Bank of Mum and Dad: Should You Gift a Deposit?

The Bank of Mum and Dad gave UK first-time buyers £9.6 billion in 2024, according to estate agency Savills. Read that as a heartwarming story about families helping each other out and you have missed the point entirely. A number that large is the receipt for something colder than family generosity: a broken housing market, a private workaround for a structural failure that the state has quietly outsourced to whichever families happen to own a home.

So here is the genuine fork this article exists to settle. Is gifting your kid a deposit simple fairness, the most natural thing in the world? Or is it the mechanism that bakes in the very inequality this site rails against, deciding who gets a home by parental wealth rather than the buyer's own graft? Both things are true at the same time. Let us do the numbers, then I will tell you where I land, and hand the floor back to you.

Contents

• How big is the Bank of Mum and Dad?
• The case for gifting a deposit
• The case against: inherited postcodes
• Where I land on the Bank of Mum and Dad
• If you do gift, do it cleanly

How big is the Bank of Mum and Dad? {#how-big}

Start with the scale, because it changes the conversation. In 2024 the Bank of Mum and Dad handed over £9.6 billion in gifts and loans to first-time buyers, Savills found. That money helped 173,500 buyers, an average of £55,572 each. Roughly 52% of all first-time buyers got family help, the highest share of any year since 2012 bar one.

Hold that average gift, £55,572, against the deposit a buyer actually needs. The average first-time buyer deposit in England is around £63,855 (UK Finance), against a median full-time salary of £39,039 (ONS). The maths is brutal. A solo buyer on the median wage, saving hard, is chasing a deposit worth more than a year and a half of their entire gross pay, before a penny of rent or food comes out. And the deposit is only half the wall. As we argue on the first-time buyer's real problem, the income multiple your lender caps you at is often the harder one. The family cheque does not top up the deposit. For most assisted buyers, it more or less is the deposit.

This is the bit the cosy framing skips. When more than half of first-time buyers need a parental subsidy to clear the gate, the subsidy has stopped being a leg-up and become the price of entry. A market that only works with £9.6 billion of family money injected every year is on life support, and the parents are the machine keeping it alive.

The case for gifting a deposit {#case-for}

Now the honest case for it, because there is a strong one. You love your kids. You have spent thirty years being told to provide for them, and a deposit is the single most useful thing you can hand a 30-year-old in 2026. Watching your daughter pour £1,400 a month into a landlord's mortgage while a deposit drifts further out of reach, when you could end it with one transfer, is its own kind of cruelty. Refusing on principle does not fix the housing market. It just keeps your own child renting.

There is a cold financial logic too. Money sitting in your estate may get taxed at 40% on death through inheritance tax. The same money given as a deposit goes to work immediately, in the years your kid actually needs it, and often falls outside the IHT net entirely if you survive seven years. As we argue in why £100k at 25 beats £500k at 60, the timing of help matters as much as the amount. A deposit at 28 compounds into decades of avoided rent. The same sum inherited at 58 lands long after the hard years are done.

And the fairness point is real. You earned that money. You paid tax on it once already. Choosing to spend it on your own child rather than a cruise is nobody's business but yours. Fair enough.

The case against: inherited postcodes {#case-against}

Here is where it gets uncomfortable, and where this site has to look at its own argument squarely. Every one of those individually reasonable decisions adds up to something ugly. When 52% of buyers are funded by family, the other 48% are not competing on a level field. They are bidding against people whose parents own a house, and they will keep losing.

That is the engine of inherited inequality, running in plain sight. A bright, hardworking 30-year-old from a renting family is now structurally outbid by a less careful one from an owning family. The deposit decides it, and the deposit came from a postcode the buyer had no hand in choosing. Housing access stops tracking what you do and starts tracking who your parents are. That is precisely the thing we mean when we say the system does not care whether you succeed, covered in full in the brutal maths facing Gen Z buyers.

It also quietly props up the prices that caused the problem. £9.6 billion of family money poured into deposits every year is £9.6 billion of demand that would otherwise have to come from earnings, or not at all. It lets house prices stay detached from wages, which makes the next cohort even more dependent on the Bank of Mum and Dad than the last. The "help" feeds the disease. Each generation of parents has to find a bigger cheque because the previous generation's cheques kept prices high.

Where I land on the Bank of Mum and Dad {#where-i-land}

So I will take the side I promised. The Bank of Mum and Dad is not a personal virtue story and it is not a personal failing either. It is a symptom. The target for your anger is the housing market itself, not the parents writing cheques or the kids cashing them. It broke the link between work and shelter so badly that private family transfers now do the job a functioning economy used to do through wages.

My honest take is that today's young buyers are starting from a worse structural position than their parents did at the same age, through no choice of their own. Stagnant real wages since 2008 met house prices that ran away, and the gap got filled by inheritance. That is a kind of shadow debt you are born holding. None of it is the individual's fault, but the arithmetic still has to be done from where you actually stand.

Which means: if you can help your own kid, help them. Opting out on principle is a tax you levy on your own child to make a point the market will not notice. But do it with your eyes open about what it is. You are not fixing anything. You are buying your family an exit from a problem that everyone without your postcode is still trapped inside. The fix is political, not parental, and the same energy is better spent on the rent versus buy reality and on voting like housing is the emergency it is.

Now the floor is yours. You know your own family, your own retirement, and your own conscience better than I do.

If you do gift, do it cleanly {#do-it-cleanly}

If you decide to help, treat the gift as the piece of estate planning it actually is, with the same care you would put into a will. Three rules turn a kind gesture into a clean one.

Protect your own retirement first. This is the one nobody says out loud. A deposit gift is irreversible, and there is no Bank of Adult Children to bail you out at 75. Run your own pension numbers before you run theirs. Gifting money you will later need just hands a deferred problem back to the same kid you were trying to help.

Gift it, do not lend it informally. A vague family loan is the worst of all worlds. Mortgage lenders ask directly whether deposit money is a gift or a loan, because a loan is a claim on the property that affects affordability, and an undeclared one can sink the application or count as fraud. Worse, an informal loan with no paperwork is how families fall out. If it is a gift, sign a short gifted-deposit letter saying so, with no repayment and no stake in the home. If it genuinely must be a loan, get a solicitor to document it properly. Never leave it as a handshake.

Understand the IHT 7-year rule, but do not panic about it. You can give away £3,000 a year completely free of inheritance tax (the annual exemption, and you can carry one unused year forward). Larger gifts are "potentially exempt transfers": fall outside the estate completely if you survive seven years. Die within seven years and they count back, but here is the nuance the scare stories omit. Taper relief and tax only bite on gifts above the £325,000 nil-rate band. A deposit-sized gift of £55,000 sits well under that, so for most families no IHT is actually due. The 7-year rule is a real concern for large estates, not for an ordinary parent helping one child onto the ladder. Check your own position against GOV.UK on gifts, and if your estate is large, take regulated advice rather than guessing. This is general information, not personal tax advice.

Get those three right and you have done the decent thing without making it worse for your own retirement or your relationship. That is the most any individual can do inside a system this broken.

Debt: The First 5,000 Years - David Graeber - A long view on how debt and intergenerational transfers (deposits, mortgages, inheritances) quietly decide who ends up owning what across a society. The big-picture context behind every family cheque. (Affiliate link - we may earn a small commission at no extra cost to you.)

Frequently Asked Questions

How much does the Bank of Mum and Dad lend each year?

In 2024 the Bank of Mum and Dad gave UK first-time buyers £9.6 billion in gifts and loans, according to Savills. That money helped 173,500 buyers, at an average of £55,572 each, with around 52% of all first-time buyers receiving family help.

Is a gifted deposit taxed in the UK?

A gifted deposit is not taxed when it is received, and there is no gift tax in the UK. The only tax question is inheritance tax. If the giver dies within seven years, the gift counts back into their estate, but tax and taper relief only apply to gifts above the £325,000 nil-rate band, so a typical deposit gift usually carries no IHT.

What is the 7-year rule on gifts?

Gifts above your annual exemptions are "potentially exempt transfers". If you survive seven years after giving, they fall outside your estate for inheritance tax. If you die within seven years, they are added back, with taper relief reducing the tax on amounts over £325,000 on a sliding scale from three years onward. Check the current rules on GOV.UK.

Should a deposit from parents be a gift or a loan?

A clean gift is almost always better. Mortgage lenders treat a loan as a claim on the property that reduces how much you can borrow, and they require you to declare it. An informal, undeclared loan can derail the application. If parents want to help, a documented gift with a signed gifted-deposit letter is the cleanest route.

Does helping your child buy a house make inequality worse?

At a society level, yes, even when each individual decision is reasonable. When over half of first-time buyers rely on family money, buyers without property-owning parents are structurally outbid, and the extra demand helps keep house prices detached from wages. The fix is a functioning housing market, not asking parents to refuse to help their own children.

This article is general information, not financial or tax advice. Inheritance tax rules, allowances and thresholds can change, and how they apply depends on your own circumstances. Check the current rules on GOV.UK, and consider regulated advice for a large or complex estate.