Deferred Payment Agreements for Care

What is a deferred payment agreement?

A deferred payment agreement is a loan-style arrangement offered by a local council in England to help a person meet residential care fees without selling their home during their lifetime. The council pays the deferred portion of the fees to the care provider and registers a legal charge against the property, a little like a mortgage, so the accumulated amount is repaid later. It is designed to give families breathing space rather than to remove the fees.

How does a deferred payment agreement work?

Under a deferred payment agreement, you still pay a weekly contribution towards your care from your income and any savings, worked out by a financial assessment, while the council covers the shortfall and adds it to a running debt secured on your home. Nothing is written off. The amount builds up over time and is settled when the property is sold or from your estate after death, together with interest and any administration charge the council applies.

Financial assessment. The council works out what you can pay each week from income and savings.

The agreement. If you qualify, the council agrees to defer the shortfall and registers a legal charge on your home.

The debt grows. The deferred amount accrues week by week, with interest and any fees added.

Repayment. The balance is repaid when the home is sold, or from your estate.

Who qualifies for a deferred payment agreement?

Broadly, councils in England are expected to offer a deferred payment agreement to a person moving into residential care who owns a home that is not disregarded and whose other assets, not counting that home, fall below the upper capital limit. For 2026 to 2027 the upper capital limit is £23,250 and the lower capital limit is £14,250 (gov.uk, as at July 2026, subject to change). Individual circumstances, including whether the home is affordable to keep, also matter, so it is worth checking directly with your council.

Means-test figure (England, 2026 to 2027)	Amount
Upper capital limit	£23,250
Lower capital limit	£14,250
Tariff (assumed) income above the lower limit	£1 a week per £250

Means-test figure (England, 2026 to 2027)

Amount

Upper capital limit

£23,250

Lower capital limit

£14,250

Tariff (assumed) income above the lower limit

£1 a week per £250

Interest and administration charges

Deferring is not free. Councils in England are permitted to charge interest on the deferred amount and an administration fee to cover the cost of setting the agreement up, so the debt that is eventually repaid is larger than the fees deferred. The maximum interest rate is set nationally and can change at intervals, tracking a published market gilt rate, so the exact figure that applies depends on when your agreement runs (gov.uk, Care and support statutory guidance, as at July 2026, subject to change).

Because interest compounds and charges vary between councils, the total owed can be significant where care lasts several years. Many people ask their council for a written illustration of how the balance could grow before committing, and it can be worth discussing the numbers with a qualified professional.

The rate and fees are set under national rules that change, so confirm the current figures with your council. See gov.uk, Care and support statutory guidance, as at July 2026, subject to change.

How is a deferred payment agreement repaid?

The deferred amount, plus interest and any charges, is repaid when the property is sold or, if the home is kept, from the estate after death. Some people sell the home during the agreement and clear the balance then; others keep it, perhaps letting it, and settle the debt later. Repayment usually falls due within a set period after death, and if the debt is not cleared the council can ultimately recover it from the secured property.

A worked example (illustration only). Assume someone moves into residential care with a home worth £300,000 and savings of £20,000, which is below the £23,250 upper capital limit for 2026 to 2027 (gov.uk, as at July 2026, subject to change). Rather than sell at once, they agree a deferred payment with the council, which pays the weekly shortfall and secures it against the home. Over three years the deferred fees, plus interest at the nationally set rate and any administration charge, build into a debt that is repaid when the home is later sold. The exact balance depends on the fee level, the interest rate at the time and the council's charges, so this is general information rather than a calculation for any real case.

Deferred payments and deprivation of assets

A deferred payment agreement is a legitimate, mainstream option, and it does not involve giving assets away. That distinction matters, because councils can look back at whether someone has deliberately reduced their assets to reduce a care bill. Where a council decides a person has deprived themselves of capital to avoid care fees, for example by gifting a home or spending down savings, it may treat that value as though the person still held it (gov.uk, Care and support statutory guidance, as at July 2026, subject to change). This guide describes how the scheme works, not how to sidestep fees; deliberately arranging affairs to avoid care costs can be challenged. Where care planning and inheritance tax overlap, it can be worth discussing with a qualified professional.

Deferring is not gifting. The fees are still paid in full, just later.

Giving assets away can be reviewed. Deliberate deprivation to avoid fees may be reversed by the council.

Take advice on timing. Care and tax rules interact, and mistakes can be costly.

Deferred payments in Scotland and Northern Ireland

This guide describes the scheme in England, where deferred payment agreements sit within the Care Act framework and the capital limits above apply (gov.uk, as at July 2026, subject to change). Wales, Scotland and Northern Ireland run their own social care charging systems with different rules, limits and, in some cases, different interest treatment, so the detail can vary. Anyone considering care outside England should check the position with the relevant authority. For the wider picture, see our guide to selling a house to pay for care.

Frequently asked questions

What is a deferred payment agreement for care?

It is an arrangement with your council in England that lets you delay paying part of your residential care fees rather than selling your home immediately. The council pays the deferred amount to the care provider and secures it against the property with a legal charge, and the debt, plus interest and any charge, is repaid when the home is sold or from your estate. It postpones payment; it does not cancel the fees.

Who is eligible for a deferred payment agreement?

Councils in England are broadly expected to offer one to a person entering residential care who owns a home that is not disregarded and whose other assets fall below the upper capital limit, which is £23,250 for 2026 to 2027 (gov.uk, as at July 2026, subject to change). Other factors, such as whether the property can be secured, also apply, so check with your council.

Is interest charged on a deferred payment agreement?

Yes, in England councils are permitted to charge interest on the deferred amount, along with an administration fee to cover setting the agreement up. The maximum interest rate is set nationally and can change at intervals, tracking a published market rate (gov.uk, as at July 2026, subject to change). Because interest builds over time, the balance repaid is larger than the fees deferred, so ask for an illustration.

Do I have to sell my home under a deferred payment agreement?

Not during your lifetime, which is the point of the scheme. You can keep the home, and the deferred debt is repaid either when you choose to sell or from your estate after death. Some people let the property in the meantime, subject to the council's terms. The debt, with interest and any charge, must eventually be settled from the property or the wider estate, depending on circumstances.

Can a deferred payment agreement avoid care fees?

No. It defers payment; it does not remove the fees, which are repaid in full with interest and any charge. Deliberately giving assets away to avoid care fees is different and can be challenged as deprivation of assets, with the council treating the value as though you still held it (gov.uk, as at July 2026, subject to change). Many people discuss care and tax planning with a qualified professional.

Does a deferred payment agreement affect inheritance tax?

The deferred debt reduces the net value of the estate, because the balance owed to the council is a liability settled before assets pass on. That interacts with the nil-rate band of £325,000 and the residence nil-rate band of up to £175,000 (gov.uk, as at July 2026, subject to change). The effect depends on the whole estate, so it is one area where advice can help.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.

Deferred Payment Agreements for Care Fees