to sign a declaration confirming you’re entitled to the funds and that they don’t need to be repaid. 

If your deposit is coming from a living relative instead, the process differs – see our guide on gifted deposits from parents. 

4. Inheritance Tax considerations 

By the time money reaches you as a beneficiary, any Inheritance Tax due on the estate should already have been paid by the executors. At the time of writing, the Nil Rate Band is £325,000, with an additional £175,000 residence allowance in many cases. You don’t usually pay further tax once you receive the funds, but keep the probate records in case of any future HMRC queries. 

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Final Thoughts 

Using an inheritance for a deposit is a significant step that requires careful legal handling to satisfy mortgage lenders. Our conveyancing team at Setfords is experienced in verifying complex sources of funds, ensuring your inheritance is correctly documented so your purchase can proceed without delay. 

Have questions about your deposit? Get your free conveyancing quote today.