Guide · Personal Finance
Care Home Funding in the UK: How the Financial Assessment Works
Care home fees in England average around £1,200 a week for residential care and £1,500 for nursing care — costs that can rapidly consume a lifetime of savings. Understanding the means test, what happens to your home, and the alternatives available can make an enormous difference to what your family ultimately pays.
The local authority means test: capital limits
When someone can no longer live independently and needs residential care, the local authority (LA) in England conducts a financial assessment to determine who pays. The assessment is based on capital — savings, investments, and in some circumstances property — and income. Two capital limits define three funding zones.
If your capital exceeds £23,250, you are a self-funder and pay the full cost of care. Below £14,250, the local authority funds care minus a contribution from your income (you keep a personal expense allowance of at least £30.15/week). Between the two thresholds, a 'tariff income' applies: for every £250 of capital above £14,250, you are assumed to have £1/week of additional income, which reduces the LA's contribution accordingly.
Who pays at different capital levels
| Capital held | Funding responsibility | Weekly tariff income | Approx. LA contribution |
|---|---|---|---|
| £10,000 | Local authority funds | None | Full cost minus income contribution |
| £20,000 | Partial — tariff applies | £23/week | Partial — reduced by tariff income |
| £23,250 | Threshold — self-fund begins | £36/week | Negligible |
| £30,000 | Self-funder | N/A | £0 |
| £50,000 | Self-funder | N/A | £0 |
| £100,000 | Self-funder | N/A | £0 |
Capital limits for England as of 2026. Scotland, Wales, and Northern Ireland have different thresholds and rules. Professional social care advice is recommended for complex estates.
Self-funders typically pay more than LA-funded residents at the same care home because local authorities negotiate block-contract rates significantly below the private rate. The Care Quality Commission does not regulate fee differentials, so the gap between what a self-funder pays and what the LA pays for an identical room can be several hundred pounds per week at some homes.
NHS Continuing Healthcare and Funded Nursing Care
NHS Continuing Healthcare (CHC) is the most financially significant provision in the care system because it covers all care costs — including accommodation — regardless of assets. It is available to anyone whose primary need is a health need rather than a social or personal care need. The NHS uses a structured assessment tool across 12 domains including cognition, behaviour, communication, and medication needs. Award rates vary significantly by Integrated Care Board and have historically been inconsistent.
If full CHC is not awarded but someone in a nursing home has a registered nurse's input into their care, the NHS Funded Nursing Care (FNC) contribution applies regardless of the means test. The FNC standard rate for 2025/26 is £235.88 per week, paid by the NHS directly to the nursing home on the resident's behalf. This is not means-tested and reduces the amount the self-funder or LA must pay.
Deferred Payment Agreements: avoiding a forced sale
If your home would be counted in the means test (because no qualifying person lives there) but you do not want to sell it immediately, a Deferred Payment Agreement (DPA) allows the local authority to fund your care and place a legal charge on the property instead. The debt accumulates with interest and is repaid when the property is eventually sold.
To qualify, your non-property assets must be below £23,250 at the time of the application, and the property must be legally saleable (no outstanding charges that would prevent repayment). DPAs give families time to make considered decisions about whether to sell, rent the property, or pursue other funding options. They do not make care free — they defer the cost — but they prevent the immediate pressure of a forced sale during an already difficult period.
Frequently asked questions
Is my home counted in the care costs means test?
Your main home is disregarded in the financial assessment if a spouse or civil partner, a dependent child under 18, or a close relative who is aged 60 or over (or who is disabled) still lives there. If none of these apply, the local authority can include the property value in the assessment after 12 weeks in a care home — though a Deferred Payment Agreement can prevent a forced sale. If you receive care at home (domiciliary care rather than residential care), the property is always disregarded.
What is NHS Continuing Healthcare?
NHS Continuing Healthcare (CHC) is fully funded care arranged and paid for by the NHS for people with a 'primary health need' — a level and complexity of health needs that makes the NHS, rather than local authority social care, primarily responsible. CHC is not means-tested; it covers the full cost of care in a nursing home or at home regardless of your assets. In practice it is awarded to a relatively small proportion of applicants. Assessment uses a Decision Support Tool across 12 care domains. If you believe a relative qualifies, apply promptly and consider professional advocacy support during the assessment.
How do Deferred Payment Agreements work?
A Deferred Payment Agreement (DPA) allows you to use the value of your home to pay for care without selling it during your lifetime. The local authority funds your care and places a legal charge on your property. The debt is repaid when the property is eventually sold — usually after you move into care permanently, move to a different property, or die. Interest is charged on the deferred amount at a rate set by the government (currently close to Bank of England base rate plus 0.15%). DPAs are available as a right if you meet the criteria: you must be in a care home, your assets excluding the home must be below the upper capital limit of £23,250, and the property must not already have a charge that would prevent repayment.
Will care costs affect my inheritance?
Potentially yes, significantly. A self-funder paying £1,200 per week for residential care spends £62,400 per year. Over three years — a typical care home stay — that is £187,200 before any adjustments. If your assets include a family home, the equity may be substantially reduced or exhausted depending on the length of care. Planning ahead with a financial adviser who specialises in care funding can help identify legal strategies such as putting assets into trust, equity release, or care fee annuities. However, deliberate deprivation of assets to avoid care costs — giving away property specifically to fall below the means-test threshold — is taken seriously by local authorities, who can treat disposed assets as if still owned.