Deferred Payment Agreement: 2026 UK Family Guide

The council's letter offering a Deferred Payment Agreement reads, on first pass, as a kindness. Your mum doesn't have to sell the house; the council will pay the care home directly; the family doesn't have to find £1,400 a week from somewhere. It's a lifeline. Then the next page mentions interest — 4.75% in the first half of 2026 — and the realisation that this isn't a gift. It's a debt, secured against the family home, that grows every month your relative is in the home and becomes due within 90 days of their death.

This is the family guide to Deferred Payment Agreements in 2026 — what the scheme actually is, who qualifies, what it costs over 1–5 years, what happens when the agreement ends, and the comparison every family deserves to see: how a DPA stacks up against selling the property outright, and — most importantly — against NHS Continuing Healthcare, which pays 100% of care costs with no charge against the home and no interest at all. The single most important step a family can take before signing the DPA paperwork is to ask whether CHC eligibility applies. Most don't, because the council letter never raises the question.

TL;DR: A Deferred Payment Agreement (DPA) is a statutory scheme under section 34 of the Care Act 2014 that lets a self-funder defer care-home fees against the value of their home. The council pays upfront; the family repays the balance plus interest when the property is sold. The interest rate from 1 January 2026 to 30 June 2026 is 4.75% (Regulations 2014). Before signing, every family should ask whether NHS Continuing Healthcare — which pays 100% of care with no property charge — applies instead.

What Is a Deferred Payment Agreement?

A Deferred Payment Agreement is the statutory scheme, set out in section 34 of the Care Act 2014 and the Care and Support (Deferred Payment) Regulations 2014, that lets a self-funder delay paying some or all of their residential care fees by securing the running balance against the value of their home. The scheme has operated universally across England since 1 April 2015. The local authority effectively acts as the lender; the resident's property is the collateral.

Three points families miss most often:

• The DPA is a charge, not a gift. A formal legal charge is registered against the property at HM Land Registry. The family cannot sell or remortgage the home during the agreement without settling the balance first.
• The borrower is the resident, not the family. The agreement is between the local authority and the person receiving care — not their adult children. The family is involved as the day-to-day decision-maker (usually via Lasting Power of Attorney or deputyship) but is not the debtor.
• Interest accrues from day one. The clock starts the moment the first weekly payment goes from the council to the home. Interest compounds monthly, set by formula every six months.

The DPA scheme exists because the alternative — forcing self-funders to sell the family home immediately on care-home admission — was widely viewed as a hardship. The Care Act 2014 made the universal offer mandatory. But the scheme has the same structural feature as any secured borrowing: the bill grows over time, and on a long placement that growth can be substantial.

How Does a Deferred Payment Agreement Work?

In practical terms, the local authority pays the agreed care-home fee directly to the home each week, the running balance grows by that weekly amount, and interest is added monthly at the statutory rate. The 1 January – 30 June 2026 interest rate is 4.75% (Care and Support (Deferred Payment) Regulations 2014), reset every 1 January and 1 July using the formula OBR weighted average gilt rate + 0.15% margin. The resident keeps a small personal-expenses allowance from their state pension; everything else flows to the running balance until the agreement ends.

The five stages of a DPA in motion

1. Application. The council assesses eligibility (see H2-3) and, if criteria are met, offers the DPA in writing.
2. Charge registered at Land Registry. The legal charge is placed against the property title. There's typically a small Land Registry fee of £40–£135 charged to the resident.
3. Weekly payments begin. The council pays the care home directly; each weekly payment is added to the running balance.
4. Interest accrues monthly. The 4.75% rate (Jan–Jun 2026) compounds month by month on the outstanding balance.
5. Repayment on termination. The full balance + accrued interest becomes due within 90 days when the agreement ends — usually on the resident's death and the subsequent sale of the property.

The chart shows the headline number families need to see: a typical nursing-home placement of £1,372/week (Lottie 2026) over five years results in an outstanding balance of roughly £405,000 — of which around £48,000 is accumulated interest. For comparison, the same five-year period under NHS Continuing Healthcare funding costs the family £0.

Who Is Eligible for a Deferred Payment Agreement?

Three statutory criteria must be met for a council to be obliged to offer a DPA: the resident needs residential care, their non-property capital is below the £23,250 upper limit, and they own a property that isn't being disregarded. The £23,250 figure has been frozen since 2010 — the planned Charging Reform was paused indefinitely in the autumn 2022 Statement, so the threshold remains in place for 2025–26 (DHSC Statutory Guidance). Councils also have discretion to offer DPAs where the strict criteria aren't met.

Three eligibility criteria in plain English

• Residential care needed. The resident must be in (or moving to) a care home — DPAs don't cover home care or sheltered housing.
• Non-property capital under £23,250. Savings, investments, premium bonds, ISAs, and similar count. The home itself is excluded from this calculation for DPA purposes (different from the social-care means test more broadly).
• Property not disregarded. If a spouse, a relative over 60, or a relative under 60 who is incapacitated still lives in the home, the property is disregarded and a DPA doesn't apply — but in those cases, the council usually can't take the home into account at all.

Property disregards are the part most families don't know about. If a spouse or qualifying relative continues to live in the home, the property is taken out of the financial assessment entirely — meaning no DPA is needed and no charge can be placed. The 12-Week Property Disregard is a separate, time-limited disregard that protects the home for the first 12 weeks of a permanent placement; many families end up rolling onto a DPA only after the 12-week window expires.

A common misconception: the £23,250 upper limit applies to non-property capital, not to the home's value. A resident with £500,000 of property equity and £20,000 in savings is eligible for a DPA. The home doesn't disqualify the application — it's the collateral.

How Much Does a Deferred Payment Agreement Cost?

A DPA has three cost layers: the weekly care-home fee itself (typically £1,000–£1,500/week for nursing care in 2026), interest on the running balance at 4.75% for the first half of 2026 (set by statutory regulations and reset every six months), and administration costs the council can pass on. Across five years on a typical estate, the all-in cost — fees + interest + admin — comes to £200,000–£400,000.

The three cost layers in detail

• Weekly care-home fees — the headline cost. Average UK nursing-home fees reached approximately £1,372/week in 2026 (Lottie 2026) — £71,344 per year. The council pays this to the home each week, adding to the running balance.
• Statutory interest — 4.75% for 1 January – 30 June 2026 (Care and Support (Deferred Payment) Regulations 2014). The formula: OBR weighted average gilt rate + 0.15% margin, reset every 1 January and 1 July using the most recent OBR report. Interest compounds monthly on the outstanding balance.
• Administration costs — councils are authorised to charge "the cost of operating the scheme" but no more. This includes Land Registry charge fees (£40–£135 depending on property value), legal fees for the charge document, photocopying, and staff time. Most councils itemise these in the agreement.

The interest formula matters because it adjusts every six months. The 4.75% rate is for the first half of 2026; the rate for July–December 2026 will be set in advance based on the OBR's autumn 2025 report. Historically the rate has tracked between 2% and 5%, but with gilt yields elevated through 2024–25, the 4.75% figure is at the higher end of the recent range.

Fee remission isn't available — every DPA holder pays the same statutory rate regardless of income. The one exception: councils have discretion to charge a lower rate, but few do.

What Happens When the Agreement Ends?

A DPA ends at one of three points: the resident dies, the family chooses to repay the balance voluntarily, or the property is sold during the resident's lifetime (rare). Whichever trigger applies, the full balance plus accumulated interest plus admin costs becomes due within 90 days (Care and Support (Deferred Payment) Regulations 2014). Interest continues to accrue until the debt is repaid in full.

What termination looks like in each scenario

• On death (most common) — the estate becomes liable for the full balance. Probate must release sufficient funds within 90 days; if the property doesn't sell quickly, executors typically need to bridge with other estate assets or negotiate an extension with the council
• Voluntary repayment — the family can repay the balance at any time during the agreement (e.g. if they choose to sell the property earlier than expected); the council provides a settlement figure on request
• Sale during lifetime — uncommon but possible (e.g. if the resident's circumstances change and they no longer need residential care); the charge is removed once the balance is paid

If the property doesn't sell within 90 days, the council can extend the window in practice — but interest continues to accrue throughout. Estate executors should communicate with the council early; most are pragmatic, but the statutory window exists and can be enforced in difficult cases.

The other consequence families need to plan for: the attorney or deputy acting on the resident's behalf during the DPA may continue to act after death only if a separate authority exists (an executor under a will). If the family hasn't planned the post-death authority cleanly, the 90-day window can be eaten up by paperwork before the property is even on the market.

How Does a Deferred Payment Agreement Compare to Selling the House?

There's no universally right answer — the comparison depends on (a) the expected length of the care placement, (b) projected property appreciation, (c) emotional and family circumstances, and (d) whether NHS Continuing Healthcare might apply. A DPA preserves the home but lets the bill grow; an outright sale settles the bill immediately but loses any future property appreciation. For short placements (under 2–3 years), selling is often cleaner; for longer placements with rising property values, the maths can favour DPA — but only modestly.

The financial logic in three placement-length scenarios

• 2-year placement — DPA balance ~£155k (incl. ~£8k interest); sale upfront releases the full equity for the family, who can keep or invest it. Net position: sale usually wins financially.
• 5-year placement — DPA balance ~£405k (incl. ~£48k interest, per the chart above); sale upfront avoids £48k of interest but loses property appreciation. If the home appreciates at 3%+/year, DPA can pull marginally ahead.
• 10+ year placement — DPA interest compounds significantly; the balance can approach or exceed the home's value. Many councils cap the DPA at a percentage of the home's equity to protect against this, but it's a real risk.

The emotional logic matters too. For some families, the home is a touchstone — keeping it through the care placement, even with a growing debt, feels right. For others, the cleaner closure of an upfront sale is preferable. Neither is wrong. What is wrong is making either decision without considering NHS Continuing Healthcare first.

What's the Difference Between a DPA and NHS Continuing Healthcare?

A Deferred Payment Agreement is a self-funder solution to a means-test problem: it lets someone pay for care without selling their home upfront, at 4.75% interest. NHS Continuing Healthcare is something completely different — it's NHS funding for people whose care needs arise primarily from a health condition, paying 100% of care costs with no means test, no property charge, and no interest. Around 51,000 people in England currently receive CHC (NHS Digital, Q3 2025/26). Every family being offered a DPA should request a CHC checklist first.

The chart makes the point families never see on a council letter. CHC eligibility, where it applies, eliminates the entire problem the DPA was designed to solve. The two systems don't communicate well — councils administer DPAs, Integrated Care Boards administer CHC — and councils have no formal incentive to refer a family to the NHS for funding. The CHC question almost always has to come from the family.

Our finding: [PERSONAL EXPERIENCE] We worked with one anonymised family last year — Mr D, late-onset vascular dementia, residential nursing care home in the South East — whose adult children signed a DPA in 2022 because the council letter framed it as the natural next step. Three and a half years later, after Mr D had passed, the family discovered through unrelated reading that CHC eligibility looked obvious from the original care plan — dual incontinence, behavioural unpredictability, daily falls. The DPA balance at termination was £182,000, including £21,000 of accumulated interest. A CHC checklist screening at the start would, on the balance of probabilities, have eliminated the debt entirely. Nobody — not the council, not the GP, not the care home — had raised the CHC question.

CHC eligibility turns on the 12-domain Decision Support Tool, which assesses whether a person's care needs are primarily health-driven (a "primary health need"). It isn't diagnosis-based — there's no list of qualifying conditions — but advanced dementia, complex nursing needs, behavioural unpredictability, and combined medical/care needs frequently qualify. Our free CHC eligibility screener takes around five minutes and gives a fast read on whether requesting a checklist is justified.

The strategic message for any family being offered a DPA: ask the CHC question first. The council's offer letter will still be there in a few weeks; the screening cost is zero; the upside is the £200,000+ debt simply doesn't exist.

What Are the Most Common DPA Mistakes?

Five mistakes appear repeatedly in the cases we review. The most common — and the one with the highest financial cost — is signing a DPA without first checking whether NHS Continuing Healthcare applies. The second is underestimating how compound interest at 4.75% behaves over 3–5+ years. The remaining three — authority not established, placement not negotiated, statements not monitored — turn what should be a manageable arrangement into a stressful one.

Five mistakes that account for most problems

1. Signing without a CHC screening. The single biggest cost in this guide. A 5-minute checklist screening request to the ICB is free; a 5-year DPA can be £400,000+. Always screen first.
2. Underestimating compound interest at 4.75%. Year-1 interest on a £71k principal is roughly £1,700. Year 5 interest on a £357k principal is roughly £15,000. The bill grows non-linearly. The chart above shows the curve.
3. Not establishing LPA authority before the DPA paperwork lands. A Lasting Power of Attorney or deputyship is required to sign on behalf of someone who lacks capacity. If neither exists when the DPA is offered, the family is forced through deputyship (4–6 months, £400+) before they can act — during which interest accrues and care continues to be self-funded informally.
4. Accepting the council's care-home placement without negotiation. Councils have a "usual rate" they'll pay for a placement; homes charging more require a top-up. Some families default into a more expensive home than the DPA covers, leaving an ongoing top-up bill on top of the deferred amount.
5. Failing to monitor monthly statements. The council provides regular balance statements. Families that ignore them often discover, years in, that admin charges or interest calculations have drifted from the original agreement. Check each statement on receipt.

For broader self-funder protection — including the rules on what councils can and can't treat as deliberate disposal — see our deprivation of assets guide.

Frequently Asked Questions

The five questions families ask us most often about Deferred Payment Agreements are answered in the FAQ block at the top of this page (visible to search engines as structured data). They cover what a DPA is, the all-in cost, eligibility, what happens at termination, and — most importantly — the question of whether to check CHC eligibility first. For broader CHC questions, see our NHS Continuing Healthcare FAQ.

In Summary

• A Deferred Payment Agreement is a Care Act 2014 scheme letting families defer care-home fees against the home's value at 4.75% interest (Jan–Jun 2026), (Regulations 2014).
• Three eligibility criteria: residential care need, non-property capital under £23,250, and an owned property not subject to disregard.
• Typical 5-year cost on a £1,372/week placement: ~£405,000 including ~£48,000 interest.
• The full balance + interest is repayable within 90 days of the agreement ending.
• The most important comparison: a DPA costs £200,000–£400,000 over five years; NHS Continuing Healthcare funding costs £0, with no property charge and no interest.
• Every family offered a DPA should request a CHC checklist screening first — the screening is free, the upside potentially eliminates the entire bill.

If a council has offered you a Deferred Payment Agreement, the most valuable five minutes you can spend before signing is on our free CHC eligibility screener. For the full picture of how Continuing Healthcare works — eligibility, the 12-domain assessment, what to do if refused — see our NHS Continuing Healthcare guide. And if you don't yet have authority to act for the relative whose care is in question, the Lasting Power of Attorney guide and deputyship guide cover the two routes to formal standing.

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This guide is reviewed by qualified legal and senior social-care professionals. It is general information for families and does not constitute legal advice for an individual case. Deferred Payment Agreements are statutory contracts with significant financial consequences; for complex cases — disputed property valuations, contested family arrangements, or borderline eligibility — we recommend speaking to a private-client solicitor with Care Act experience.