Opening Doors: How to gift a home deposit (without the headache)

Because while the intention is simple, the reality can be anything but. Tax rules, legal risks, relationship dynamics – there’s a lot to consider. And if you don’t structure things properly, your well-meaning gift could come with unintended consequences.

Let’s break it down.

First, the tax bit (we’ll keep it brief)

Gifting cash or assets? That’s what HMRC calls a “Potentially Exempt Transfer.” No Inheritance Tax (IHT) is due upfront, but if you pass away within seven years, the gift could be pulled back into your estate. And if you’ve made multiple gifts, things can get complicated fast.

Translation: get advice before you give.

Make it a gift, not a grey area

If you’re gifting money, make it clear. Once the funds are handed over and the property is purchased, your child owns it – no strings attached. That’s the point of a gift.

But what if they’re buying with a partner? Especially one who isn’t contributing equally? That’s where things get tricky.

Enter: The Declaration of Trust

This simple legal document can:

• Protect your gift if the relationship ends
• Define who owns what
• Clarify how sale proceeds should be split

It’s especially important if your child isn’t married. (And yes, marriage can change things – so legal advice is a must.)

Thinking of buying together?

Some parents go a step further and co-purchase the property. It can boost borrowing power, but it also opens the door to:

• Extra Stamp Duty(if you already own property)
• Capital Gains Tax(if you don’t live there)
• Ownership questions(are you a financial backer or a co-owner?)

The right structure can reduce tax exposure – but only if it’s set up properly.

Loaning instead of gifting?

It’s an option. But it’s not as simple as “they’ll pay me back.” You’ll need to think about:

• Repayment terms
• Whether the loan is secured
• How it affects their mortgage application

Again, legal advice is your friend here.

Gifting a property (or a share of one)

Already own a property you’d like to pass on? That can work too – but it’s not without its own set of rules:

• You might lose rental income
• Capital Gains Tax could apply
• IHT might still be in play if you pass away within seven years
• If you’re only gifting part of the property, a Declaration of Trust is essential

Here’s a real-world scenario: you gift your daughter £100,000 toward a flat she buys with her partner. A few years later, they split. Without a Declaration of Trust? Your contribution could vanish.

The bottom line

Helping your child onto the property ladder is a powerful way to support their future. But it’s not just about generosity, it’s about getting it right.

That means:

• Protecting your gift
• Minimising tax exposure
• Avoiding family friction
• And making sure your intentions are honoured

We’re here to help you do just that.

Talk to our Private Wealth team before you make the transfer. We’ll help you structure your support in a way that’s smart, secure, and aligned with your long-term goals.

Because opening doors for the next generation shouldn’t mean opening a can of worms.

Curious about how this fits into your broader wealth planning? Read our article on Retirement for People Too Young to Retire.