What are the rules for using a gifted deposit for a UK mortgage?

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Gifted deposits are one of the most common ways first-time buyers and home movers boost their deposit, but lenders and conveyancing solicitors apply specific rules to protect against fraud and disputes over ownership. **Who can give a gifted deposit** Most mainstream lenders are happy to accept gifted deposits from close family members, such as parents, grandparents, or siblings, and some will also accept gifts from a wider range of relatives or, less commonly, close friends -- but lenders vary considerably in exactly who they will accept a gift from, so it is worth checking with a mortgage broker before assuming any given source will be acceptable. **The gifted deposit letter** Lenders require a signed gifted deposit letter (sometimes prepared by the buyer's solicitor) confirming several key points: that the money is an outright gift, not a loan; that the person gifting the money has no right to any share of the property or any expectation of it being repaid; and that they will not live in the property (or if they will, this is disclosed and may affect the type of mortgage available). Some lenders also require the gifter to confirm they are not receiving means-tested benefits that a large capital gift might affect. **Source of funds checks** Under anti-money-laundering rules, both the lender and the buyer's solicitor will usually want to verify the source of a gifted deposit -- for example, requesting bank statements showing the money has been in the gifter's account for a reasonable period, or evidence of how a lump sum (such as an inheritance or the sale of another property) was obtained. This is to prevent gifted deposits being used to disguise the proceeds of crime. **Inheritance Tax implications for the person giving the gift** A cash gifted deposit is treated as a normal gift for Inheritance Tax purposes -- specifically a Potentially Exempt Transfer if given to an individual. If the giver survives seven years from the date of the gift, it falls outside their estate entirely for IHT; if they die within seven years, it may be brought back into the calculation, subject to available nil rate bands and taper relief on the tax rate (not the value) for gifts made between three and seven years before death. **Gifted deposits from money still owed on a mortgage** Some lenders are cautious about gifted deposits that have themselves been raised by the giver taking out additional borrowing (for example, remortgaging their own home) rather than from savings, since this can raise questions about the giver's own affordability and intentions -- always disclose the true source of the funds to your broker and lender. **Worked example** Parents gift their child £30,000 towards a £300,000 property purchase, sign a gifted deposit letter confirming it is an outright gift with no expectation of repayment or ownership share, and provide bank statements evidencing the source of the funds. The mortgage lender accepts this as part of the deposit, alongside the buyer's own £15,000 savings, giving a total 15% deposit and an 85% loan-to-value mortgage. **Practical tip** Start the gifted deposit paperwork early, since delays gathering source-of-funds evidence or gifted deposit letters are a common cause of mortgage completion delays -- speak to your solicitor as soon as a gift is agreed, not just once you are close to completion.

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