A gifted deposit is money given to a homebuyer — typically by a family member — that does not need to be repaid and has no strings attached. For first-time buyers struggling to save while paying rent, it can be the difference between owning and waiting another five years. But the rules around gifted deposits trip up buyers, parents, and even some solicitors, so it is worth understanding exactly how lenders treat them before you make any assumptions.
What exactly counts as a "gifted" deposit?
A gift is a transfer of funds where the donor has no expectation — written or implied — of repayment, interest, or any share in the property. If the donor expects money back at any point, or wants a stake in the equity, lenders treat the arrangement as a loan, not a gift. That distinction matters enormously: a loan counts as a liability and reduces how much a lender will advance you.
Who is allowed to gift a deposit?
Most high-street and specialist lenders accept gifts from immediate family: parents, grandparents, and siblings. Some extend this to step-parents, aunts, uncles, and legal guardians. Friends and unrelated third parties are far more restricted — a handful of lenders permit them, but underwriting scrutiny is significantly higher. The relationship must be declared clearly on the gift letter, and some lenders require proof that the donor is who they say they are.
Does a gifted deposit affect my mortgage application?
It should not, provided the gift is properly documented and the donor has no repayment expectation. Lenders assess affordability on your income alone; the gifted deposit simply covers part or all of your deposit requirement. Where applications run into trouble is when the money appears in your bank account without explanation — lenders reviewing three-to-six months of statements will query any large credit that is not accounted for.
What is a gifted deposit letter and what must it say?
A gifted deposit letter is a formal declaration, signed by the donor, confirming the nature of the transfer. Most lenders have a template they prefer, but at minimum the letter must state: the donor's full name and relationship to you, the exact amount gifted, confirmation that it is a gift and not a loan, confirmation that the donor will have no interest in the property, and the donor's signature with the date. Your solicitor will typically hold this letter on file as part of the conveyancing process.
Do lenders accept a gifted deposit as the whole deposit?
Many do, particularly for first-time buyers at 90–95% loan-to-value. However, some lenders — especially at higher LTVs — require that a portion of the deposit comes from your own savings. This is sometimes called a "minimum own contribution" rule and varies by lender. At 90% LTV (10% deposit), most mainstream lenders are comfortable with the entire deposit being gifted. At 95% LTV the picture is more mixed, and you may need to source a lender through a whole-of-market broker rather than going direct to your bank.
Will the donor face any tax implications?
In most cases, no. In the UK, gifts between individuals are not subject to income tax or capital gains tax. However, if the donor dies within seven years of making the gift, it may be brought back into their estate for inheritance tax purposes — this is the "seven-year rule." Gifts that fall within the donor's annual exemption (£3,000 per tax year) are immediately outside the estate. For larger gifts, donors with significant estates should take independent tax advice before transferring funds.
How soon before completion can the gift be transferred?
Timing matters. Most lenders want to see the gifted funds sitting in the buyer's account — or their solicitor's client account — before exchange of contracts, though some allow transfer closer to completion. The funds need to appear on bank statements that the lender reviews, or be evidenced by a solicitor's confirmation. Transferring the money too late can stall your completion date, so plan for funds to arrive at least four to six weeks before exchange wherever possible.
Do I need to declare a gifted deposit to HMRC?
As a buyer, you do not report the gift itself to HMRC. Stamp Duty Land Tax (or its Scottish and Welsh equivalents) is calculated on the purchase price, not on how you funded the deposit. The donor does not need to file a tax return specifically for the gift unless their estate is large enough that inheritance tax planning is relevant. Your solicitor will handle the SDLT return; the gifted nature of the deposit does not change the figures.
What happens if the lender finds out the "gift" is actually a loan?
This is where things become serious. Misrepresenting a loan as a gift on a mortgage application is mortgage fraud — a criminal offence. Lenders do carry out checks: they may ask the donor to confirm the gift in writing, verify the donor's bank statement showing the outgoing transfer, or query the source of the donor's funds if the amount is substantial. If it later emerges the money was a loan, the lender can demand immediate repayment of the mortgage in full. The consequences are not worth the risk.
Which lenders are most flexible with gifted deposits?
Nationwide, Halifax, and Barclays all accept gifted deposits from immediate family across most of their product ranges. Specialist lenders such as Accord, Leeds Building Society, and Coventry Building Society tend to have clear, documented policies that are straightforward to work with. For cases where the donor is not an immediate family member — or where the buyer has limited credit history — a specialist residential mortgage broker with whole-of-market access can identify lenders whose criteria fit your specific situation rather than asking you to reshape your finances to fit a product.
Still unsure? The question most people get wrong.
If one thing causes gifted deposit applications to stall, it is the assumption that the letter alone is sufficient. Documentation is necessary, but lenders also scrutinise the source of the donor's funds — especially for gifts above £25,000. If the donor recently sold a property, liquidated investments, or received their own inheritance, you should be prepared to provide evidence of that too. A broker who has handled gifted deposit cases before will know exactly what a given lender's underwriters want to see, and can front-load that evidence to avoid delays.
Key takeaways
- A gifted deposit must be a true gift — no repayment, no equity share — or lenders will treat it as a loan and recalculate your affordability.
- The gift letter must be signed, specific, and confirm the donor's relationship and their lack of interest in the property.
- Most lenders accept 100% gifted deposits at 90% LTV; at 95% LTV, lender criteria vary and whole-of-market advice is worth taking.
- Donors should be aware of the seven-year inheritance tax rule for large gifts, and take independent tax advice if their estate is substantial.
- Source of funds evidence for the donor — not just a signed letter — is increasingly standard practice at larger gift amounts.
Working with Agnes Mortgage
Agnes Mortgage is a whole-of-market UK mortgage broker specialising in complex first-time buyer cases, including those involving gifted deposits, non-standard income, and lenders outside the high street. If you are ready to move forward, book a private consultation at /#contact and speak directly with a named broker who will handle your case from first call to completion.
Frequently asked questions
Can my parents gift me a deposit for a house?
Yes. Most UK mortgage lenders accept gifted deposits from parents, and many accept gifts from grandparents and siblings too. The gift must be documented with a signed letter confirming no repayment is expected and the donor has no interest in the property.
Does a gifted deposit need to be declared to HMRC?
As a buyer, you do not need to report the gift itself to HMRC. Stamp Duty Land Tax is calculated on the purchase price, not how the deposit was funded. The donor may need to consider inheritance tax implications if they die within seven years of making a large gift.
Can the whole deposit be a gift or do I need some of my own savings?
Many lenders — particularly at 90% LTV — accept a fully gifted deposit with no minimum own contribution required. At 95% LTV, some lenders insist on a portion coming from the buyer's own savings. A whole-of-market broker can identify which lenders fit your situation.
What should a gifted deposit letter include?
The letter should state the donor's full name and relationship to you, the exact amount gifted, confirmation that it is not a loan, and confirmation that the donor will have no stake in the property. It must be signed and dated by the donor.
Can a friend gift me a deposit for a mortgage?
A small number of UK lenders accept gifted deposits from friends or unrelated parties, but underwriting scrutiny is significantly higher and many lenders will decline. Your best route is a whole-of-market broker who can identify lenders with the most flexible criteria for non-family gifts.