Gifted deposits, Lifetime ISAs and Help to Buy ISAs

Putting your deposit together

Many buyers put their deposit together from more than one place: their own savings, a gift from family, and money from a Lifetime ISA or Help to Buy ISA. Each source has its own checks and paperwork, and each can only be used at certain points in the purchase.

Two dates matter most. Exchange of contracts is the point where the deal becomes legally binding and you usually pay a deposit, commonly 5% to 10% of the price. Completion is the day the rest of the price is paid and you get the keys.

Your conveyancer, the solicitor or licensed conveyancer doing the legal work, must check every source of money before it can be used. Tell them about any gift or ISA at the start, and tell your mortgage lender too.

How a gifted deposit works

A gifted deposit is money someone gives you towards the purchase, with no expectation of repayment and no share of the property in return. Givers are often parents or grandparents. Lenders set their own rules, and some only accept gifts from close family, so check before you agree how the money will be provided.

The giver is usually asked to sign a gift letter or declaration. It confirms the amount, that it is a gift rather than a loan, and that they will have no interest in the property. Some lenders and law firms insist on their own form, and if the money comes from a joint account, both account holders may need to sign.

If the giver will live in the property with you, the lender usually asks them to sign a further form. In it they agree that any right they might have to stay in the home ranks behind the mortgage, so the lender could still sell if the loan was not repaid. They may be advised to take independent legal advice first.

Checks on the person giving the money

Anti-money laundering rules require your conveyancer to check where all of your purchase money comes from, and that includes a gift. Expect the firm to ask the giver for:

• photo identification and proof of address, often checked electronically
• bank statements showing the money in their account, commonly for the last three to six months
• evidence of where the money came from, such as savings, a property sale, an inheritance or a pension lump sum
• details of the account the money will be sent from

For example, if your father is giving you £25,000 from the sale of his flat, the firm may ask for the completion statement from that sale, the summary of where the sale money went, and statements showing the money reaching his account. Gifts from abroad usually need more evidence and take longer to clear. Some firms ask the giver to send the money straight to the firm's client account, its bank account for clients' money, once the checks are done.

Gifts, loans and Inheritance Tax

If the money has to be repaid, or the giver expects a share of the property, it is not a gift. Tell your lender and conveyancer. A loan affects how much a lender will offer, some lenders will not accept a borrowed deposit, and describing a loan as a gift to a lender is misleading.

A family member who wants their contribution recognised has other options. They could buy with you as a joint owner, but if they already own a home this can bring in the higher rates of property tax for additional homes and can remove first-time buyer relief. Joint buyers putting in different amounts can record their shares in a declaration of trust.

Gifts are generally free of Inheritance Tax if the giver lives for seven years after making them. If they die within seven years, the gift may count towards their estate, although some gifts are exempt anyway, such as up to £3,000 a year under the annual exemption. The giver should keep a record and take advice on larger sums, and GOV.UK explains the rules on gifts.

Using a Lifetime ISA

A Lifetime ISA lets you save up to £4,000 a year, and the government adds a 25% bonus, up to £1,000 a year. You must be 18 or over but under 40 to open one, and you can pay in until you are 50. To use it towards a first home without a charge:

• you must be a first-time buyer, buying a home you will live in
• the price must be £450,000 or less
• you must be buying at least 12 months after your first payment into the account
• you must be buying with a mortgage and using a conveyancer or solicitor

Withdrawing for any other reason before you are 60 means a withdrawal charge of 25% on the amount you take out. In the Budget on 28 October 2026 the government reduced the charge to 20% from 29 October 2026 for a first-time buyer buying a home that costs more than £450,000, so they are not penalised: at 20%, the charge takes back the bonus and none of your own money. The charge on other withdrawals stays at 25% (HM Treasury, Budget 2026: overview of tax legislation and rates). Two first-time buyers buying together can each use their own Lifetime ISA.

The same Budget announced a new First Time Buyer ISA, to replace the Lifetime ISA for new savers from April 2029, with a 25% government bonus towards a first home costing up to £450,000. If you already have a Lifetime ISA, you can carry on paying in and using it under the current rules. Check GOV.UK for the latest position before you rely on these details.

How Lifetime ISA money reaches your conveyancer

For a home purchase, the money does not come to you. Your conveyancer sends your ISA provider a declaration with the purchase details, and the provider pays the money directly to the conveyancer, normally within 30 days.

Once the money arrives, the purchase must complete within 90 days. If completion is delayed, your conveyancer can ask the provider for an extension of 60 days and then a further 30 days. If the purchase falls through, the money goes back into your Lifetime ISA.

So timing matters. Your conveyancer will usually request the funds when exchange is in sight, so the money is ready for completion before the 90 days run out. Ask early whether it can go towards the deposit at exchange or only the completion money, and plan your other savings around the answer.

Using a Help to Buy ISA

The Help to Buy ISA closed to new savers in November 2019, but existing accounts can still be used. You can pay in up to £200 a month until November 2029, and the bonus must be claimed by November 2030. The government adds 25% of your savings, from £400 on £1,600 saved up to a maximum of £3,000.

The home must be the only one you own and where you intend to live, with a price of up to £250,000, or up to £450,000 in London. When you are ready, you close the account and give the closing documents from your provider to your conveyancer, who claims the bonus before completion. Do not close the account too early, because the claim must be made within 12 months of closing it.

The bonus is paid for completion, so it cannot go towards the deposit at exchange. If you have both kinds of ISA, you can only use the government bonus from one of them for your first home. GOV.UK sets out the current rules.

Checklist: getting the timing right

Most delays with gifts and ISAs come from money or paperwork arriving late. Work back from your target dates:

• tell your lender and conveyancer about every gift and ISA at the start, so the mortgage offer and the checks reflect them
• ask the giver to complete their identity and source of funds checks soon after you instruct the firm, not in the week of exchange
• get the gift letter signed in the form your lender and conveyancer require
• make sure money needed for the exchange deposit is with the firm as cleared funds, meaning it has fully arrived, before exchange
• send the rest by the deadline the firm gives for completion, often a few working days before the completion date
• pass on your Help to Buy ISA closing documents promptly
• before anyone sends money, confirm the firm's bank details by phone on a number you have checked independently

For example, if you hope to exchange in early June and complete two weeks later, the giver's checks should ideally be finished in May and the deposit money with the firm before exchange. Your conveyancer will tell you the exact deadline for each payment.

Next steps

When you get a quote from Keyfolio, tick the options for a gifted deposit, a Lifetime ISA or a Help to Buy ISA. Any extra charge for that work then shows as its own line, and the law firm confirms the quote in writing before you instruct it.

Buying your first home? Our first-time buyers page covers the wider process, and the stamp duty calculator shows the tax on your price.