UK Deferred Payment Agreement for Care Explained

What a DPA does

A Deferred Payment Agreement is a contract between the person needing care (or their representative) and the local authority. The council pays the care fees on the person's behalf; the amount owing accrues against the home. When the home is eventually sold (or other assets become available), the council recovers the deferred amount plus interest.

Who can use a DPA

DPAs are aimed at people who own their home but lack sufficient liquid assets to pay care fees. To be eligible, the person typically must:

be receiving care in a care home;

have less than the upper capital limit (GBP 23,250 in England) excluding the home;

own the home (sole or jointly) and not have it disregarded for the means test;

have mental capacity, or have a deputy or attorney who can sign on their behalf.

How the agreement works

The council values the home and the cost of the agreed care. Each week, the council pays the care fees to the home and adds the amount to the deferred balance. Interest is charged on the running balance.

The interest rate

The interest rate is set by the Department of Health and Social Care and updated periodically. The rate is intended to reflect the council's cost of capital plus a small administrative margin, typically a few percentage points.

The legal charge

The agreement is secured by a legal charge on the property, registered at the Land Registry. The charge ensures that the council recovers from the eventual sale, ranking after any existing mortgage.

Equity protection

The total deferred amount is capped at a specified percentage of the home's value, leaving the person with an equity buffer. The cap protects the resident from running out of value mid-stay.

Repayment

The agreement is repaid when the home is sold or, more commonly, after the person's death. Typically the home must be sold within 90 days of death, though this can be negotiated with the council.

Top-up payments

If the person wishes to live in a care home more expensive than the council would fund, a third party (often a family member) can top up the difference. A DPA can be combined with a top-up arrangement.

Alternatives

Alternatives to a DPA include selling the home before entering care, renting the home to fund the care, equity release, or family funding the care directly. Each has different implications.

The Care Act 2014 statutory framework

The Care Act 2014, in force from April 2015, is the principal legislation governing adult social care in England. The Act consolidated and reformed the law on local authority responsibilities for assessment, eligibility, and funding of care services. Sections 9 to 13 cover the care needs assessment and eligibility determination; section 17 covers the financial assessment; sections 18 to 23 cover the duty to meet eligible needs.

The Care and Support Statutory Guidance, issued by the Department of Health and Social Care under section 78 of the Act, is binding on local authorities. Departures from the guidance must be justified on rational grounds and can be challenged through the council's complaints procedure, the Local Government and Social Care Ombudsman at lgo.org.uk, and ultimately by judicial review.

The national eligibility threshold under the Care and Support (Eligibility Criteria) Regulations 2015 has three components: the adult has needs arising from a physical or mental impairment or illness; the needs prevent the adult from achieving two or more specified outcomes; and this has a significant impact on the adult's wellbeing. The threshold is applied consistently across England but its application is fact-sensitive.

Means-testing thresholds and rules

In England, local authority care funding is means-tested with two capital thresholds. Capital below GBP 14,250 is disregarded; the local authority pays in full apart from a contribution from income, leaving the person with a Personal Expenses Allowance of GBP 30.65 per week. Capital between GBP 14,250 and GBP 23,250 attracts a tariff income of GBP 1 per week per GBP 250 of capital above GBP 14,250. Capital above GBP 23,250 means the person self-funds.

The family home is generally disregarded for home care funding because the person continues to live in it. For residential or nursing care, the home is included in the capital test unless a spouse or civil partner lives there, a relative aged 60 or over, an incapacitated person, or a dependent child under 18 lives there. The 12-week property disregard allows the council to fund the first 12 weeks of permanent residential care without including the home in the means test.

Scotland operates a different system with free personal care (a fixed weekly contribution toward personal and nursing care, regardless of means). Wales has higher capital thresholds for residential care than England. Northern Ireland operates yet another framework. The thresholds and details are reviewed periodically; the current government has consulted on care funding reform but has not implemented the Dilnot Commission cap proposed in the Care Act.

NHS Continuing Healthcare

NHS Continuing Healthcare (CHC) provides fully NHS-funded care for adults with a primary health need (rather than primarily social care needs). CHC is not means-tested; the full cost of care is met regardless of the person's wealth or income. The assessment is administered by Integrated Care Boards (ICBs) using the Decision Support Tool covering 12 care domains.

Eligibility decisions are based on the nature, intensity, complexity, and unpredictability of the person's needs. CHC eligibility is heavily contested in practice; many initial refusals are overturned on appeal through the local resolution process, NHS England, and ultimately the Parliamentary and Health Service Ombudsman. Specialist CHC advisers (often nurse-led firms) handle many appeals.

NHS-funded Nursing Care (FNC) provides a contribution toward nursing care costs in care homes for residents who need nursing but do not meet the CHC threshold. The current FNC rate is reviewed annually; it is paid to the care home directly to cover the nursing element of the care.

Mental capacity and Lasting Powers of Attorney

The Mental Capacity Act 2005 provides the framework for decision-making where an adult lacks capacity to make a decision. Capacity is presumed unless the contrary is established on the balance of probabilities. The Act sets out a decision-specific test: a person may have capacity for some decisions but not others.

Lasting Powers of Attorney (LPAs) come in two types under the MCA. Property and Financial Affairs LPAs cover money management, banking, and property. Health and Welfare LPAs cover medical decisions and care arrangements. LPAs must be registered with the Office of the Public Guardian (OPG) before they can be used. Registration fees are GBP 82 per LPA, with fee remission for those on low income.

Where capacity is lost without an LPA in place, the Court of Protection appoints a deputy under the MCA. The process takes 4 to 6 months and is more administratively demanding than LPA registration. The OPG supervises deputies through annual reports and (for property and financial affairs deputies) requires security through a bond.

Care Quality Commission regulation

The Care Quality Commission (CQC) is the independent regulator of health and social care providers in England under the Health and Social Care Act 2008. The CQC registers and inspects care homes, domiciliary care providers, hospitals, GP practices, and other care services. Inspection ratings are: Outstanding, Good, Requires Improvement, Inadequate. The CQC publishes inspection reports at cqc.org.uk.

The CQC's enforcement powers include warning notices, civil penalties, prosecution, suspension of registration, and cancellation of registration. Providers rated Inadequate are typically subject to special measures with intensive oversight and a timetable for improvement. Persistent failure can lead to deregistration and closure.

Scotland operates the Care Inspectorate, Wales the Care Inspectorate Wales, and Northern Ireland the Regulation and Quality Improvement Authority. Each performs broadly equivalent functions under the relevant devolved legislation.

Direct payments and the right to choose

Personal budgets allocated under the Care Act 2014 can be taken as direct payments rather than council-arranged services. Direct payments give the eligible person flexibility to employ a personal assistant directly, contract with care providers of their choice, or combine multiple approaches. The Department of Health and Social Care has actively encouraged direct payment uptake, though take-up varies significantly between local authorities.

Becoming an employer through direct payments brings legal responsibilities under employment law, PAYE registration with HMRC, employer's liability insurance (compulsory under the Employers' Liability (Compulsory Insurance) Act 1969 at a minimum GBP 5 million limit), and compliance with the National Minimum Wage. Most councils offer payroll services or contract with brokerage organisations to support direct payment recipients.

Hospital discharge and intermediate care

NHS hospital discharge follows the Discharge to Assess model implemented progressively since 2020. The model emphasises rapid discharge with care arranged in the community, with assessments completed after discharge rather than in hospital. Local authorities provide reablement services for up to 6 weeks free of charge to support recovery and minimise dependency.

Continuing Healthcare assessment can be triggered by hospital admission or discharge where the person has substantial health needs. The CHC checklist is the initial screening tool, followed by a Decision Support Tool assessment for those who pass the checklist. CHC funding, where awarded, covers all care costs without means-testing.

Funding reform and the Dilnot proposals

The Care Act 2014 provided for a cap on lifetime care costs based on the Dilnot Commission's 2011 recommendations. The cap was originally scheduled for 2016, then delayed to 2020, then to October 2025, and most recently to a date to be determined. The cap as proposed would have limited an individual's lifetime contribution to their care to a fixed sum (originally GBP 72,000, raised to GBP 86,000 under later proposals), with the local authority covering costs above the cap.

The most recent government position has been to abandon the Dilnot cap entirely and consult on alternative funding reform. The current means-tested system therefore continues without the planned cap. Specialist policy commentary from organisations such as the King's Fund, the Health Foundation, and Age UK tracks the ongoing reform debate.

Where to get further help

MoneyHelper at moneyhelper.org.uk provides free impartial guidance on UK personal finance topics from the Money and Pensions Service. Citizens Advice at citizensadvice.org.uk provides free advice on benefits, debt, housing, and consumer issues. The FCA's consumer pages at fca.org.uk/consumers cover regulated financial products with consumer-focused explanations. For complaints about regulated firms, the Financial Ombudsman Service at financial-ombudsman.org.uk handles disputes with award limits of GBP 430,000 for cases referred from 1 April 2024.

For specialist topics, professional bodies maintain accreditation registers and consumer information. The Society of Trust and Estate Practitioners at step.org lists qualified estate planners; the Law Society at lawsociety.org.uk lists qualified solicitors; the Personal Finance Society and the Chartered Insurance Institute maintain registers of qualified financial advisers. For regulated financial advice, the FCA Register at register.fca.org.uk is the authoritative check on firm authorisation.

Practical next steps

Anyone considering action in this area should review their current arrangements alongside any recent changes in legislation or HMRC guidance, take advice from a qualified professional where the position is material, and check current published figures on gov.uk and the relevant regulator websites before acting. Tax and regulatory rules change between Finance Acts and successive Budget announcements; figures cited reflect the position at publication but may have been superseded by the time of reading.

Disclaimer

This article provides general information on UK Deferred Payment Agreements and is not personal financial or legal advice. Each situation differs; specialist advice is recommended for significant care funding decisions.

Frequently asked questions

Who is eligible for a DPA?

Generally people owning a home and receiving care in a care home, with limited liquid assets, and where the home would normally be in the means test.

Is interest always charged?

Yes. The rate is set centrally and updated periodically.

What happens if the home does not sell quickly after death?

The interest continues to accrue until the home sells and the council is repaid.

Can a DPA be terminated early?

Yes, by selling the home or repaying the council from other assets.

Are DPAs the same across the UK?

The detailed rules vary by country. The framework here applies to England under the Care Act 2014.

Frequently asked questions

Who is eligible for a DPA?

Generally people owning a home and receiving care in a care home, with limited liquid assets, and where the home would normally be in the means test.

Is interest always charged?

Yes. The rate is set centrally and updated periodically.

What happens if the home does not sell quickly after death?

The interest continues to accrue until the home sells and the council is repaid.

Can a DPA be terminated early?

Yes, by selling the home or repaying the council from other assets.

Are DPAs the same across the UK?

The detailed rules vary by country. The framework here applies to England under the Care Act 2014.