Quick answer
A gifted deposit is not taxed for the buyer. For the giver, a gift is free of inheritance tax if they live for 7 years after making it, and each person can give £3,000 a year with no 7-year wait (plus last year's unused £3,000).1 Your lender will want a signed gift declaration, and your conveyancer must check where the money came from, including the giver's identity and source of funds.23 The giver's own home ownership does not affect your first-time buyer relief unless they are a buyer too.4
Key takeaways
- No tax for the buyer on a gift. Inheritance tax can apply to the giver's estate if they die within 7 years.1
- Annual exemption: £3,000 per giver per tax year, plus the previous year's unused £3,000.1
- Wedding gifts: up to £5,000 from a parent, £2,500 from a grandparent, £1,000 from anyone else.1
- Lenders ask for a gifted deposit declaration; conveyancers must check the source of funds, including the giver's.23
- The inheritance tax nil-rate band is £325,000, fixed until April 2031.5
A large share of first-time buyers get help from family. A gift is the simplest way to do it, but only if it is a real gift, set out in writing and with a clear paper trail. Getting this right early avoids last-minute delays at the lender and the conveyancer.
Tax rules apply UK-wide (inheritance tax); stamp duty references are for England and Northern Ireland. This guide is general information, not tax or legal advice.
What do lenders and conveyancers need?
Lenders ask for proof of your deposit: savings statements, or a completed form from the person who has gifted money.2 That form is usually called a gift letter or gifted deposit declaration. Each lender has its own form, so use theirs and check exactly what it asks the giver to confirm.
Your conveyancer has their own duty under the Money Laundering Regulations to check the source of funds.6 The Solicitors Regulation Authority says that where a parent gifts funds for a purchase, the solicitor may need to check the giver's identity and where their money came from, and the regulations do not allow exceptions for this.3 Expect to provide the giver's ID and bank statements showing the money building up or arriving, for example from a sale or savings account.
How does inheritance tax work on a gifted deposit?
The buyer pays no tax on receiving the gift. The question is the giver's estate. No tax is due on gifts if the giver lives for 7 years after making them, unless the gift is part of a trust.1 If they die within 7 years, the gift is counted as part of their estate for inheritance tax.
Some gifts are exempt straight away. Each person can give £3,000 a tax year, and unused allowance can be carried forward to the next tax year only.1 Wedding or civil partnership gifts are exempt up to £5,000 to a child, £2,500 to a grandchild or great-grandchild and £1,000 to anyone else. Regular gifts out of normal income are exempt if the giver can afford them after their usual living costs.1
| Years between gift and death | Inheritance tax rate on the gift |
|---|---|
| Less than 3 | 40% |
| 3 to 4 | 32% |
| 4 to 5 | 24% |
| 5 to 6 | 16% |
| 6 to 7 | 8% |
| 7 or more | 0% |
Taper relief only reduces the tax if the gifts made in the 7 years before death total more than the £325,000 nil-rate band.1
Worked example: £30,000 from two parents
Two parents give their daughter £30,000 in October 2026 towards a £250,000 flat. Each parent has a £3,000 exemption for 2026/27, and neither used their 2025/26 allowance, so each can carry £3,000 forward. That makes £12,000 exempt straight away (£6,000 each).
The other £18,000 (£9,000 from each parent) is a gift that becomes fully exempt if they live 7 years. If one parent dies within that time, their £9,000 is added back and uses up part of their £325,000 nil-rate band first.15 Unless their estate and other recent gifts exceed that band, no tax is due. The daughter, buying alone and never having owned a home, pays no stamp duty at £250,000 as a first-time buyer.7
Gift, loan or a share in the home?
A loan from family is a different thing: it is a debt, and lenders need to know about debts because they affect what you can borrow. If the family wants the money back, or wants a share of the home, say so before you apply and get advice; do not describe it as a gift.
If the giver is added as a buyer, their ownership history counts: first-time buyer relief needs every purchaser to have never owned a home anywhere in the world.4
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Frequently asked questions
Do I pay tax on a gifted deposit?+
No. The buyer pays no tax on receiving a gift. Inheritance tax can apply to the giver's estate if they die within 7 years and the gift is not covered by an exemption.
How much can parents gift tax-free?+
Each parent can give £3,000 a tax year free of inheritance tax, plus last year's unused £3,000. Larger gifts become exempt if the giver lives 7 years after making them.
What is a gifted deposit letter?+
A signed declaration, usually on the lender's own form, from the person giving the money. It confirms the gift; check the form for exactly what the giver must declare.
Will my solicitor check the person gifting the money?+
Usually, yes. Under the Money Laundering Regulations the conveyancer must check the source of funds, and the SRA says that can include the giver's identity and where their money came from.
Does a gifted deposit affect first-time buyer stamp duty relief?+
Not if the giver is not one of the buyers. The relief looks at the purchasers: all of them must never have owned a home anywhere in the world.
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OfficialThe figures and rules on this page are drawn from the official UK government sources below. Rates are the confirmed 2026/27 amounts. Each link opens the relevant official page in a new tab.
- GOV.UK: Inheritance Tax on gifts www.gov.uk/inheritance-tax/gifts 7-year rule, taper rates, £3,000 annual exemption, wedding and normal-income gifts.
- MoneyHelper: How to apply for a mortgage www.moneyhelper.org.uk/en/homes/buying-a-home/how-to-apply-for-a-mortgage Proof of deposit can be savings statements or a completed form from someone who has gifted money.
- Solicitors Regulation Authority: Anti-money laundering checks www.sra.org.uk/consumers/choosing/aml/ Solicitors must check the source of funds, including money gifted by a parent.
- HMRC SDLT Manual SDLTM29845: first-time buyer conditions www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm29845 All purchasers must never have acquired a major interest in a dwelling anywhere in the world.
- GOV.UK: Inheritance Tax thresholds (policy paper, Nov 2025) www.gov.uk/government/publications/inheritance-tax-thresholds/inheritance-tax-thresholds Nil-rate band of £325,000 fixed to 2030 to 2031.
- legislation.gov.uk: Money Laundering Regulations 2017, regulation 28 www.legislation.gov.uk/uksi/2017/692/regulation/28 Customer due diligence, including the source of funds where necessary.
- GOV.UK: Stamp Duty Land Tax residential property rates www.gov.uk/stamp-duty-land-tax/residential-property-rates 0% to £125,000, 2% to £250,000, 5% to £925,000, 10% to £1.5m, 12% above, from 1 April 2025; first-time buyer relief to £500,000.
Verified against published UK government guidance. See also Methodology and Editorial standards.