Bank of Mum and Dad: Gifted Deposit Tax Rules 2026/27
Parents gifting money towards a child's house deposit face few immediate tax consequences, but inheritance tax, mortgage-lender paperwork and the seven-year rule all matter. Here is what the Bank of Mum and Dad needs to know in 2026/27.
No tax for the recipient — the real question is the giver's estate
If your parents give you £40,000 towards a deposit, you owe no tax on receiving it. The consideration that matters is entirely on the giver's side: has the gift reduced their taxable estate for inheritance tax purposes, and if they die soon after, does some of that gift get pulled back into their estate calculation?
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Open Mortgage Affordability calculatorWorked example: gift made well within the seven-year window
David gifts his daughter £60,000 towards a deposit in 2026 and lives for over seven years afterwards.
| Element | Outcome |
|---|---|
| Gift amount | £60,000 |
| Survives 7 years? | Yes |
| IHT impact on David's estate | None — fully outside the estate |
Worked example: gift followed by death within taper relief window
Margaret gifts £100,000 to her son in 2026 and dies in 2031 (five years later). Her estate is above the nil-rate band.
| Years survived | Taper relief applied | Effective IHT rate on this gift |
|---|---|---|
| 0-3 years | None | 40% |
| 3-4 years | 20% reduction | 32% |
| 4-5 years | 40% reduction | 24% |
| 5-6 years (Margaret's case) | 60% reduction | 16% |
| 6-7 years | 80% reduction | 8% |
| 7+ years | 100% | 0% |
Because Margaret died in year five to six of the gift, taper relief cuts the effective rate on that gift to 16% rather than the full 40%, assuming her nil-rate band is otherwise used up by the rest of her estate.
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Open Stamp Duty calculatorThe gifted deposit letter
Mortgage lenders will not release funds without a signed letter from the person gifting the deposit, confirming: the money is a genuine gift with no expectation of repayment; the giver has no beneficial interest in the property; and, usually, confirmation of the source of the gifted funds for anti-money-laundering purposes. Your conveyancing solicitor will typically provide a template, and delays in getting this letter signed and returned are a common cause of last-minute completion hold-ups.
Protecting a large family contribution
Where the gifted sum is substantial relative to the property price, some families choose a declaration of trust instead of an outright gift, recording the parent's proportionate beneficial interest in case of a future relationship breakdown. This is a more complex (and solicitor-fee-incurring) route than a simple gift, and it should be discussed with both a solicitor and the mortgage lender before completion, since not all lenders accept a trust arrangement in place of a straightforward gift.
Frequently asked questions
Do I pay tax on a deposit my parents give me for a house?
No, there is no tax charge on the recipient for receiving a cash gift towards a house deposit, however large, because the UK has no gift tax. The main tax consideration falls on the giver's estate for inheritance tax purposes, not on you as the person receiving the gift.
Does gifting a deposit affect my parents' inheritance tax position?
Potentially, yes. A cash gift is a 'potentially exempt transfer' for inheritance tax: if the giver survives seven years after making the gift, it falls outside their estate entirely and no IHT is due on it. If they die within seven years, the gift may be brought back into their estate for IHT calculation purposes, with taper relief reducing the tax due on gifts made more than three years before death.
What is the seven-year rule in practice?
If a parent gifts £50,000 towards a deposit and dies within three years, the full £50,000 (less any available nil-rate band) can be added back into their estate for IHT purposes at the full 40% rate. Between three and seven years, taper relief reduces the effective rate on the gift in stages (down to 8% in year six to seven), and after seven years the gift is entirely outside the estate.
Can my parents gift up to £3,000 a year with no seven-year rule risk?
Yes — everyone has an annual gift exemption of £3,000 (which can be carried forward one year if unused, giving a maximum of £6,000 in a single year), and gifts within this exemption are immediately outside the estate regardless of how soon the giver dies. Larger gifted deposits typically exceed this exemption, meaning the excess is what falls under the seven-year potentially-exempt-transfer rules.
What is a gifted deposit letter and why does my mortgage lender need one?
Almost all mortgage lenders require a signed letter from whoever is gifting deposit money confirming the funds are a genuine gift (not a loan), that the giver has no stake or right to repayment, and that they will not have any interest in the property. Lenders need this to satisfy anti-money-laundering checks and to be confident the deposit is not secretly a loan that could complicate their security over the property.
Does a gifted deposit affect stamp duty?
No — how the deposit is funded (savings, gift, loan) makes no difference to the stamp duty due on the purchase, which is based purely on the property's purchase price and the buyer's own status (first-time buyer, additional property, etc). The gift simply funds part of the total purchase cost alongside the mortgage.
Can parents gift a deposit and still have some security if the relationship breaks down?
Some families use a formal declaration of trust or a family mortgage/loan structure instead of an outright gift, giving the parent a recorded beneficial interest proportionate to their contribution — this protects their contribution in the event of a relationship breakdown or divorce, but it changes the transaction from a straightforward gift to something a solicitor needs to document carefully, and it may affect how a lender treats the funds.
What if my parents gift money from selling their own home?
The tax treatment is the same — a cash gift is a potentially exempt transfer regardless of where the money originally came from. If your parents are downsizing and gifting some of the proceeds while still surviving on the rest, it is worth them getting IHT planning advice, since large one-off gifts alongside other estate planning can interact with the residence nil-rate band and other reliefs.
Do multiple gifts from both parents each get their own £3,000 exemption?
Yes — the annual £3,000 exemption applies per individual, so two parents gifting jointly can together give £6,000 a year (or £12,000 if both also carry forward an unused prior year) entirely free of any seven-year consideration, on top of whatever larger sum falls under the potentially-exempt-transfer rules.
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