Gifted Deposit Mortgages, Gift Letters and Inheritance Tax

What is a gifted deposit mortgage?

A gifted deposit mortgage is a residential or buy to let mortgage where some or all of the buyer's deposit is money given by another person, usually a parent or other relative, with nothing to repay, no interest and no share in the property for the giver. No separate product exists. The lender assesses the buyer's own income, outgoings and credit history, as it would if the deposit were the buyer's savings. For a home the buyer will live in, that is regulated lending under the responsible lending rules of the Financial Conduct Authority (FCA Handbook: MCOB 11.6), with the same affordability assessment as any other purchase. Most buy to let mortgages are not regulated by the FCA.

The gift lowers the loan to value, the loan as a percentage of the property's value, which can move the mortgage into a lower pricing band and reduces the loan the buyer's income has to support. It also brings an evidence trail. The giver signs a gift letter and shows where the money came from, because the buyer's conveyancer has to check the source of funds under the Money Laundering Regulations 2017, as part of the anti-money laundering checks on every purchase. A giver who will live in the home is usually asked to sign an occupier's waiver as well. Gifts go towards first purchases, moves, remortgages and buy to let purchases, and lenders treat each of those differently, as the types below show.

Mortgage Lane arranges mortgages with gifted deposits for first-time buyers, home movers adding a gift to the equity from a sale, buyers whose family will cover part of the deposit, buyers receiving a gift from overseas, buy to let purchasers, and owners remortgaging to buy out a former partner with family help. A gift is one of several ways a family can help, and our family help mortgages page compares it with the others, including a family springboard mortgage, where savings are held as security and returned, and a joint borrower sole proprietor mortgage, where a parent's income is added. The first-time buyer mortgage guide sets gifts alongside the other deposit sources and schemes.

Because the giver is not a buyer and takes no share, a home the giver owns does not count for the higher rates of Stamp Duty Land Tax in England and Northern Ireland. Those rates look at the buyers and anyone married to or buying with them (gov.uk: higher rates of SDLT). First-time buyers' relief depends in the same way on the buyer and anyone buying with them being first-time buyers (gov.uk: SDLT residential property rates), so a gift does not affect it. In Wales Land Transaction Tax and in Scotland Land and Buildings Transaction Tax apply their own rules. A parent who joins the title to protect the money becomes a buyer for all of these taxes.

Gifted deposit mortgage rates

Lenders price a mortgage with a gifted deposit the way they price one funded from savings, by product and by loan to value band, so a gift does not usually change the rate on its own. The band the gift reaches can change it: a gift that takes the loan from 95% to 90% or 85% of the price can open a lower-priced band. Each lender sets its own band edges, so the same gift can cross an edge at one lender and fall just short at another. The illustration below shows a £15,000 gift taking a £300,000 purchase from 95% to 90%. Our 95% mortgages, 90% LTV mortgages and 85% LTV mortgages pages cover those bands in turn.

Comparing lenders means looking at the rate and fees at the loan to value the gift produces, and at which lenders accept this giver and this source of money. A gift from a friend, a gift from abroad or a deposit that is entirely gifted leaves fewer lenders to choose from, and with fewer lenders the price can be higher. The term, the length of any fixed rate and the product fee sit alongside the rate, as on any purchase.

Family helping with your deposit? Get in touch with the amount, who is giving it and where the money is held. We check which lenders accept that giver and that money before the gift is moved.

Gifted deposit criteria

A lender applies its standard residential criteria to the buyer, and its gift policy to the giver and the money. The table shows what that policy covers, and which rows are published rules, Mortgage Lane's experience as at October 2026, or points that vary by lender.

Types of gifted deposit, and how each is assessed

Who gives the money, where it comes from and what it is for decide which lenders will accept a gift.

From parents or grandparents

Lenders that accept gifted deposits usually accept gifts from parents and grandparents. Each person giving signs the gift letter, provides identification and bank statements, and confirms they will have no interest in the property. Where the money is in a joint account, a lender may ask both account holders to sign. A grandparent's gift can come from savings, a pension lump sum or the sale of their own home, and the evidence of where it came from matters more when the sum arrived in their account recently. If a grandparent is downsizing, the completion statement from their sale shows the source. Send us the amount, who is giving it and where it is held.

From siblings, other relatives or friends

Each lender defines family in its own criteria. Some accept gifts from immediate family only and some include brothers, sisters, aunts and uncles. On the family help cases we arrange, helpers can include wider family such as cousins and uncles. Gifts from a friend, from a partner who will not be on the mortgage or from an employer are accepted by some lenders and not by others. Where the giver is not family, a lender may look harder at whether the money is really a gift and not a loan, and a partner who will live in the home also signs the occupier's waiver. A payment from an employer raises a tax point as well, because a gift that arises from the employment counts as earnings for income tax (HMRC Employment Income Manual, EIM01450). Tell us how the giver is related to you.

Gifts from overseas

Some lenders accept a gift from a parent or relative living abroad and some do not. Those that do set their own evidence requirements, which can include statements translated into English, evidence of how the money was built up, and the money reaching a UK account before exchange. International transfers and the extra checks take time, so an overseas gift needs to move early, with a clear trail from the giver's account to the buyer's conveyancer. The giver may also have gift rules to follow in their own country. UK inheritance tax reaches a giver's overseas assets only if the giver is a long-term UK resident. Since 6 April 2025 that means UK tax residence for at least 10 of the previous 20 tax years (gov.uk: Inheritance Tax if you are a long-term UK resident). A giver who has lived abroad for many years and gives from an overseas account may be outside it. A tax adviser confirms the position. Our expat mortgages and mortgages for foreign nationals pages cover buyers whose own income or residence is overseas. Tell us where the gift is held and how it will be sent.

Gifts towards a move or a remortgage

A home mover can add a gift to the equity from a sale to reach a lower loan to value or a larger home. On a remortgage, a gift can reduce the loan into a lower band, or help one owner buy out a former partner through a transfer of equity or a remortgage into the remaining owner's name. Lenders differ on gifts at remortgage, and acceptance on a remortgage is checked separately from acceptance on a purchase. The gift letter and the source-of-funds checks are the same. Our single person mortgages page covers taking a joint mortgage into one name. Tell us what the gift is for.

Gifts for buy to let

Some lenders accept a gifted deposit on a buy to let mortgage in personal names, with the same gift letter and checks, and some do not. A company purchase on an SPV mortgage has its own rules. Money a relative pays into the company may be recorded as a loan to the company or as share capital, and the lender looks at how it is recorded and who it is owed to. The rent then decides the loan in the usual way, as our buy to let mortgage guide explains. Tell us how the purchase will be structured.

Gifted equity from a family seller

Where a relative sells you their home for less than it is worth, the discount is a gift of equity and can work as the deposit with lenders that accept it. That is a concessionary purchase, assessed on the lender's rules for gifted equity and covered on our concessionary purchase mortgages page. For inheritance tax, the difference between the market value and the price paid counts as a gift (gov.uk: rules on giving gifts), and our guide to buying a house from family sets out the legal and tax steps. Tell us the agreed price and the value you expect.

The gifted deposit letter and the evidence

Lenders and conveyancers read two documents before a gifted deposit can be used: the gift letter, and the evidence of where the giver's money came from. An occupier's waiver is a third where the giver will live in the home.

What the gift letter states

A gifted deposit letter usually gives the giver's name, address and relationship to the buyer, the amount, and the address of the property being bought. It confirms that the money is a gift and not a loan, that nothing is to be repaid and no interest charged, that the gift carries no conditions, and that the giver will have no legal or beneficial interest in the property. The giver signs and dates it. Some lenders and conveyancers have their own form, and where they do the giver completes that one. The letter is evidence for the lender. The giver also keeps their own record of the date and the amount, which matter for inheritance tax.

Source-of-funds checks

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 apply to firms providing legal services when they take part in buying and selling property (regulation 12). They must identify and verify their client and scrutinise transactions, including the source of funds where necessary (regulation 28). The government's guide to buying a home in England and Wales lists financial gifts from family and friends among the funds buyers are asked about, and says the checks are a legal requirement (gov.uk: how to buy a home). For a gifted deposit, the giver is usually asked for:

• photo identification and proof of address;
• bank statements showing the money held, over a period the lender or conveyancer sets;
• evidence of where any recent large sum came from, such as the completion statement from a property sale, an estate account for an inheritance, or an investment or pension lump sum statement.

The lender may make its own checks as well. Money that arrives in the giver's account shortly before the gift, or passes through several accounts, prompts more questions, so the clearest trail is a transfer straight from the account where the money has been held. Cash paid into an account is harder to trace than a transfer between bank accounts.

The occupier's waiver

A giver who will live in the property, such as a parent moving in with the buyer, is usually asked to sign an occupier's waiver or consent before completion. It confirms that any right they have to live there, or any claim they might make to a share of the home, ranks behind the lender's charge. Lenders ask for it because, in England and Wales, an interest belonging to a person in actual occupation can bind a lender. One exception is where the person was asked about it before the mortgage and failed to disclose it when they could reasonably have been expected to (Land Registration Act 2002, Schedule 3). The giver is often asked to take independent legal advice before signing. Scotland and Northern Ireland have their own land law, and the lender's solicitor says what is needed there.

When the money moves

The gift is usually sent once the gift letter is signed and the conveyancer has the giver's identification and source-of-funds evidence. In England and Wales the buyer pays the deposit at exchange of contracts, which is when the purchase becomes legally binding (gov.uk: exchange and deposit). In Northern Ireland exchange is also the point at which the sale becomes binding (nidirect: buying a home). In Scotland the buyer's solicitor collects the buyer's contribution and the mortgage funds for settlement on the date of entry (mygov.scot: settlement), after the missives are concluded. The money can go straight from the giver to the conveyancer's client account, or through the buyer's own account with a clear trail, and the conveyancer checks it either way. The lender's offer may record the gift, and if the amount or the giver changes after the offer, the lender needs to know. Our mortgages in Scotland and mortgages in Northern Ireland pages cover the buying process in each nation.

The giver's tax position: inheritance tax and the seven-year rule

For inheritance tax, money given to another person is a potentially exempt transfer: no tax is due when it is given, and it is exempt if the giver lives for seven more years. Section 3A of the Inheritance Tax Act 1984 defines it as a gift by one individual to another (legislation.gov.uk: section 3A). If the giver dies within seven years, the gift becomes chargeable. It is set against the giver's nil-rate band, which is £325,000 and fixed at that figure until 5 April 2031 (HMRC: Inheritance Tax thresholds; Finance Act 2026, section 72), before the rest of the estate is. Gifts do not use the residence nil-rate band, the extra allowance of up to £175,000 where a home goes to children or grandchildren, so that stays available to the estate (gov.uk: residence nil rate band). A widow, widower or surviving civil partner can also claim the unused share of a late spouse's or civil partner's nil-rate band, so their band can be as much as £650,000. The larger band also applies to gifts that become chargeable on their death (gov.uk: transferring unused basic threshold; HMRC Inheritance Tax Manual, IHTM43034).

Tax falls on the gift itself only if the gifts made in the seven years before the death add up to more than the nil-rate band. The part above the band is taxed at 40% where the giver dies within three years of the gift, and at a lower rate under taper relief where the death is three to seven years after it (Inheritance Tax Act 1984, section 7; gov.uk: rules on giving gifts). Mortgage Lane does not give tax advice. The rules here are summarised from gov.uk and the legislation, and an accountant, solicitor or tax adviser confirms how they apply to a particular family; HMRC's Inheritance Tax helpline answers questions but cannot advise on paying less tax.

Exemptions that apply straight away

Part of a gift can be exempt from the day it is made, so it never counts towards the estate (gov.uk: rules on giving gifts):

• The annual exemption of £3,000 for each giver in each tax year, which runs from 6 April to 5 April. An exemption not used in one tax year can be carried forward for one tax year only, so a parent who gave nothing last year can give £6,000 exempt this year, and two such parents £12,000.
• The wedding and civil partnership exemption, for a gift to someone getting married or forming a civil partnership: up to £5,000 from each parent, £2,500 from a grandparent or great-grandparent and £1,000 from anyone else (Inheritance Tax Act 1984, section 22). It can be combined with the annual exemption for the same person.
• Regular gifts out of income, which have no limit where the giver pays them from regular income and can still meet their usual living costs. A one-off deposit paid from savings does not fit that description, but regular payments from income, such as rent paid for a child, can.

The £250 small gifts allowance cannot be used for a person who also receives another exempt gift from the same giver. The giver should keep a record of what they gave, to whom, its value and the date, because the person dealing with their estate will need it.

Who pays if tax is due

Inheritance tax due because of gifts is usually paid by the estate. Once the giver's gifts in the seven years before death exceed £325,000, though, the people who received gifts in that period pay the tax on their own gifts (gov.uk: how Inheritance Tax on a gift is paid). A buyer given a large deposit could therefore have a bill if the giver dies within seven years. A gift within the nil-rate band brings no tax on the gift itself, but it uses part of the band, so the rest of the estate can pay more. On a £20,000 potentially exempt transfer that is up to £8,000 at 40%, and taper relief does not reduce it.

A giver who will live in the home

Where the giver will live in the home the gift helps to buy, the tax position needs advice before the money moves. HMRC treats a person who provided money towards land they later occupy as meeting the contribution condition for the income tax charge on pre-owned assets. An exclusion can apply, such as an outright gift of money made at least seven years before they moved in (HMRC Inheritance Tax Manual, IHTM44005). HMRC's manual also gives the example of a cash gift used to buy the giver's own home, which may be a gift with reservation of benefit (IHTM14372), and gov.uk explains that a gift the giver still benefits from counts towards their estate. A tax adviser can say which rule applies to a particular family.

The buyer's tax position

The buyer does not normally pay income tax on a gift from a relative, and the gift does not count as income for the mortgage. Inheritance tax can reach it only in the circumstances above. A payment from an employer can be taxed as earnings, and money that reaches the buyer from an overseas trust or company can bring other rules into play, which a tax adviser can check. The source of the deposit does not change the buyer's stamp duty.

Gift, loan or family mortgage?

The table compares a gift with three other ways a family can help: a loan, a family springboard mortgage and a joint borrower sole proprietor mortgage. Which fits depends on whether the family has money it can give away, savings it needs back or income it can add to the application.

A family loan has to be declared to the lender, and a gift letter that describes a loan as a gift is a false statement. For inheritance tax, a loan stays part of the family member's estate, because the debt is owed to them (HMRC Inheritance Tax Manual, IHTM44005). Where the family wants its money back, a family springboard mortgage keeps the savings in the family's name, and our family help mortgages page works through a springboard and a gift of the same money side by side. Where income is the limit, a joint borrower sole proprietor mortgage adds a parent's income without adding them to the title, as our JBSP mortgages page explains, and a parent can add income and give the deposit at the same time. A relative selling their home below its value is a different route again, covered on our concessionary purchase mortgages and BMV mortgages pages.

How a gifted deposit mortgage is arranged

1. Plan the gift. The amount, who is giving it and where the money is held, checked against the lenders that accept that giver and that source before anything moves. Where the giver will live in the home, or the gift is large, the giver takes tax advice at this stage.
2. Agreement in principle. An agreement in principle on the buyer's income, with the gift declared and the deposit set at the loan to value the gift reaches.
3. Application and the lender's form. The full application declares the gift, the giver and their relationship to the buyer, the lender issues its own gift form where it uses one, and the lender's valuation follows.
4. Conveyancing checks. The giver's identification, bank statements and source-of-funds evidence go to the conveyancer, and the gift letter and any occupier's waiver are signed.
5. Funds and completion. The gift reaches the conveyancer's client account before exchange in England, Wales and Northern Ireland, or before settlement in Scotland, and the purchase completes as normal. The giver keeps a dated record of the gift.

What a gift changes: the arithmetic

A gift changes the buyer's loan to value and the giver's estate, and both can be planned before the money moves. The steps follow one illustrative first-time buyer: £15,000 saved, a £55,000 salary with no credit commitments, and a £300,000 home in mind. The calculator below starts on the same figures.

Illustrative arithmetic on hypothetical figures. Five times income is the standard multiple in Mortgage Lane's experience, up to 6 for professionals and specialist products; it is not a product term or a lender limit, and each lender's affordability assessment decides the actual figure. The rate of 5.2% over 30 years is the illustrative rate used across our guides, not a product rate, and it is used at every loan to value to keep the comparison simple. Not an offer of finance or tax advice.

Step 1. The buyer's side

At 5 times £55,000, the most the buyer's income supports is £275,000. The table shows the loan, the loan to value and the payment with no gift, a £15,000 gift and a £30,000 gift.

On savings alone the £285,000 loan is £10,000 more than the buyer's income supports at 5 times, so the purchase does not work at this price unless the buyer qualifies for a higher multiple. A £15,000 gift brings the loan within reach at 90%, and £30,000 takes it to 85% with £20,000 to spare. At the same illustrative rate, each £15,000 of gift saves £82.37 a month, and a lower rate in the lower band would save more. The calculator works out the gift needed for any loan to value you choose: here £15,000 for 90% and £30,000 for 85%.

Step 2. The giver's side

Two parents give £30,000 between them, £15,000 each from their own money, and neither has made any other gift in this tax year or the last.

If one parent dies within seven years, their £9,000 becomes chargeable and is set against their £325,000 nil-rate band. No tax is due on the gift itself, because it is well within the band. The band left for the rest of their estate falls by £9,000, though, which can mean up to £3,600 more tax on the estate at 40% if the estate is large enough to use the whole band. Where that parent leaves their estate to the surviving spouse or civil partner, the estate passing to them is normally exempt. The unused nil-rate band that can be transferred to the survivor is then £9,000 smaller while the band stays at £325,000 (HMRC Inheritance Tax Manual, IHTM43021). Had the gift been made in consideration of the buyer's marriage, on or shortly before the wedding, each parent could have added £5,000 of wedding exemption, and the potentially exempt transfer would have fallen from £18,000 to £8,000.

Step 3. When taper relief applies

Taper relief comes in only where a giver's gifts in the seven years before death exceed the nil-rate band, which a single large gift can do. A divorced parent with no other gifts in the previous seven years gives £406,000 towards a home, with both years' annual exemptions unused. Of the gift, £6,000 is exempt, the potentially exempt transfer is £400,000, and £75,000 of it is above the £325,000 nil-rate band. A widowed parent who can claim a late spouse's or civil partner's unused band could have a band of up to £650,000, which would cover the whole of this gift. The table shows the tax on that £75,000 by the time between the gift and the death.

Because the parent's gifts in the seven years before death exceed £325,000, the buyer who received the gift pays this tax. The gift also uses the whole nil-rate band, so the rest of the estate is taxed at 40% above any residence nil-rate band, which gifts do not use, and taper relief does not reduce that part. The calculator gives the same figures when the gift, the number of givers, the band left and the years are entered.

What decides the case

On the buyer's side, the gift can be sized to the loan to value band it reaches and the loan the buyer's income supports, as Step 1 shows. On the giver's side, the points to check are the annual exemptions left in the tax year the gift is made, any wedding exemption, other gifts in the previous seven years and, for a large gift, who would pay if the giver died within seven years. The gift letter and the evidence of where the money came from should be ready before the money moves.

For a first home in Scotland, see first time buyer mortgages in Scotland. A council tenant in England using a Right to Buy discount, with or without a family gift towards the rest, can start with our Right to Buy mortgages page.