Last reviewed: June 2026
TL;DR- A gifted deposit is money given to a buyer by a third party - typically a family member - to contribute to the purchase deposit.
- Most lenders accept gifted deposits from close family members but require a signed gifted deposit letter confirming the funds are a gift and not a loan.
- Anti-money laundering (AML) checks apply - lenders and solicitors will require evidence of the source of the gifted funds.
- If any repayment is expected, the gift becomes a loan and may not be accepted by the lender - or may need to be declared and factored into the affordability assessment.
What Is a Gifted Deposit?
A gifted deposit is a sum of money given to a property buyer by a third party - most commonly a parent, grandparent or other close family member - to contribute to the deposit required for a mortgage. The gifted funds form part of the buyer's total deposit, reducing the amount they need to save themselves. Lenders allow gifted deposits because they are a legitimate and common form of financial support, but they apply specific conditions to manage the risk of disguised borrowing and to comply with anti-money laundering regulations.
Who Can Gift a Deposit?
Most lenders accept gifted deposits from close family members, typically defined as parents, grandparents, siblings or other direct family members. Some lenders accept gifts from a wider circle of family or friends; others restrict the source strictly to parents or direct family. The specific acceptable donor definition should be checked with the lender before proceeding, as this varies.
Gifted deposits from employers, business associates or third parties with a commercial relationship to the buyer or seller are generally not accepted by mainstream lenders and may raise AML concerns.
The Gifted Deposit Letter
Lenders require a signed gifted deposit letter from the donor confirming:
- The amount of the gift.
- The donor's relationship to the buyer.
- That the funds are an unconditional gift and not a loan.
- That the donor has no interest in the property being purchased.
- That the donor does not require repayment of the funds.
The letter is typically required at the mortgage application stage. Lenders may provide their own template or accept a letter in the borrower's own format, provided all the required information is included. The letter must be signed by the donor.
Anti-Money Laundering Checks
Both the mortgage lender and the conveyancing solicitor are required by law to carry out anti-money laundering due diligence on all funds used in a property purchase, including gifted deposits. The donor will typically be required to provide evidence of the source of the gifted funds - for example, bank statements showing the accumulation of savings, inheritance documentation, or evidence of a property sale that generated the proceeds. The strength of the AML evidence required is proportionate to the size of the gift - larger sums require more detailed documentation.
When a Gift Becomes a Loan
If any expectation of repayment exists - even informal - the gift is treated by lenders as a loan rather than a gift. A loan from a third party must be declared as a liability in the mortgage affordability assessment and may reduce the maximum mortgage available. Some lenders will not accept a property purchase where any part of the deposit is a loan from a third party, as this represents a higher risk position (the buyer effectively has a higher level of debt relative to the property value than the LTV suggests).
Buyers should be clear with the donor and with the lender about the nature of the funds before proceeding. Declaring a loan as a gift is mortgage fraud.
Frequently Asked Questions
Does a gifted deposit affect stamp duty?
No. The source of the deposit does not affect the stamp duty land tax calculation, which is based solely on the purchase price of the property. A gifted deposit does not create any additional stamp duty liability for the buyer or the donor.
Does the donor pay tax on a gifted deposit?
Cash gifts between individuals are not subject to income tax or capital gains tax at the point of gift. However, gifts may be subject to inheritance tax (IHT) if the donor dies within seven years of making the gift and the estate exceeds the nil-rate band threshold. Gifts made out of regular income, qualifying as gifts from normal expenditure, may be exempt from IHT under specific HMRC rules. Tax implications for the donor should be reviewed with a financial or tax adviser if the gift is substantial.
Can a gifted deposit be used for a buy-to-let purchase?
Some buy-to-let lenders accept gifted deposits, but many require the deposit to come entirely from the borrower's own funds. This is because BTL lenders assess the borrower's own financial resources as part of the risk assessment. The specific lender policy should be checked before assuming a gifted deposit will be accepted for a BTL purchase.
What if the donor cannot provide bank statements?
If the donor cannot provide standard documentary evidence of the source of funds, the AML process will be more challenging. Lenders and solicitors are required by the Money Laundering Regulations to satisfy themselves about the source of all property transaction funds - if they cannot do so, they cannot proceed with the transaction. The donor should discuss with the solicitor what alternative evidence might be acceptable in their specific circumstances.
