Care home fees in England: means test and deferred payment

Start with a needs assessment

Under the Care Act 2014, anyone who appears to need care and support can ask the local authority for a needs assessment. The assessment is free and is the statutory gateway to publicly arranged care. It considers what the person can do, what they cannot do, and what outcomes they want. The local authority must involve the person and, where appropriate, a carer or an advocate. The outcome may be a care and support plan, a personal budget, or a decision that the person's needs are not eligible for local authority support. Even where needs are eligible, the local authority does not pay automatically. Payment depends on the separate financial assessment.

The needs assessment also triggers other rights. If the person is likely to need residential care, the local authority must carry out a financial assessment to decide who pays. It must also consider whether the person should be offered a deferred payment agreement, which allows care fees to be paid from the value of the home later. Separately, the NHS continuing healthcare checklist should be completed where there is a suggestion that the primary need is a health need. That checklist can lead to a full assessment and, if successful, fully NHS funded care. The needs assessment is therefore not only about the type of care. It is the point at which the funding routes are identified.

The 23,250 pound means test

The financial assessment applies national capital limits. In England the upper capital limit is 23,250 pounds and the lower capital limit is 14,250 pounds. A person with capital above 23,250 pounds is responsible for the full cost of their care in a care home. A person with capital below 14,250 pounds pays only what they can afford from income. A person with capital between the two limits pays what they can afford from income plus a tariff income of 1 pound per week for every 250 pounds of capital between the limits. These figures come from the DHSC local authority circular on social care charging for 2025 to 2026 and 2026 to 2027. The personal expenses allowance in England is 31.80 pounds a week for 2026 to 2027. That allowance is the amount a person in residential care keeps from their income for personal spending.

Capital includes savings, investments, and property that is not disregarded. Income includes state pension, private pensions, and most benefits, though some benefits are treated differently. The assessment is means tested, so two people with identical care needs can pay different amounts. The local authority must provide a written record of the assessment. If the person disagrees with the calculation, there is a right to ask for a review and to use the local authority complaints procedure. The limits are not the same across the United Kingdom. Scotland, Wales and Northern Ireland use different capital limits and rules, so the figures above apply in England only.

How your home is counted

The value of a person's home is disregarded for the first 12 weeks of permanent residential care. After that, it is included in the financial assessment unless a qualifying person still lives there. Qualifying people are a spouse or civil partner, a relative aged 60 or over, an incapacitated relative, or a child under 18. If one of those people lives in the home, the value is disregarded for as long as that remains the case. The disregard is not automatic in every family arrangement. It depends on the relationship and on the person's circumstances. Where the property is included, the local authority will normally seek a valuation and may treat the person as having a notional income from it.

The 12 week disregard applies to permanent residential care, not to temporary or respite care. It gives time to decide whether the home will be sold or retained. If the home is retained and no qualifying person lives there, its value counts as capital. That can push a person above the 23,250 pound upper limit and into full self funding. If the home is sold, the proceeds become capital and are treated in the same way. The rules on the home interact with deferred payment agreements, which are designed for people whose main asset is the property they own. A deferred payment agreement does not change the means test. It changes the timing of payment.

Deferred payment agreements

Under the Care Act 2014, local authorities must offer deferred payment agreements to eligible people. The council pays the care fees and places a legal charge on the property. The money is recovered with interest and administration fees when the property is sold or from the estate. The interest rate is set by government and reviewed twice a year. Administration fees are also set by the local authority within government rules. The agreement is a loan secured on the home, not a gift or a transfer of ownership. The person remains the owner and can usually continue to rent out the property, subject to the terms of the agreement.

Eligibility depends on the person having eligible needs, on the home being their main asset, and on there being insufficient other assets to pay the fees. The local authority must offer the agreement where the person is eligible, though the person can choose not to take it. A deferred payment agreement does not remove the means test. The person still contributes from income, and the personal expenses allowance of 31.80 pounds a week for 2026 to 2027 is protected. Interest continues to accrue until the debt is repaid. If the property is not sold during the person's lifetime, the debt is usually repaid from the estate. Families should ask for the terms in writing, including the interest rate, the fees, and the circumstances in which the agreement can be ended.

NHS continuing healthcare and nursing care

NHS continuing healthcare is free care arranged and funded by the NHS for people whose primary need is a health need. It is not means tested. The process begins with a checklist, usually completed by a health or social care professional. If the checklist indicates a possible need, a full assessment follows using the national framework. If the person is eligible, the NHS funds the care package, including the care home fees. Where the person is in a nursing home but not eligible for continuing healthcare, the NHS may pay a funded nursing care contribution towards the nursing element of the fees. That contribution is paid directly to the care home and does not cover the personal care or accommodation costs.

Continuing healthcare is separate from the local authority financial assessment. A person can be eligible for continuing healthcare and therefore pay nothing, or be ineligible and be assessed under the Care Act rules. The checklist and full assessment are decision making tools, not negotiations. If a person is found ineligible, there is a right to request a review. The distinction matters because continuing healthcare is based on health need, while local authority funding is based on care needs and financial circumstances. Families often ask for the checklist when a relative's needs appear mainly medical. The result can change who pays entirely.

Deprivation of assets and the cancelled cap

Local authorities may treat assets as still owned if they decide they were deliberately given away to avoid care fees. There is no time limit on how far back they can look. This is known as deprivation of assets. It can apply to money, property, or other assets transferred to family members or into trusts. The test is intention and purpose at the time of the transfer, not simply the fact that it happened. If the local authority decides that deprivation has occurred, it can calculate the person's contribution as if the asset were still owned. The person may then be treated as self funding even though the asset is no longer in their name. The rules apply to gifts, transfers at undervalue, and some trust arrangements.

The charging reform announced in 2021 would have raised the upper capital limit to 100,000 pounds and introduced an 86,000 pound lifetime cap on personal care costs. That reform was cancelled in July 2024 and is not in the current legislative programme. An independent commission chaired by Baroness Casey is examining the future of adult social care. Until any new legislation is passed, the 23,250 pound upper limit and the 14,250 pound lower limit continue to apply in England. Scotland, Wales and Northern Ireland use different capital limits and rules. Anyone planning a transfer of assets should take independent legal and financial advice, because the deprivation rules can apply regardless of when the transfer was made.

Source: GOV.UK: social care charging for local authorities.

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Frequently asked questions

What are the capital limits for care home fees in England?

The upper capital limit is 23,250 pounds and the lower capital limit is 14,250 pounds. Above the upper limit a person pays the full cost of care. Below the lower limit only income is counted. Between the limits, tariff income of 1 pound per week applies for every 250 pounds of capital between the limits.

What is the personal expenses allowance?

The personal expenses allowance in England is 31.80 pounds a week for 2026 to 2027. It is the amount a person in residential care keeps from their income for personal spending.

Is my home included in the financial assessment?

The value of the home is disregarded for the first 12 weeks of permanent residential care. It is also disregarded while a spouse or civil partner, a relative aged 60 or over, an incapacitated relative, or a child under 18 lives there. Otherwise it is included as capital.

What is a deferred payment agreement?

A deferred payment agreement is an arrangement where the council pays the care fees and places a legal charge on the property. The money is recovered with interest and administration fees when the property is sold or from the estate. Local authorities must offer the agreement to eligible people under the Care Act 2014.

Is NHS continuing healthcare means tested?

No. NHS continuing healthcare is free care arranged and funded by the NHS for people whose primary need is a health need. It is assessed by a checklist and then a full assessment, and it is not based on capital or income.