When Michelle Lomas appeared on Ticker TV to discuss Chipkie, the platform she founded to help families manage informal loans, she touched on something far more significant than a fintech product launch. She highlighted a growing reality across the United Kingdom and beyond: the Bank of Mum and Dad has become one of the largest de facto lenders in the property market, yet most families treat six-figure transfers with less formality than a mobile phone contract. That disconnect is where real financial damage — and real relationship damage — tends to happen.
From Personal Experience to a Genuine Problem
Lomas explained that Chipkie was born from her own experience borrowing a substantial sum from her parents to purchase a home in Sydney. She wanted a way to manage the loan transparently so it wouldn’t corrode the family relationship, but found nothing between a DIY spreadsheet and expensive legal fees. The result was an all-in-one platform featuring a “Loan Wizard” for agreeing terms, a tracking dashboard, legally binding contracts, and optional automated payments.
Her story resonated because it’s universal. In the UK, research from Legal & General has consistently placed the Bank of Mum and Dad among the top ten mortgage lenders by value. Hundreds of thousands of first-time buyers rely on parental gifts or loans each year, and the cost-of-living crisis has only accelerated the trend. Yet the legal and tax infrastructure around these arrangements remains woefully misunderstood by nearly everyone involved.
Why “We’ll Sort It Out Later” Is the Most Expensive Sentence in Family Finance
Lomas made a critical point on Ticker TV: without a written contract, money transferred between family members can be treated as a gift in the eyes of the court. In England and Wales, this principle carries consequences that go well beyond hurt feelings.
If a parent lends £60,000 towards a property deposit and there is no documented loan agreement, several things can go wrong simultaneously:
- Mortgage lender treatment: Most UK mortgage lenders require a signed “gifted deposit” declaration confirming the money carries no expectation of repayment. If the money is actually a loan, signing that declaration is a misrepresentation — potentially mortgage fraud.
- Inheritance tax exposure: HMRC may treat undocumented transfers as potentially exempt transfers (PETs). If the parent dies within seven years, the amount falls back into their estate for IHT purposes. A properly structured loan, evidenced by a deed and regular repayments, is not a PET — it’s an asset of the parent’s estate at its outstanding value, which is a fundamentally different tax position.
- Divorce and separation: If the borrower’s relationship breaks down, the family court will scrutinise whether parental money was a gift or a loan. Without contemporaneous documentation, courts routinely treat it as a gift to the couple, meaning half can walk out the door with an ex-partner.
Platforms like Chipkie address the documentation gap, but UK families need to understand what proper documentation actually requires under English law — particularly when property is involved.
The Declaration of Trust Most Families Never Get
When parental money contributes to a property purchase — whether as a loan or a contribution towards equity — a Declaration of Trust (also called a Deed of Trust) becomes essential. This document records each party’s beneficial interest in the property, specifies whether unequal contributions are loans or equity adjustments, and sets out what happens on sale or if one party wants to exit.
Without one, the Land Registry’s default position for joint owners is straightforward and often unjust: equal shares. If a parent has contributed 40% of the purchase price but isn’t named on the title, or if two friends have bought together with vastly different deposits, the absence of a trust deed means the law assumes equality unless someone can prove otherwise — an expensive and uncertain exercise through the courts.
Crucially, any co-ownership agreement should be executed as a deed rather than a simple contract. Obligations in a deed carry a twelve-year limitation period under the Limitation Act 1980, compared to just six years for a standard contract. When you’re documenting arrangements that may not be tested for a decade, that extra runway matters enormously.
TOLATA: The Legal Weapon Nobody Sees Coming
Under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA), any co-owner of property — including a parent with a beneficial interest — can apply to court to force a sale, even if the other owner objects. Family lending arrangements rarely contemplate this scenario, but it arises with depressing regularity when relationships sour, parents need care home fees, or siblings dispute an inheritance. A well-drafted co-ownership agreement should include a right of first refusal, a buy-sell mechanism with a clear valuation method, and a realistic exit timeline — precisely to avoid a TOLATA application.
Tax Traps That Catch Even Careful Families
Two tax issues blindside families more than any others:
Stamp Duty Land Tax surcharge: If either buyer in a joint purchase already owns property anywhere in the world, the 3% SDLT higher rate applies to the entire purchase price. A parent who goes on the title deed alongside their child to provide security triggers this surcharge on the full amount — turning a helpful gesture into thousands of pounds of additional tax.
Capital Gains Tax: Principal private residence relief only applies to the proportion of the property that is the owner’s main home, and only for the period they actually live there. A parent named on the title who lives elsewhere gets no PPR relief on their share. On a property that appreciates significantly, the CGT liability can be substantial — and it’s a liability many families only discover when they sell.
What Good Looks Like: Practical Steps
Whether you use a platform like Chipkie, a solicitor, or both, here is what a properly structured family loan arrangement should include as a minimum:
- A written loan agreement executed as a deed, specifying the amount, interest rate (even if zero), repayment schedule, and consequences of default.
- A Declaration of Trust if the money relates to property, recording beneficial interests and exit provisions.
- Tenancy in common rather than joint tenancy if co-owners are not married — this allows unequal shares, independent inheritance rights, and avoids automatic survivorship passing the property to someone unintended.
- Consistent repayment records — bank transfers with clear references, not cash — to evidence the arrangement’s legitimacy to HMRC, mortgage lenders, and courts.
- Disclosure to the mortgage lender if the property is mortgaged, because failing to declare a secondary charge or loan obligation is a breach of mortgage conditions.
The Honest Takeaway
Michelle Lomas deserves credit for building a tool that normalises structure around family lending. The cultural resistance to “making it formal” with loved ones is the single biggest risk factor in these arrangements — people feel that asking for a contract signals distrust, when in reality it signals respect. But UK families must go further than any app alone can take them. Property transactions demand solicitor-drafted trust deeds, proper tax advice, and honest conversations about what happens when life doesn’t go to plan. The best time to have those conversations is before the money moves. The second best time is today.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial or legal advice. Property and lending laws in the United Kingdom vary and may change over time. We always recommend consulting with a qualified solicitor and mortgage broker before entering into a property purchase or financial arrangement with another party.
