How do people afford care homes in the UK? A comprehensive guide

According to the Office of National Statistics, nearly half of all care home residents aged 65 or over in the UK fund their own care. This highlights the critical need to understand how do people afford care homes in the UK?, as options range from self-funding to state assistance, depending on individual circumstances.

Quick Summary

Affording a care home in the UK depends on individual finances, with options including means-tested local authority support, full NHS funding for specific health needs, or using private funds from savings, investments, or property sales.

Key Points

• Local Authority Funding: Your local council conducts a means test to determine eligibility for financial assistance based on your capital and income.

• Self-Funding: If your assets exceed the threshold (e.g., £23,250 in England), you must pay for your care using your own funds.

• NHS Continuing Healthcare (CHC): Provides full, non-means-tested funding for individuals with a primary health need.

• Deferred Payment Agreements (DPAs): Allow homeowners with limited savings to use their property to defer paying care costs until later.

• Deprivation of Assets: Councils can legally challenge the deliberate giving away of property or money to avoid paying care fees.

• Top-Up Fees: A third party can pay extra for a more expensive care home than the council's standard rate.

• Regional Variations: Financial thresholds and funding rules differ significantly across England, Wales, Scotland, and Northern Ireland.

Understanding the Care Funding System

Navigating the process of paying for a care home in the UK can be a complex and daunting task. The system is designed to provide financial support based on a combination of assessed care needs and a financial assessment, or 'means test', to determine eligibility. It is vital to understand the different routes to funding to make informed decisions for yourself or a loved one. The main paths involve local authority support, self-funding, and NHS continuing healthcare.

Local Authority Funding: The Means Test

If you are found to need a care home place following a care needs assessment, your local council will conduct a financial assessment to determine how much you need to contribute. This is a means test that considers both your income and capital. The rules and thresholds vary across the UK.

Key Financial Thresholds (England)

For care home residents in England, there are specific capital thresholds that dictate funding eligibility:

• Over £23,250 in capital: You are considered a 'self-funder' and are expected to pay for your own fees in full.
• Between £14,250 and £23,250 in capital: The council will provide some financial support, and you will pay a contribution from your income, plus a 'tariff income' based on your capital.
• Under £14,250 in capital: The council provides financial support, and you only contribute from your income.

What Counts as Capital?

In the financial assessment, the council looks at your income, savings, investments, and potentially your property. However, the value of your main home is typically disregarded if a spouse, partner, or certain relatives continue to live there.

Personal Expenses Allowance (PEA)

If you are eligible for local authority funding, you are left with a set weekly amount for personal expenses. For 2025/2026, the PEA in England is £30.65.

Self-Funding Options for Care Home Fees

For those with assets above the local authority limit, a number of self-funding options are available:

• Using Savings and Investments: You can pay for care directly using your savings, or by generating income from investments such as stocks, shares, or bonds.
• Releasing Property Equity: Many people use their home to fund care. This can be done by selling the property outright, or through an equity release scheme like a lifetime mortgage or home reversion plan. It's crucial to seek expert financial advice before pursuing this route due to the complex implications.
• Care Fee Annuities: A care fee annuity (or immediate care plan) involves paying a lump sum to an insurance company in exchange for a guaranteed, tax-free income for life to cover care costs.
• Deferred Payment Agreements (DPA): If you own your home but have limited other assets, the council may offer a DPA. They effectively loan you the money for your care fees, with the debt being repaid when your home is eventually sold. Interest is usually charged on the deferred amount.

NHS Funding for Care Home Costs

In certain circumstances, the National Health Service (NHS) may cover care home costs regardless of your financial situation.

NHS Continuing Healthcare (CHC)

If a primary health need is the main reason for requiring care, you may be eligible for NHS Continuing Healthcare. This is not means-tested and covers 100% of care home fees, including accommodation. Eligibility is determined by a strict assessment and is notoriously difficult to obtain.

NHS-Funded Nursing Care (FNC)

For individuals living in a nursing home who do not qualify for CHC, the NHS pays a flat-rate contribution directly to the care home to cover the nursing care component of the fees. The rate is set by the government and is not means-tested.

Potential Complications: Top-Up Fees and Deprivation of Assets

When navigating care funding, two concepts warrant special attention:

• Top-Up Fees: If you choose a care home that is more expensive than the local authority's standard rate, a third party (like a family member) must pay the difference through a 'top-up' fee. You cannot pay this yourself, and if the third party stops paying, you could be moved to a cheaper home.
• Deprivation of Assets: Councils are aware of people trying to avoid care fees by giving away property or money. If they believe you have done this intentionally, they can treat you as though you still own the asset and include its value in the means test.

Comparing Care Home Funding Rules Across the UK

Feature	England	Scotland	Wales	Northern Ireland
Upper Capital Limit	£23,250	£32,750	£50,000	£23,250
Lower Capital Limit	£14,250	£20,250	£50,000 (No lower limit)	£14,250
Free Personal Care?	No	Yes (age 65+)	No	No
Top-Up Fees?	Yes, from third party	Yes, from third party	Yes, from third party	Yes, from third party
Deferred Payment Agreement?	Yes	Yes	Yes	Consult HSCNI

Conclusion: Seeking Expert Advice

There is no single answer to how do people afford care homes in the UK? as the solution is highly individualised. Whether you are relying on state support, self-funding, or a combination of both, it is essential to begin planning as early as possible. Given the complexity, seeking independent financial advice from a specialist is highly recommended to ensure you understand all the options and can secure the best possible care. For comprehensive guidance on paying for residential care, an excellent resource can be found on the Age UK website: Age UK - Paying for residential care.

The Financial Assessment Process Explained

1. Request a Care Needs Assessment: Contact your local council to assess if you require residential care, which is the first step towards receiving financial support.
2. Complete a Financial Assessment: If a care home is deemed necessary, a financial assessment will follow. This involves providing detailed information on your income, savings, investments, and property.
3. Determine Your Contribution: The council calculates your weekly contribution based on the financial assessment. This may include your income and any capital above the lower threshold.
4. Confirm Funding Arrangement: The council will inform you of your personal budget and whether you are a self-funder or eligible for full or partial funding. They will explain how payments are made.
5. Explore Other Funding Avenues: Depending on the outcome, you can pursue NHS funding, benefits like Attendance Allowance, or self-funding methods to bridge any gaps.

Frequently Asked Questions

What is the capital limit for care home funding in England?

In England, the upper capital limit for local authority funding is £23,250. If your assets are above this amount, you are typically responsible for paying your own care home fees.

Do I have to sell my home to pay for care home fees?

Not necessarily. If a spouse or other qualifying relative lives in the property, its value is usually disregarded in the financial assessment. If you have no one living there, options like a Deferred Payment Agreement can delay the need to sell.

What is NHS Continuing Healthcare and who is eligible?

NHS Continuing Healthcare (CHC) is a package of care for individuals with significant, complex healthcare needs. Eligibility is determined through a clinical assessment, and if you qualify, the NHS pays for all your care costs regardless of your wealth.

What is a 'top-up' fee for care homes in the UK?

A top-up fee is an additional payment required if you choose a care home that is more expensive than the rate your local council is willing to pay. This fee must be paid by a third party, such as a family member.

Can I give away my assets to avoid care home fees?

This is known as 'deliberate deprivation of assets'. Local councils have powers to investigate such cases and can still include the value of the gifted assets in their financial assessment, holding you accountable for the costs.

Can Attendance Allowance help with care home costs?

Yes, Attendance Allowance is a tax-free benefit for older adults requiring care, and self-funders can claim it to help offset care home costs. However, if you receive NHS Continuing Healthcare, your Attendance Allowance will stop after 28 days.

Do care home funding rules vary across the UK?

Yes, funding rules, including capital thresholds and free personal care policies, differ between England, Wales, Scotland, and Northern Ireland. For example, Scotland offers free personal care to those aged 65 and over who are assessed as needing it.