Gift or loan? Decide first
Your lender will insist on knowing. Most lenders ask the person giving the money to sign a gifted deposit letter saying it's a gift, that it doesn't have to be repaid, and that they'll have no share in the property. Lenders usually provide their own form for this.
If it really is a gift, a declaration of trust between the two owners is the right tool. If your parents expect the money back, it's a loan. That needs a separate loan agreement and usually your lender's agreement too, and it's a job for a solicitor rather than a template.
Who was the gift to?
A gift to one of you becomes part of that person's deposit. A gift to both of you is shared. Write down which it was, because years later people remember it differently.
In a declaration of trust, a gift to one owner is simply part of their contribution. With the "deposits back first" split, it comes back to that owner before anything is shared. The deed can also record who gave the money and how much, as a reminder of where it came from.
An example
Priya's parents give her £40,000. Her partner Tom puts in £10,000. They buy for £250,000 with a £200,000 mortgage, and later sell for £290,000, leaving £90,000 after the mortgage.
- With no declaration of trust, they would likely get £45,000 each.
- With deposits back first, Priya gets £40,000 back, Tom gets £10,000 back, and the other £40,000 is split equally. Priya leaves with £60,000 and Tom with £30,000.
Does the person giving the money need to sign?
Not the declaration of trust. They aren't an owner. They sign the lender's gifted deposit letter. If they will live in the home, the lender may also ask them to sign a form giving up any right to stay there if the lender repossesses.
Tax for the parents
A gift like this usually has no immediate tax. For inheritance tax, each person can give away £3,000 a tax year without it counting towards their estate. Bigger gifts become tax free if the giver lives for seven years afterwards. If they die sooner, the gift may count towards their estate, with tax tapering down after three years. GOV.UK has the details under "Inheritance Tax: rules on giving gifts".