Gifted deposits for first-time buyers in Scotland 

Buying your first home is an exciting but often daunting experience, especially when it comes to saving for a deposit. In Scotland, as in the rest of the UK, house prices can be high, making it challenging for first-time buyers to get onto the property ladder. One option that many turn to is a gifted deposit—a sum of money given by a family member to help with the purchase of a property.

What is a gifted deposit?

A gifted deposit is a financial contribution made towards a house purchase that does not require repayment. It is usually provided by parents, grandparents or other close relatives. The key characteristic of a gifted deposit is that it must be a gift, not a loan, meaning there should be no expectation of repayment.

Why are gifted deposits important?

With rising property prices, many first-time buyers struggle to save enough for a deposit, particularly when also covering rent and living expenses. A gifted deposit can help buyers secure a mortgage, access better interest rates, and reduce the amount they need to borrow, making homeownership more affordable in the long run.

Who can gift a deposit?

In most cases, lenders prefer gifted deposits to come from close family members such as parents, grandparents, or siblings. Some lenders may accept gifts from more distant relatives but they often scrutinise these arrangements more closely to ensure there is no expectation of repayment.

How do lenders view gifted deposits?

Lenders require proof that the deposit is a gift and not a loan. They typically ask for a gifted deposit letter, signed by the donor, confirming that the money is a gift and does not need to be repaid. Proof of the donor’s identity, such as a passport or driving licence, along with their address identification, is also required. Additionally, lenders will request evidence of the source of funds to comply with anti-money laundering regulations.

What should a gifted deposit letter include?

A gifted deposit letter must clearly state the donor’s name, address, and relationship to the buyer. It should specify the amount of money being gifted and confirm that the funds are a gift that does not require repayment. The letter must also include a statement confirming that the donor will have no legal interest in the property. Donors are advised to seek independent legal advice to ensure they fully understand the implications of gifting the money.

Tax implications of gifted deposits

In Scotland, there is no immediate tax liability for receiving a gifted deposit. However, donors should be aware of inheritance tax (IHT) rules. If the donor passes away within seven years of giving the gift, the money may be subject to IHT, depending on the total value of their estate. Consulting a financial adviser can help ensure tax planning is managed effectively.

Legal considerations

While a gifted deposit is a common way for parents to help their children buy a home, there are legal factors to consider. If the buyer is purchasing a home with a partner, it is important to have a clear agreement in place to protect the gifted funds in case of future disputes.

A gifted deposit can be a valuable tool for first-time buyers in Scotland, helping them secure a mortgage and step onto the property ladder sooner. However, both buyers and donors must understand the legal and financial implications involved. By ensuring all documentation is in order and consulting with professionals where necessary, a gifted deposit can make homeownership a reality for many aspiring buyers.