Bank of Mum and Dad: gifted deposits explained

A gifted deposit is money someone gives you towards buying a home, often from parents. The main issues are usually not whether gifts are allowed, but how the lender treats them, what tax rules may apply to the person giving the money, and what checks the professionals involved must carry out. There is no single official gifted-deposit rule: the FCA Handbook contains no "gifted" rule and GOV.UK has no gifted-deposit page, so lenders set their own requirements. This guide sets out what the law and regulators actually require, checked against official sources in August 2026.

Mortgages are regulated by the Financial Conduct Authority. This guide is general information, not financial advice; a mortgage adviser can confirm how a gifted deposit applies to your circumstances.

What lenders and the law actually require

Lenders must verify that you can afford the mortgage, but no rule sets a specific gifted-deposit process. Under FCA rules (MCOB 11.6.8R), income must be evidenced "of a type and for a period which is adequate" - the period is set by the lender, not by regulation. That is why lenders commonly ask for three to six months of bank statements; that period is lender policy, not a legal requirement.

The regulatory anchor for asking where a deposit came from is the money-laundering regime: under HMRC guidance, estate agents and conveyancers must carry out customer due diligence that includes establishing "the source and origin of funds". In practice that means the gift must be traceable - usually through a signed gift letter and the donor's bank statements showing the transfer. There is no official gift-letter template; lenders and conveyancers set their own requirements, and it is worth asking what form they want before exchange.

A gifted deposit makes no difference to Stamp Duty Land Tax, which is charged on the price paid rather than on who funded it.

How gifted deposits work for lenders

Because there is no official gifted-deposit rulebook, each lender decides how much of a deposit can be gifted, whether the donor must be an immediate family member, and what evidence it wants. Common requirements are a signed gift letter confirming the money is a gift (not a loan), proof of the donor's funds, and confirmation that the gift does not need to be repaid. A gifted deposit from someone who expects repayment can count as a loan and change the affordability picture, so the gift letter matters.

Inheritance Tax: the annual exemption and the 7-year rule

For Inheritance Tax, you can give away a total of £3,000 of gifts each tax year without it being added to your estate, and any unused exemption can be carried forward for one year. Small gifts of up to £250 per person are also exempt. Separate to that, no Inheritance Tax is due on gifts if the donor lives for seven years after making them, unless the gift is in a trust. Gifts made in the three years before death are taxed at 40%, while gifts made three to seven years before death may qualify for taper relief, from 32% down to 8%, but only if total gifts in the seven years exceed £325,000. Gifts between spouses are exempt without limit, and wedding gifts of up to £5,000 to a child, £2,500 to a grandchild or £1,000 to anyone else are exempt.

Normal expenditure out of income

Regular payments to another person can be tax-free with no limit if they count as normal expenditure out of income. The verified example is help with living costs, and the conditions are that the donor pays from regular monthly income and can still meet their usual living costs. That is a specific tax rule, not a general statement that any payment towards a house purchase will qualify.

Gifted deposits with other schemes

With the Help to Buy equity loan in Wales (open to new applications until 31 March 2027), the buyer must provide a 5% cash deposit at exchange; neither GOV.UK nor GOV.WALES publishes whether that deposit can be gifted. With shared ownership, the deposit is usually 5-10% of the share you buy, and whether a gifted deposit is accepted is set by each housing provider's own policy. Neither the Lifetime ISA nor the Help to Buy ISA rules state whether the bonus can combine with a gifted deposit, so check with the scheme operator and your conveyancer.

Practical steps for a gifted deposit

The practical steps are: agree the amount and the fact it is a gift in writing; ask the lender and conveyancer what evidence they need (often a gift letter plus the donor's bank statements); make sure the transfer is clearly traceable (same donor account to your account, not cash); and tell your mortgage adviser early - gifted deposits are routine, but hiding one is a problem. The donor should also consider the inheritance tax position of a large gift, because lifetime giving can reduce their estate.

Source of funds and money laundering checks

Property professionals must carry out customer due diligence and establish the source and origin of funds. GOV.UK guidance also says that unusual third-party involvement, cash gifts and large payments from private funds increase money laundering risk and may lead to enhanced due diligence. In practice, that means a gifted deposit is likely to bring extra questions and evidence checks.

SDLT: why the source of the deposit does not matter

Stamp Duty Land Tax is charged on the price paid for the property, described in the guidance as the consideration. On that basis, where the deposit came from does not change the SDLT calculation. A gifted deposit may matter for lender and compliance checks, but not for SDLT itself.

Key facts

Source: GOV.UK - Inheritance Tax on gifts — Guidance checked August 2026

Source: GOV.UK - Inheritance Tax on gifts — Guidance checked August 2026

Source: GOV.UK - Inheritance Tax on gifts — Guidance checked August 2026

Source: GOV.UK - Inheritance Tax on gifts — Guidance checked August 2026