Helping Your Child Buy A Property

27 February, 2026 5 minutes reading time

The ‘Bank of Mum and Dad’ is firmly established among the top ten lenders in the UK. Once seen as a leg-up for first-time buyers, it is now a significant source of support for those who already own a property. Recent market data from Barclays shows a significant shift: nearly 20% of ‘second-steppers’ now rely on family support to move into their next home.

As the gap between the value of a first property and a forever family home widens, parents are contributing an average of £81,451 to help their children take that second step.  Amid current market pressure, it is clear that 2026 will see even more children rely on parental support to secure a home.

However, transferring a large sum between generations can be a legal minefield. If you don’t follow the correct procedure, you could delay the house purchase, face an unexpected tax bill, or even lose your investment entirely if your child’s relationship ends. Here are the key points you need to know before you transfer the money.

Second Steppers 

It is no longer just about getting a foot on the ladder. Many parents are now helping their children avoid the traditional starter home altogether or helping them move out of a flat into a detached or semi-detached house.

If you are supporting a child who already owns a property, the legal considerations change. You may need to look more closely at how your contribution affects their Stamp Duty liabilities or how it sits alongside the equity they have already built up in their current home.

Gift vs. Loan

Before your child views a house, decide whether this money is a gift or a loan. This decision affects both your child’s mortgage and your legal rights.

Choosing to gift is the simplest option. Most mortgage lenders prefer a non-repayable gift because it does not increase the buyer’s monthly liabilities. They will require you to sign a Gifted Deposit Letter. This document confirms that you have no legal interest in the property and that you don’t expect the money back. Once signed, you cannot change your mind.

If you choose to lend the money and expect repayment (even without interest), you need a formal loan agreement. However, be aware that many lenders view this as an additional monthly outgoing for your child, which could reduce the amount they are willing to lend.

The Importance of a Paper Trail

Anti-Money Laundering (AML) regulations are now more rigorous than ever. Your child’s solicitor isn’t just being difficult when they request your bank statements; they are legally obliged to verify the source of your funds. Typically, they will ask for 3–6 months’ worth of bank statements to confirm the source of the funds. This can include long-term savings, a house sale, or an inheritance. If the funds come from a family friend rather than a direct relative, the verification process is often even more thorough.

Protecting the Equity from Ex-Partners

This is especially vital for second-steppers who may be buying with a spouse or long-term partner. If your child is putting £100k of their own equity into a house and you are adding another £80k, you need to ensure that the ‘Declaration of Trust’ reflects these specific amounts.

This legal document sits alongside the title deeds and specifies exactly who receives what if the property is sold. By choosing a tenants in common ownership structure, you can ring-fence your contribution.

 

Ownership Type	What Happens to Your Money
Joint Tenants	Usually split 50/50, regardless of who paid what.
Tenants in Common	Shares can be 70/30, 60/40, or whatever is most appropriate.

 

Without these protections, a relationship breakdown could see the family’s generational wealth split down the middle with a former partner.

The Seven-Year Inheritance Tax Rule

Under current law, if you gift the money, it is treated as a Potentially Exempt Transfer (PET). If you live for seven years after making the gift, it is usually exempt from Inheritance Tax (IHT). However, if you die within those seven years, the gift may be subject to up to 40% tax.

Alternatively, if you lend the money, the outstanding debt remains part of your estate upon your death. Either way, it is vital to keep a clear record of the date and amount of the gift for your executors to avoid a messy HMRC investigation later.

Financial Support Checklist

Use this checklist to confirm you’ve covered all essentials before the completion date:

1.  Decide on the Structure: Is it a gift, a loan, or an equity stake?

2.  Prepare a Declaration of Trust: Essential if your child is purchasing with someone else.

3.  Review Existing Equity: If your child is selling a property, ensure your contribution is documented separately from their existing home equity.

3.  Organise Your Paperwork: Have six months’ bank statements ready for the solicitor.

4.  Review Your Retirement Savings: Make sure you have sufficient funds for the long term.

5.  Sign the Gift Letter: If you are gifting, ensure it is correctly witnessed to avoid delays.

6.  Review or Make a Will: A large gift or loan may affect how you want to distribute your estate.

Our Advice

Helping your children buy a home is a thoughtful and caring gesture, but it’s important to have everything in writing rather than rely on a handshake. In a market where the average parental contribution now exceeds £80,000, you cannot afford to wing it. Legal clarity doesn’t mean you lack trust in your family; it’s about safeguarding their future—and yours too.

Our specialist estate planning team can help you create a comprehensive estate plan that protects your assets and reflects your wishes. Contact us today. We’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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