Taking out a mortgage with a gifted deposit? You need to read this.

27 December 2025 Catherine Mortgage

Imagine this, you’ve just received a generous gift from a family member, and you’re wondering how the gifted mortgage deposit process works in the UK. Perhaps it was a Christmas or birthday gift, or even ‘just because’. That financial gift may be a few hundred pounds, possibly even thousands, and you’re wondering if you can use it as a deposit for your dream home.

The great news is that yes, you can.

Receiving a financial gift to put towards a home is incredibly generous, and we have no doubt you’ll be jumping up and down in gratitude towards your loved one for their support.

The gifted deposit mortgage process is pretty straightforward, and as mortgage brokers, we deal with them all the time.

That is why we’re sharing our insights into what you need to know before you start house-hunting. In this article, we will walk you through what a gifted deposit is, how lenders view it, and what paperwork you’ll need to keep your mortgage application smooth and stress-free.

What is a gifted deposit for a mortgage in the UK?

A gifted deposit is money given to you from a relative to help buy a property. It can be used as your full deposit or to add to your existing funds, boosting your deposit to meet a lower loan-to-value (LTV) threshold and make you eligible for better rates.

The most important word here is gift.

That financial donation must be non-repayable, with no expectation of the giver receiving any form of share in your home. This needs to be confirmed in writing.

If the lender suspects that the gifted deposit is a loan, your mortgage could be declined for two reasons.

Affordability: They need to know you’re not taking on extra debt that you can’t afford to repay.

Anti-Money Laundering (AML): They must verify where the money has come from to prove the transaction is legal. These checks are required under AML regulations.

Who can give you money for a house deposit?

Typically, anyone can give you a financial gift to put towards a house deposit, but UK mortgage lender rules for gifted deposits vary. For example, Lloyds Bank will not accept monetary gifts from family friends, cousins or aunts and uncles who are not blood relatives. In contrast, Nationwide will allow financial gifts from anyone over the age of 18.

As your mortgage broker, we will always make sure we match you with the right lender based on who has gifted you a house deposit.

Let your conveyancer, solicitor, or mortgage broker know as soon as possible if your deposit is a gift. Giving them the heads-up early means they can get all the checks and paperwork sorted without slowing things down. If you wait until later in the process, it could delay the process because your solicitor needs time to prepare the gift documentation before contracts can be exchanged.

What is a gifted deposit letter, and why is it needed?

If you’re using a financial gift for your house deposit, you will need to submit a gifted deposit declaration for mortgage approval. This is typically a written gift letter for mortgage lenders, explaining that the person giving you the money doesn’t expect you to repay it or grant them rights over the property. It’s a legal document that could protect you in the future if they change their minds and request repayment.

What should a gifted deposit letter include?

Each lender will have its own requirements, but a gifted deposit letter typically includes the following information.

Your full name and address.

The giver’s name and address.

Details of your relationship

The exact amount being gifted.

Where the funds have come from (the giver will need to provide bank statements to verify the legitimacy of the funds)

A written statement confirming the money is a gift and doesn’t need to be repaid.

Confirmation that the giver won’t expect or receive any ownership or interest in the property.

As your mortgage broker, we’ll always let you know the specific details that your lender requires.

The person offering a financial gift will need to verify their identification.

Along with the gifted deposit letter, the person offering you the money will also need to verify their identity to your conveyancer.

They should expect to provide photo ID, such as a driving licence or passport, as well as two different proofs of address. This could include a letter from HMRC, a utility bill, a bank statement or a council tax statement.

Are there any tax implications for accepting a gifted deposit?

In most cases, gifted deposits are tax-free in the UK, which is great news for homebuyers. However, there are a few situations where inheritance tax could come into play, such as if the amount gifted is more than £3,000, the donor has already used up their annual tax-free allowance, or they pass away within seven years of giving you the money.

On top of that, if the gift comes from an employer (unlikely but not impossible), it’s treated as income and will be subject to tax and National Insurance.

As a reminder, our experienced mortgage brokers are not financial advisors, and you should always speak to a regulated FA if you require any advice relating to tax implications.

What are the potential issues you should be aware of when it comes to gifted deposits?

Gifted deposits are generally straightforward, but there are a few situations that can cause hiccups if you’re not prepared. As experienced mortgage brokers, we always want to share the potential problems from the outset, so you know what to expect.

Make sure you read this list and think carefully before accepting any financial gift.

Failing to declare a gift could be considered mortgage fraud. Always tell your lender and solicitor about any gifted money right from the start.

Loan vs. Gift could cause family disputes. A gift must be genuinely free. Make sure your gift letter clearly states that the money is non-repayable and that the donor won’t have any stake in the home.

There are Inheritance Tax (IHT) risks. Gifted deposits are usually tax-free, but if the donor dies within seven years of giving the money, the gift may count toward their estate for inheritance tax purposes. If the amount is over £3,000 and the donor has no remaining tax-free allowance, this could matter, so getting tax advice is beneficial.

Lenders need to know where the money came from. A clear paper trail from the giver to you, and then to your solicitor, is essential.

Some lenders are cautious about gifts from non-family members (like friends) because they see them as higher risk. This could limit your choice of lenders or mean extra scrutiny. If your gift is from someone outside your immediate family, be prepared for more checks.

Gifts for furniture or renovations. If the money isn’t going toward your deposit, you usually don’t need to declare it. But for larger amounts, transparency is always best. Being honest and open with your solicitor could prevent issues from escalating later on.

Gifted deposits for mortgages are straightforward if you prepare early.

Using a gifted deposit can be a fantastic way to get on the property ladder or move into your next home sooner. But it’s not as simple as just transferring money. Lenders and solicitors need transparency, clear documentation, and time to complete checks. Declaring the gift early, preparing the proper paperwork, and understanding any tax implications will save you stress and prevent delays.

If you’re thinking about using a gifted deposit, then speak to one of our expert mortgage brokers today. We’ll guide you through the process, match you with the right lender, and ensure everything runs smoothly so you can focus on finding your dream home.

Frequently asked questions

What counts as a “gift” to lenders?

To a lender, a gift is money given to you with no strings attached, meaning you don’t have to pay it back, and the person giving it won’t have any claim on your property.

If there’s any expectation of repayment, it’s considered a loan, and that can cause problems with your mortgage application.

Do recipients need to declare gifts?

Absolutely, yes! Always tell your lender and solicitor about any gifted money. Hiding it could be seen as mortgage fraud (yikes!). Plus, declaring it early means they can get all the checks and paperwork done without slowing things down.

Can I use deposit gifts from multiple sources?

You can! It’s common for buyers to receive help from more than one person. Just make sure each gift giver provides the right paperwork (a gift letter, proof of funds, and ID), so your lender has a clear picture of who has given money and where it’s come from.

How do lenders verify gift funds?

Mortgage lenders are looking for a clear paper trail. That usually means bank statements from the giver showing where the money came from (such as savings or the sale of an asset) and a signed gift declaration confirming that it’s not repayable.

Can I get a mortgage with a gifted deposit in the UK?

Yes, you can, and lots of people do! As long as the gift is documented correctly and meets the lender’s criteria, it shouldn’t stop you from getting a mortgage. In fact, it might even help you secure a better deal if it boosts your deposit.

What are the tax implications of a gifted deposit?

There’s no tax for you as the recipient. But inheritance tax could apply later if the donor passes away within seven years of giving the gift and the amount is over £3,000.

Should I declare a gift if the money is to be used for furniture?

If the money isn’t going toward your deposit, you usually don’t need to declare it. That said, if it’s a significant amount, being upfront with your solicitor can prevent any awkward questions later.