How can you help family members onto the property ladder?

Many young people can’t afford to buy their first home without some financial help from parents, grandparents, or other generous relations.

Increases in house prices and interest rates led to almost a third of first-time buyers accepting financial help from parents and other family members in 2023 according to property firm Hamptons.

If you plan to provide financial support to help members of your family onto the property ladder, it’s important to understand the options, any potential tax implications and how best to protect your money if things don’t go according to plan.  

A gift or a loan?

If proving a lump sum to a family member, it’s important to be clear whether it’s a gift with no expectation that it will be paid back or a loan. Both are treated differently when it comes to tax, and rights in the event of a relationship breakdown.


Many parents and grandparents are happy to make gifts to their children and grandchildren to see them enjoying the benefits during their lifetime and as a way of mitigating Inheritance Tax.

Even before they are ready to buy a house, you can help them build a deposit by making use of your annual Inheritance Tax gifting allowance that allows you to give away up to £3,000 each tax year. In addition, you can use the ‘gifts from normal expenditure’ exemption that allows you to make regular gifts out of your excess income, which are immediately exempt from Inheritance Tax.

If you are gifting sums over and above your tax-free allowances, they will remain part of your taxable estate for seven years after making the gift.

If your child or grandchild is aged between 18 and 40, they can invest up to £4,000 each tax year into a Lifetime ISA to which HMRC will add a 25% bonus of up to £1,000 each tax year. This money can be withdrawn to use as a deposit on a first property.

When making a gift it’s important to remember that it becomes your child or grandchild’s property and that you lose the right to have it repaid to you.


If parents, grandparents, or other family members prefer to lend rather than gift money, it is advisable to draw up a loan agreement which sets out the terms of the loan, including how and when it will be repaid and any interest that will be charged.

From a tax perspective, any interest payable to you as the lender will be taxable income and the value of any outstanding loan will be included in the value of your assets when it comes to Inheritance Tax.

Protecting the gift

If your child or grandchild is buying a home with a partner, but they aren’t married or in a civil partnership there are steps they can take to protect the money they are investing as a deposit in the event of their relationship breaking up.

If the house is bought as ‘Tenants in Common’ a ‘Declaration of Trust’ can be used to specify each person’s contribution to the deposit as a share of the equity in the property. When the property is sold, the proceeds after repaying any mortgage will be divided in the shares set out in the ‘Declaration of Trust’. It’s important to take legal advice to ensure this is set up correctly.          

Diverting an inheritance

If you receive an inheritance and you want to immediately gift some or all of it to a loved one to help them buy a house, one option to consider is a ‘Deed of Variation’.

This allows you to divert the inheritance straight to them, the advantage being that should you die within seven years the value of the sum diverted isn’t included in your estate for inheritance purposes. The ‘Deed of Variation’ must normally be done within two years of the death who left you the inheritance.      

Should you use your pension to help?

Once you reach 55 you may be able to access tax free cash from your pension. However, just because you can, doesn’t mean you should. Taking out money to help the younger generation runs the risk of compromising your own income in retirement.

It’s important to take financial advice to help you make the right decisions for you and your family.

What's next?

You can give us a call on:

0800 622 323

A member of the team will be able to support you in arranging an appointment with an NFU Mutual Financial Adviser to discuss your individual needs.

You should be aware that the value of investments may rise or fall and you may get back less than you invested.

The tax treatment of pensions depends on individual circumstances and may change in the future.

Inheritance Tax advice is not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

NFU Mutual Financial Advisers advise on NFU Mutual products and selected products from specialist providers. When you contact us, we'll explain the advice services we offer and the charges.

Financial advice is provided by NFU Mutual Select Investments Limited.