Buyer's Gifted Deposit: What Sellers Need to Know

According to Legal and General's Bank of Mum and Dad report, parents and family members help fund approximately one in four property purchases in the UK each year. The total value of family contributions runs into billions of pounds annually, making the “Bank of Mum and Dad” one of the largest effective mortgage lenders in the country.

If your buyer is relying on a gifted deposit, it does not automatically mean the sale is at greater risk. But it does mean there are additional steps in the conveyancing process that you should understand. Delays with gifted deposit verification are one of the less obvious reasons that transactions slow down, and being aware of the process helps you manage your expectations and keep the sale on track.

What is a gifted deposit?

A gifted deposit is a sum of money given to a property buyer by someone else — almost always a close family member — to help fund the deposit on a property purchase. The critical distinction is that it must be a genuine gift, not a loan. The person giving the money must have no expectation of repayment and must not acquire any legal or beneficial interest in the property as a result of the contribution.

Gifted deposits are most common among first-time buyers who have sufficient income to service a mortgage but have not yet saved enough for a deposit. They are also used by buyers who want to put down a larger deposit than they could manage alone, which can help them access better mortgage rates. For more on how a buyer's deposit affects the transaction, see our guide on exchange deposits explained for sellers.

Common sources of gifted deposits

• Parents. By far the most common source. Parents may gift from savings, investments, or equity released from their own property.
• Grandparents. Also very common, sometimes as part of broader estate planning or to make use of annual gift allowances.
• Other family members. Siblings, aunts, uncles, or other relatives. Some lenders are more restrictive about gifts from extended family.
• Non-family members. Gifts from friends or partners who are not on the mortgage are accepted by fewer lenders and attract more scrutiny.

How gifted deposits affect your sale

As the seller, you receive the full agreed purchase price regardless of how the buyer has funded their deposit. The gifted deposit is between the buyer, the donor, and the buyer's mortgage lender. However, the process of verifying the gift can have a direct impact on your transaction timeline.

Additional checks on the donor

Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, the buyer's solicitor must carry out due diligence on anyone providing funds for the purchase. When the deposit comes from a third party, the solicitor must verify:

• The donor's identity. This typically requires a copy of the donor's passport or driving licence and a recent utility bill or bank statement as proof of address.
• The source of the funds. Bank statements showing where the money came from — savings, investments, sale proceeds, pension lump sum, or other verifiable sources.
• The nature of the payment. A signed gifted deposit letter confirming that the money is a gift with no strings attached.

These checks mirror the anti-money laundering procedures carried out on the buyer themselves. For more on how solicitors verify buyer identity and funds, see our guides on solicitor identity checks explained and source of funds in conveyancing.

Potential timeline impact

If the donor is organised and provides their documentation promptly, the additional checks typically add only a few days to the conveyancing process. However, delays occur when:

• The donor is slow to provide identification or bank statements
• The donor lives abroad and their documents are in a different format or language
• The source of funds is complex — for example, money held across multiple accounts, in foreign currencies, or derived from a recent inheritance that itself requires verification
• The solicitor identifies inconsistencies that require further explanation

In straightforward cases, the impact is negligible. In more complex situations, gifted deposit verification can add one to three weeks to the timeline. As a seller, the key is to find out early whether a gifted deposit is involved and whether the donor has already started providing their documentation.

What the buyer's solicitor must do

The buyer's solicitor has specific obligations when a gifted deposit is involved. Understanding these helps you appreciate why certain steps take time and what might cause hold-ups.

If the buyer's solicitor cannot verify the donor or the source of funds to the required standard, they are legally obliged to refuse to proceed or to file a suspicious activity report with the National Crime Agency. This is rare, but it can cause serious delays or collapse the sale entirely.

Mortgage lender policies on gifted deposits

Not all mortgage lenders treat gifted deposits the same way. Their policies determine what the buyer can and cannot do, and a lender rejection of the gifted deposit arrangement can derail the sale.

What most lenders accept

• Gifts from immediate family members (parents, grandparents, siblings) are accepted by the majority of mainstream UK lenders, including the major high street banks and building societies.
• The donor must sign a gifted deposit declaration confirming no repayment is expected and no interest in the property is sought.
• Some lenders require the donor to provide their own proof of identity and address directly to the lender as well as to the solicitor.

Where policies differ

• Gifts from non-family members. Some lenders do not accept gifts from friends, partners who are not on the mortgage, or employers. If the buyer's deposit comes from a non-family source, they may need to find a lender with a more flexible policy, which can add time to the mortgage application.
• Minimum buyer contribution. A small number of lenders require the buyer to contribute a minimum percentage of the deposit from their own funds (for example, 5% of the purchase price), even if the rest is gifted. If the buyer cannot meet this requirement, they may need to switch lenders.
• 100% gifted deposits. Where the entire deposit is gifted and the buyer is contributing nothing from their own savings, some lenders view this as higher risk. Policies vary significantly between lenders on this point.

The practical implication for sellers is that if the buyer's lender rejects the gifted deposit arrangement, the buyer may need to find a different lender. This can add three to six weeks to the mortgage process. To reduce this risk, ask your estate agent early on to confirm that the buyer's lender is aware of and has accepted the gifted deposit. For broader guidance on assessing a buyer's financial position, see our guide on proof of funds: what to ask for.

Gift vs loan: why the distinction matters

The difference between a gift and a loan is not just a technicality — it has serious legal and financial consequences that can directly affect your sale.

A gift is money given freely, with no expectation of repayment and no interest in the property. It does not affect the buyer's affordability because it creates no additional financial obligation.

A loan, even an informal one from a family member, is a debt. The buyer has an obligation to repay it, which the mortgage lender must factor into their affordability assessment. If the lender discovers that what was declared as a gift is actually a loan, the consequences can be severe:

• The mortgage offer may be withdrawn, causing the sale to collapse
• The buyer could be accused of mortgage fraud, which is a criminal offence
• The solicitor may be obliged to cease acting for the buyer

From the seller's perspective, the risk is that a sale collapses late in the process if the true nature of the deposit funding comes to light. You cannot control this directly, but thorough buyer vetting at the outset helps you understand how the buyer is funding their purchase and whether their arrangements are on solid ground.

Risks for sellers when the buyer has a gifted deposit

While gifted deposits are common and usually unproblematic, there are specific risks that sellers should be aware of:

1. Verification delays

The most common issue is the donor being slow to provide the required documentation. Unlike the buyer, the donor has no direct stake in the transaction moving quickly. They may not understand the urgency, may be unfamiliar with what is needed, or may be difficult to reach. If the verification process stalls, the entire conveyancing timeline slips.

2. Donor withdraws the gift

Until the funds have been transferred and contracts exchanged, the donor can change their mind. Family disagreements, changes in financial circumstances, or simply cold feet can lead a donor to withdraw the offer. If this happens after you have accepted the offer and taken your property off the market, the sale collapses. This is uncommon but not unheard of.

3. Lender rejection

If the buyer's mortgage lender does not accept the gifted deposit on the terms offered — for example, because the donor is not an immediate family member, or because the lender requires the buyer to contribute their own funds — the buyer must either find a new lender or find alternative deposit funding. Either option adds weeks to the process and may prove impossible.

4. Suspicious activity concerns

In rare cases, the buyer's solicitor may identify concerns about the source of the gifted funds that require a suspicious activity report (SAR) to be filed with the National Crime Agency. While a SAR is being processed, the solicitor cannot proceed with the transaction and may not be able to tell anyone why. This can cause unexplained delays of several weeks.

What to ask your estate agent

If your buyer is using a gifted deposit, you should ask your estate agent to confirm the following at the earliest opportunity:

1. Is the buyer using a gifted deposit? Establish this before accepting the offer if possible.
2. Who is providing the gift? A parent or grandparent is the most straightforward scenario. A non-family donor may complicate matters.
3. How much of the deposit is gifted? A partial gift is less risky than a 100% gifted deposit, because it shows the buyer has some of their own funds committed.
4. Has the buyer's lender confirmed they accept gifted deposits? This should be established before the mortgage application goes ahead.
5. Has the donor started providing documentation to the buyer's solicitor? The sooner this process begins, the less likely it is to cause delays.
6. Have the gifted funds already been transferred? If the money is already sitting in the buyer's solicitor's client account, the risk of the donor withdrawing is effectively eliminated.

For a comprehensive approach to assessing your buyer before accepting an offer, see our guide on how to vet a buyer.

Gifted deposits and first-time buyers

Gifted deposits are especially common among first-time buyers, who make up a significant portion of the market. If you are selling to a first-time buyer, the chances are relatively high that their deposit includes some element of family help.

First-time buyers with gifted deposits are generally strong buyers from a chain perspective — they have no property to sell, so they anchor the bottom of the chain. The main risk is on the funding side: if the gifted deposit verification stalls or the mortgage lender has issues with the arrangement, the timeline can slip. However, first-time buyers are also typically highly motivated and responsive, which helps keep things moving.

The key thing to establish is whether the first-time buyer has a mortgage agreement in principle (AIP) that already accounts for the gifted deposit. If the AIP was obtained without disclosing the gifted element, the formal mortgage application may throw up issues that the AIP did not capture.

How to protect your sale

You cannot control how your buyer funds their deposit, but you can take steps to reduce the risk of a gifted deposit causing problems:

• Ask early. Find out whether a gifted deposit is involved before or immediately after accepting the offer.
• Request confirmation from the buyer's solicitor. Once the memorandum of sale has been issued, ask your own solicitor to confirm with the buyer's solicitor that the gifted deposit documentation is in hand or being actively collected.
• Set expectations on timing. If you know a gifted deposit is involved, factor a small buffer into your expected timeline. This is particularly important if you have an onward purchase with a fixed completion date.
• Monitor progress. Ask your estate agent to check in weekly on the buyer's progress, including whether the gifted deposit verification is complete. Do not wait until the last moment to discover there is a problem.
• Have your own paperwork ready. If you have prepared your legal documents in advance — property information forms, title documents, and supporting certificates — you give the buyer's solicitor no reason to delay on their side. The faster you can get the draft contract pack across, the more pressure there is on the buyer's side to keep pace. For more on preparing your documents, see our source of funds in conveyancing guide.

Gifted deposits at exchange

At exchange of contracts, the buyer is required to pay a deposit — typically 10% of the purchase price. If this deposit includes gifted funds, the buyer's solicitor must have completed all verification checks on the donor before exchange. The solicitor cannot accept money into their client account that has not been verified.

From the seller's perspective, this means that if the gifted deposit checks are not complete, exchange cannot happen. This is why it is so important to establish early on whether the verification is progressing. If you reach the point where everything else is ready for exchange but the gifted deposit verification is outstanding, you have an avoidable delay on your hands.

For a full explanation of what happens at exchange and how the deposit works, see our guide on exchange deposits explained for sellers.

Tax implications

As the seller, a gifted deposit has no tax implications for you. You receive the full purchase price, and how the buyer funded their deposit is not your tax concern.

For the donor, however, there are potential inheritance tax considerations. Under HMRC's seven-year rule, if the donor dies within seven years of making the gift, the gift may be treated as a potentially exempt transfer (PET) and brought into the calculation of the donor's estate for inheritance tax purposes. The donor can gift up to £3,000 per tax year without any inheritance tax implications (the annual exemption), and gifts to help a child buy their first home may qualify for additional exemptions.

None of this affects the seller, but it is useful context for understanding why donors sometimes want to structure gifts in specific ways or seek professional tax advice before committing, which can occasionally cause timing delays.

Sources

• Legal and General — Bank of Mum and Dad report, annual research on family contributions to property purchases — legalandgeneral.com
• Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 — legislation.gov.uk
• Law Society — Conveyancing Protocol, 5th edition, anti-money laundering guidance for conveyancers — lawsociety.org.uk
• UK Finance — Lenders' Handbook, guidance on gifted deposits and mortgage conditions — ukfinance.org.uk
• HMRC — Inheritance Tax guidance on gifts and potentially exempt transfers — gov.uk
• Solicitors Regulation Authority — Anti-money laundering guidance for solicitors — sra.org.uk
• National Crime Agency — Suspicious Activity Reports (SARs) guidance — nationalcrimeagency.gov.uk
• Council of Mortgage Lenders (now UK Finance) — historical data on deposit sources and first-time buyer trends — ukfinance.org.uk

Related guides

• Selling to an Overseas Buyer

Frequently asked questions