UK Care Funding: The Complete Guide

The four sources of care funding

UK care funding draws on four sources: the NHS (Continuing Healthcare for those with a primary health need), the local authority (means-tested social care), self-funding by the person needing care or their family, and non-means-tested benefits (Attendance Allowance, PIP, and similar).

NHS Continuing Healthcare

NHS Continuing Healthcare is funded entirely by the NHS where the person has a primary health need, meaning that their care is primarily for a health reason (rather than primarily personal or social care). The assessment is administered by Integrated Care Boards and uses the Decision Support Tool covering 12 care domains. CHC is not means-tested; the full cost of care is met regardless of the person's wealth.

Local authority means-tested care

Where the need is for social rather than primary health care, the local authority is responsible for arranging care if eligibility criteria are met. Funding depends on a financial assessment.

In England, capital below GBP 14,250 means the local authority funds in full (apart from a contribution from income). Between GBP 14,250 and GBP 23,250, a tariff income applies (deemed GBP 1 per week of income for every GBP 250 of capital above GBP 14,250). Above GBP 23,250, the person is self-funding.

The home in the means test

The main home is generally disregarded in the means test for home care. For residential or nursing care, the home is included unless a spouse, civil partner, dependent relative, or qualifying child still lives in it. Where the home is included, its value can quickly exceed the upper capital limit, leading to self-funding until the property is sold or other assets reduce.

Self-funding

Self-funders pay the full care cost directly. UK average residential care fees are around GBP 50,000 per year; nursing care around GBP 60,000. Costs in London, the South East, and parts of Scotland are typically higher.

Deferred Payment Agreements

Where the home is the main asset and a sale is not practical immediately, a Deferred Payment Agreement allows the local authority to fund care now and recover from the eventual sale of the home (or other assets) later. Interest is charged on the deferred amount.

Attendance Allowance and other benefits

Attendance Allowance is a non-means-tested benefit for those of State Pension age needing personal care. PIP is the equivalent for those under State Pension age. Both are tax-free and do not affect other benefits, though they can increase entitlement to means-tested benefits.

Family contributions

UK law does not require adult children to fund their parents' care. Adult children sometimes contribute voluntarily through topping up local authority placements, paying for additional care services, or providing care directly themselves.

The Care Act 2014 cap

The Care Act 2014 provided for a cap on lifetime care costs. Implementation has been repeatedly delayed; current government commentary should be checked on gov.uk for the latest timetable.

Differences across the UK

Scotland operates free personal care (a fixed contribution toward personal and nursing care, regardless of means). Wales has higher capital thresholds for residential care than England. Northern Ireland operates a separate system. The figures and rules in this guide apply to England unless specified.

Equity release and care

Some self-funders use equity release on their home to fund care while still living in it. The decision is complex and irreversible; regulated advice is essential.

Immediate needs annuities

An immediate needs annuity converts a lump sum into a guaranteed income for life paid directly to the care provider, often tax-free. It transfers longevity risk to the insurer at the cost of giving up access to the capital.

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.

Disclaimer

This article provides general information on UK care funding and is not personal financial or legal advice. The rules are complex and change; specialist advice on care funding is recommended.

Frequently asked questions

What is the upper capital limit?

In England, GBP 23,250. Above this, the person self-funds. Other UK nations have different thresholds.

Is the family home always included?

For residential care funding, yes unless a spouse or qualifying relative still lives in it. For home care, no.

What is NHS Continuing Healthcare?

A non-means-tested NHS funded package covering all care costs where the person has a primary health need.

Do adult children have to pay?

UK law does not require adult children to fund their parents' care.

What is a Deferred Payment Agreement?

An arrangement allowing the local authority to fund care now and recover from the eventual sale of the home or other assets later.

Frequently asked questions

What is the upper capital limit?

In England, GBP 23,250. Above this, the person self-funds. Other UK nations have different thresholds.

Is the family home always included?

For residential care funding, yes unless a spouse or qualifying relative still lives in it. For home care, no.

What is NHS Continuing Healthcare?

A non-means-tested NHS funded package covering all care costs where the person has a primary health need.

Do adult children have to pay?

UK law does not require adult children to fund their parents' care.

What is a Deferred Payment Agreement?

An arrangement allowing the local authority to fund care now and recover from the eventual sale of the home or other assets later.