Bank of Mum and Dad: gifted deposits explained

A gifted deposit is money given to a buyer, often by family, to help fund a home purchase. The tax, lending and compliance position depends on the facts: how the money was given, when it was given, and how the buyer and donor can evidence it. Below is a plain-English summary based only on the verified points listed.

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.

How gifted deposits work for lenders

Lenders must assess whether the borrower can afford the mortgage and must not rely on a general declaration of affordability. Under FCA responsible lending rules, income must be evidenced rather than self-certified. The verified facts provided do not set out any lender-specific policy on accepting gifted deposits, so this section is limited to the general affordability rules.

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

For Inheritance Tax, you can give away up to £3,000 of gifts in a tax year without those gifts 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. Separately, 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.

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 guidance says this applies where the donor can still meet their usual living costs and the payments come from regular monthly income. An example given is help with living costs.

Source of funds and money laundering checks

Property professionals must carry out customer due diligence and establish the source and origin of funds. The verified guidance also says that unusual third-party involvement, cash gifts or large payments from private funds can increase money laundering risk and may lead to enhanced due diligence. In practice, that means a gifted deposit may attract extra checks because the money is coming from someone other than the buyer.

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 therefore makes no difference to SDLT according to the verified guidance provided.

How to arrange a gifted deposit

MISSING: verified facts on the practical steps or documents needed to arrange a gifted deposit

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