UK Local Authority Care Funding Rules Explained

The English means test

Local authorities in England follow the Care Act 2014 and the Care and Support Statutory Guidance. The financial assessment considers capital (savings, investments, property) and income (State Pension, private pensions, benefits, employment).

Capital thresholds

Capital below GBP 14,250 is disregarded. The council pays in full apart from a contribution from income (typically all of the person's State Pension and most private pension income, leaving a Personal Expenses Allowance of GBP 30.65 per week).

Capital between GBP 14,250 and GBP 23,250 attracts a tariff income: GBP 1 per week is added to the assessed income for every GBP 250 of capital between the thresholds. This reduces the council's contribution.

Capital above GBP 23,250 means the person self-funds the care.

Income contribution

Most income is included in the assessment: State Pension, occupational and personal pensions, annuities, and most benefits. Attendance Allowance and DLA mobility component are typically disregarded. The Personal Expenses Allowance (GBP 30.65 per week) is retained by the person.

The family home

For home care, the value of the main home is disregarded.

For residential or nursing care, the home is included in the capital test, but with exemptions:

The home is disregarded if a spouse or civil partner lives in it.

The home is disregarded if a relative aged 60 or over, an incapacitated person, or a child under 18 lives in it.

For the first 12 weeks of a permanent stay, the home is disregarded under the 12-week property disregard.

The 12-week property disregard

The 12-week property disregard allows the council to fund the first 12 weeks of residential care without including the home, giving time for the person and family to make decisions about the home (sale, rental, deferred payment).

Deferred Payment Agreements

Where the home is the main asset and sale is not immediate, a Deferred Payment Agreement allows the council to fund the care now and recover from the eventual sale (or from other assets after death). Interest is charged at a rate set by central government.

Top-up payments

If the person wishes to move to a more expensive care home than the council will fund, a third party (often the family) can top up the difference. The top-up must be sustainable for the foreseeable future and is monitored by the council.

Scottish rules

Scotland operates a different system. Free personal care (a fixed weekly amount toward personal and nursing care) is available regardless of means. Means-tested funding above this contribution follows Scottish capital thresholds, which differ from England.

Welsh rules

Wales has higher capital thresholds than England for residential care (currently GBP 50,000 upper limit for residential care, with planned changes monitored on the Welsh Government website).

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.

Disclaimer

This article provides general information on UK local authority care funding and is not personal advice. Rules and thresholds change; up-to-date information is on the relevant council or government website.

Frequently asked questions

What is the upper capital limit in England?

GBP 23,250. Above this, the person self-funds the care.

Is the family home always included for residential care?

No. The home is disregarded if a spouse, qualifying relative, or dependent lives in it, and for the first 12 weeks of permanent care.

What is a Deferred Payment Agreement?

A formal arrangement allowing the council to fund care now and recover from the home's sale or other assets later.

Can the family top up to a more expensive home?

Yes, where the top-up is sustainable. The council monitors top-up arrangements over time.

Are care funding rules the same across the UK?

No. England, Scotland, Wales, and Northern Ireland each have different rules and thresholds.

Frequently asked questions

What is the upper capital limit in England?

GBP 23,250. Above this, the person self-funds the care.

Is the family home always included for residential care?

No. The home is disregarded if a spouse, qualifying relative, or dependent lives in it, and for the first 12 weeks of permanent care.

What is a Deferred Payment Agreement?

A formal arrangement allowing the council to fund care now and recover from the home's sale or other assets later.

Can the family top up to a more expensive home?

Yes, where the top-up is sustainable. The council monitors top-up arrangements over time.

Are care funding rules the same across the UK?

No. England, Scotland, Wales, and Northern Ireland each have different rules and thresholds.