Understanding the financial arrangements for family care
In the UK, a family member can be paid to provide care, but the process and amounts depend heavily on the source of the funds and the care recipient's mental capacity. It is important to distinguish between payments from your parents' own savings and payments made via a local authority personal budget.
Private payment from your parents' savings
If your parents have the mental capacity to make their own decisions, they can choose to pay you for the care you provide from their own savings. While there is no legal limit to the amount they can pay, the payment must be reasonable, proportionate to the care provided, and affordable for them in the long term.
The importance of a formal agreement
Even for a private arrangement, creating a formal, written agreement is highly recommended. This document should set out:
- The specific care tasks you will perform.
- The hours you are expected to work.
- The rate of pay.
- How and when payments will be made.
- A process for regular reviews and adjustments.
This clarity helps avoid future misunderstandings with other family members, protects both you and your parents, and provides an auditable trail of payments.
Safeguarding against deliberate deprivation of assets
If your parents later require local authority funding for care, the council's financial assessment will scrutinise any large, regular payments made from their savings. If they deem that assets have been deliberately depleted to avoid care costs, they may include the value of those assets in their assessment, impacting your parents' eligibility for support. A documented, reasonable care agreement provides crucial evidence that the payments were for legitimate care services.
Direct payments from the local authority
If your parents are eligible for local authority-funded care following a needs and financial assessment, they may receive a 'personal budget'. This budget can be managed by the council or paid directly to your parents as 'direct payments'. Your parents can then use this money to hire their own care, including a family member.
There are important rules regarding who can be paid through direct payments:
- Relatives living outside the household: In most cases, you can be paid from direct payments if you do not live with your parents.
- Relatives living in the same household: Local authorities are generally more reluctant to allow direct payments to pay for a live-in relative's care, although they may do so in specific, agreed circumstances. The rationale is to prevent the duplication of care that would normally be provided for free out of love and affection. It is up to the local authority's discretion.
- What direct payments can cover: These funds must be used for assessed care needs only and cannot be spent on household costs like rent, food, or utility bills.
When your parent lacks mental capacity
If your parent does not have the mental capacity to make financial decisions, the situation is more complex. A deputy appointed by the Court of Protection, or an attorney under a Lasting Power of Attorney, must act in the parent's best interests. The Office of the Public Guardian (OPG) issues practice notes (SD14) that guide deputies and attorneys on making 'gratuitous care payments' to family members.
The OPG's guidance suggests a framework for calculating a reasonable rate, often based on the commercial cost of care minus a 20% reduction to account for non-agency costs like tax, National Insurance, and training. Any payment must still be affordable and sustainable for the parent's lifetime. A formal application to the Court of Protection is often necessary to get approval for these payments.
Tax and benefit implications for the family carer
Being paid for care, whether privately or through a direct payment, has significant financial consequences that must be carefully managed.
Carer's Allowance
This is a benefit for those providing 35 or more hours of care weekly for someone receiving certain disability benefits. For the 2025/26 tax year, the weekly rate is £83.30, but it is a taxable benefit. Crucially, it has an earnings limit (£196 per week after deductions for 2025/26), meaning many family carers might earn too much from their parents to qualify. Payments from your parents count towards this earnings limit if they are your employer.
Taxable income and HMRC
Payments for care provided constitute an income. If your total income exceeds your tax-free Personal Allowance, you will need to pay income tax. It is your responsibility to inform HMRC about your earnings. This could be managed via PAYE if you are formally employed by your parents or through a self-assessment tax return if you are self-employed.
Note on OPG payments: Some gratuitous care payments authorised by the Court of Protection for someone lacking capacity may be considered non-taxable allowances rather than salary, but this is a complex area and requires specific, professional advice. HMRC should still be kept informed.
Comparison of payment methods
| Feature | Private Payment (Parents have capacity) | Direct Payments (Council funded) | Carer's Allowance (Gov. benefit) |
|---|---|---|---|
| Funding Source | Parents' own savings and assets. | Personal budget from the local authority. | The Department for Work and Pensions (DWP). |
| Payment Amount | Agreed privately, must be reasonable and affordable. Based on local care rates, not carer's lost earnings. | Based on your parents' assessed care needs and local council rates. | Fixed weekly rate (£83.30 for 2025/26). |
| Legal/Admin | Written care agreement highly recommended. | Needs and financial assessments required. Agreement must comply with council rules. | Application required, subject to earnings test and other criteria. |
| Taxation | Payments are potentially taxable income. Must inform HMRC. | Payments for care are treated as taxable income. May affect other benefits. | Taxable income if your total earnings exceed your Personal Allowance. |
| Dependants' Benefits | Not directly affected, but care cost might deplete savings, impacting future means tests. | Your claim can affect certain benefits of the person you care for. | Your claim will affect certain benefits of the person you care for. |
| Mental Capacity | Only possible if the parent has mental capacity. | Can be managed by a nominated or authorised person if capacity is lacking. | N/A (Caree's mental capacity is not a deciding factor for carer eligibility). |
How to proceed with an arrangement
- Assess Your Parents' Needs: A formal needs assessment by the local council is a crucial first step. This will determine if they are eligible for council support and can be done regardless of their financial situation.
- Conduct a Financial Assessment: If a needs assessment shows eligibility, the council will perform a financial assessment to determine how much, if anything, your parents must contribute to their care costs.
- Explore Options: Discuss the options with your parents and other family members. Consider a private arrangement, direct payments, or relying solely on Carer's Allowance, keeping in mind the pros and cons of each.
- Create a Formal Agreement: For any private or direct payment arrangement, draft a clear care agreement that outlines the terms of the arrangement. This is essential for protecting everyone involved. See the Family Caregiver Alliance's guidance on personal care agreements for an example of key elements to include.
- Seek Professional Advice: Due to the complexity of finances, benefits, and tax implications, seeking legal and financial advice is strongly recommended before committing to any payment structure. A solicitor specialising in elder care can be invaluable.
- Inform HMRC: Ensure you or your parents inform HMRC of any care payments to manage tax obligations correctly.
Conclusion
While a rewarding option, being paid to care for your parents in the UK requires careful navigation of legal and financial frameworks. The amount you can be paid depends on whether it is a private arrangement, council-funded direct payments, or Carer's Allowance. Each route has different implications for affordability, tax, and benefits. The key is to formalise the arrangement with a written agreement, understand the impact on benefits, and seek professional advice to ensure it is both reasonable for your parents and sustainable for you.
