What to do if you're using a gifted deposit to buy a house

Get the paperwork in order

The donor will likely need to provide proof of ID and source of funds, like bank statements showing the origin of the money. You will also need confirmation that the money is clean and legal, potentially involving additional checks.

Be transparent with your mortgage adviser

Inform your adviser and lender early on about the gifted deposit. Different lenders have varying standards and restrictions around gifted deposits, so it’s important to be transparent. Be prepared to answer questions about the source of the gift and your relationship with the donor.

Consider tax implications

While unlikely, there could be potential Inheritance Tax implications depending on the amount gifted and the donor's circumstances. At Mortgage Advice Bureau, we do not give tax advice, and so speaking to a solicitor would be the best course of action.

What happens if the gift giver dies - is inheritance tax due?

If you’re accepting a lump sum gift as a type of ‘living inheritance’ from an older relative, there’s a few things you need to be aware of. If they die within seven years of providing you the gift, the estate may have to pay inheritance tax on it. Of course, this risk lies with a gift provided by someone of any age, but statistically older people are more likely to pass away during the seven-year inheritance tax period.

They also cannot be seen to be ‘depriving themselves of capital’. For example, if by giving you the gift, they would then qualify for certain state benefits, this could cause significant complications.

By following these steps and seeking professional advice where needed, you can ensure your gifted deposit helps you achieve your homeownership goals smoothly and securely.