Mortgage question
Do gifted deposits from parents need proof of source?
Yes — UK conveyancers and mortgage lenders both require a signed gift-deed letter plus 3-6 months of the gifting parent’s bank statements to evidence the money’s origin under the Money Laundering Regulations 2017. That applies even when the parents are long-known family. The gift letter confirms the cash is a gift (not a loan), that the donor is solvent, and that the donor has no claim on the property. Expect around 2 weeks of extra admin if the paperwork isn’t ready.
Why do they ask for so much paperwork?
UK conveyancers and mortgage lenders are regulated “obliged entities” under the Money Laundering Regulations 2017. They must confirm that deposit funds come from a legitimate source and that the transaction isn’t concealing proceeds of crime. Gifts from family members are legitimate — but “my mum gave me £30,000” isn’t evidence of that in itself.
Both sides also have a contractual interest. The lender is lending on the strength of a certain Loan to Value ratio; if the gift turns out to be a secret loan with repayment rights, the LTV is not what the paperwork said. The conveyancer is personally liable for money-laundering checks on every penny that passes through their client account.
What documents are needed?
The standard package in April 2026:
| Document | From whom | Purpose |
|---|---|---|
| Gift letter (signed) | Each donor | Confirms gift, not loan; no claim on property |
| Photo ID (passport or driving licence) | Each donor | Identity verification under AML rules |
| Proof of address (utility bill or bank statement < 3 months old) | Each donor | Address verification |
| Bank statements (3-6 months) showing the gift funds | Each donor | Source of funds |
| Source-of-wealth evidence (if the gift is large) | Each donor | Explains how the donor accumulated the money |
For large gifts — typically over £50,000 — the conveyancer may also ask for evidence of how the donor originally accumulated the funds: payslips, pension lump-sum letters, inheritance grant of probate, or sale proceeds from a previous property.
What does a gift letter actually say?
Most lenders publish their own template, but the essentials are the same:
- The donor’s full name, address, date of birth, relationship to the buyer
- The amount of the gift, in pounds sterling
- A clear statement that it is a gift (not a loan) with no repayment expected
- A clear statement that the donor retains no legal or beneficial interest in the property
- A confirmation that the donor is solvent and the funds are not borrowed
- Signature of the donor, dated, often witnessed by an independent adult
If two parents are giving money jointly, they’ll each sign — or sign one joint letter — depending on the lender’s preference.
What about inheritance tax — is there a 7-year rule to worry about?
Yes, and every parent should know it before gifting. A deposit gift is a Potentially Exempt Transfer (PET) for Inheritance Tax:
- If the donor dies within 3 years of the gift, the full value is added back to their estate for IHT.
- Between 3 and 7 years, taper relief reduces the IHT liability on a sliding scale.
- After 7 years, the gift is fully exempt.
IHT only kicks in if the donor’s total estate exceeds the nil-rate bands (£325,000 per person, plus up to £175,000 residence nil-rate band if a main home passes to direct descendants). For most donors, a £30,000-£60,000 deposit gift is comfortably below those thresholds even counted back in. But for wealthy donors or repeat-gifting grandparents, the maths matters — keep a written record.
What can delay things?
Three common trip-ups:
- The gift arrives in the buyer’s account only days before exchange. Lenders and conveyancers want to see the money in place with evidence, ideally at application. Dropping a lump sum in the week before exchange triggers a repeat source-of-funds check.
- The gift is split across multiple accounts. Each account needs statements. Consolidate into one before sending.
- Parents are overseas. Gifts from overseas accounts need translated statements, evidence of how currency was converted, and sometimes local tax residency evidence. Build in an extra 2-3 weeks.
Our conveyancing guide walks through the full pre-completion checklist.
Alternative: JBSP with no gift
If parents don’t have £30,000 spare but do have income, a Joint Borrower Sole Proprietor (JBSP) mortgage lets them contribute their income to the affordability pot without moving cash. No gift paperwork needed, no IHT 7-year clock — just joint liability for the debt. It’s a cleaner structure for many families.
The misconception worth clearing up
“Cash gifts from grandparents don’t need checking” — they absolutely do, and they’re scrutinised harder than parental gifts because they come from a generation more likely to hold cash outside banks. A £10,000 envelope from granddad triggers the same AML process: signed letter, ID, bank statements showing the money came from a legitimate source. If the cash has been under a mattress, banks will ask the donor to deposit it and then wait 3+ months before the trail looks normal. Plan gifts at least 6 months before you need them.
This is information, not regulated advice — your conveyancer will confirm the exact paperwork your lender requires.
Sources
Information, not regulated advice. Mortgage Notes is not an FCA-authorised mortgage adviser. For a recommendation on your specific circumstances, speak to an FCA-authorised broker.