Navigating care costs: Your property and the means test
Many people are concerned about how their property will affect their eligibility for state funding for long-term care. The rules can be complex, but a key takeaway is that the government cannot directly force you to sell your home. Instead, the value of your property is factored into a financial assessment, or 'means test', which determines how much you must contribute to your care costs.
The local authority financial assessment explained
Before you receive any financial support for care, your local council will conduct a two-part assessment. The first part is a needs assessment, which confirms you are eligible for care and support. The second is the financial assessment, which looks at your income and capital to calculate your contribution. In England, the capital limits for 2025 are typically:
- Upper Capital Limit (£23,250): If your savings and assets exceed this amount, you are typically expected to fund your care in full as a 'self-funder'.
- Lower Capital Limit (£14,250): If your capital is below this, you will pay what you can from your income, and the local authority will help with the rest.
For those with capital between these two limits, the council will contribute, but you will pay a 'tariff income' based on your capital. It is important to note that these limits can differ in Scotland, Wales, and Northern Ireland.
When is the property included in the assessment?
For care services in your own home, or for a temporary stay in residential care, your property is not included in the financial assessment. However, if you are moving into a residential care home on a permanent basis, the value of your property may be included as part of your capital. This is a critical distinction that dictates whether the house will be considered in the means test.
Exemptions: When your property is disregarded
There are specific circumstances under which the value of your property will be disregarded, meaning it is not counted in the financial assessment for permanent residential care. These include if the property remains the permanent home of:
- Your husband, wife, or civil partner.
- A close relative over the age of 60.
- A close relative who is incapacitated.
- A dependent child under 18.
Local authorities also have discretionary powers to disregard the property's value in other situations, such as if a long-term carer has given up their own home to live with you.
The Deferred Payment Scheme (DPS)
A Deferred Payment Scheme is a government-backed option for those who have been assessed as needing to contribute to their care costs but do not want to sell their home immediately. Under this scheme, the local authority effectively pays for your care home fees as a loan, which is secured against your property. The loan is then repaid, with interest, once the property is sold or from your estate after your death. This prevents the need for an immediate sale and provides greater flexibility. It is essential to get independent financial advice before entering into a DPS, as interest can accrue, increasing the total amount owed over time. You can learn more about how this scheme works through resources like the MoneyHelper Deferred Payment guide.
The 12-week property disregard
If your property is being counted in the financial assessment for permanent residential care, the council must disregard its value for the first 12 weeks of your placement. During this period, the local authority may contribute to your fees, giving you time to arrange finances, consider your options (like a DPS), or sell the property if necessary. You must inform the council of your permanent move to benefit from this disregard.
The 'Deliberate Deprivation of Assets' rule
Be aware that local authorities have rules to prevent people from giving away their assets, including property, to avoid paying for care. If the council believes you have deliberately reduced your assets for this purpose, they can still calculate your contribution as if you still owned the asset. This is known as 'deliberate deprivation of assets'. There is no set time limit for this rule, and it can be applied to actions taken many years prior to seeking care.
Alternatives to selling your home
Besides a Deferred Payment Scheme, other options can help you pay for care without an immediate sale of your home:
- Renting out your property: The rental income can be used to cover or contribute to your care home fees. This can significantly reduce the amount you need to defer. However, it requires careful management and can have tax implications.
- Equity release: You could consider a lifetime mortgage, which releases capital from your property without needing to sell it during your lifetime. Interest is charged on the loan, which is typically repaid from your estate when you die or move into long-term care.
Comparison of payment options for care home fees
| Feature | Deferred Payment Scheme | Renting the Property | Self-Funding (using equity) |
|---|---|---|---|
| Home Sale Timing | Delayed until a later date (e.g., after death). | Not required; optional. | Required to liquidate capital for fees. |
| Interest & Charges | Yes, based on government rates plus admin fees. | No interest, but you manage tenancy. | No interest, but capital is reduced. |
| Debt Accumulation | Yes, the loan amount grows with interest. | Minimal if rent covers fees; no additional debt. | Not a debt, but depletes savings/equity. |
| Control over Property | Retain ownership, but a legal charge is placed. | Retain ownership and control as landlord. | Lose ownership and control. |
| Best For... | Those who want to delay selling their home. | Those seeking ongoing income to cover costs. | Those with sufficient liquid assets or preference for a single transaction. |
Conclusion
Ultimately, while the government cannot force the sale of your home, its value will be considered in the financial assessment for permanent residential care. However, mechanisms like the Deferred Payment Scheme and property disregards offer vital protection and flexibility, ensuring you are not forced into an immediate sale. Careful planning and understanding the rules are essential for navigating this complex area of financial planning for senior care. Always seek independent financial advice to ensure you make the best decision for your specific circumstances.
