The Local Authority Means Test: A Comprehensive Breakdown
To determine how much they will contribute, local councils conduct a financial assessment (or means test). This evaluates a person's income and capital to calculate their contribution towards care costs. Before this, a care needs assessment must be completed to establish eligibility for residential care.
England: Capital Thresholds and Contributions (2025/26)
In England, there are three main scenarios based on capital:
- Over £23,250: You are responsible for paying all your residential care fees as a 'self-funder'. Local authority funding assistance begins only once your capital drops below this upper limit. It is wise to contact the council a few months before this occurs for reassessment.
- Between £14,250 and £23,250: The local authority will provide partial financial support. You will contribute towards the cost from your income and a 'tariff income' based on your savings. This tariff assumes an income of £1 per week for every £250 (or part of £250) of capital between the two limits.
- Under £14,250: Your capital is disregarded. The council will pay the bulk of your care costs, but you will still be expected to contribute most of your weekly income towards the fees.
Variations Across the UK
The financial thresholds for social care funding vary by country:
- Scotland: Capital thresholds are higher, with an upper limit of £35,000 and a lower limit of £21,500 in 2024/25. Scotland also offers free personal and nursing care payments, regardless of capital.
- Wales: The capital limit for residential care is currently £50,000. If your capital is at or below this limit, the council will contribute, with the amount you pay depending on your income.
- Northern Ireland: The thresholds for funding are aligned with England's, at £23,250 and £14,250 respectively.
How Income and Capital are Assessed
During the financial assessment, the council evaluates your financial resources. This includes:
- Income: State pensions, occupational pensions, other benefits (some are disregarded, such as the mobility component of disability benefits).
- Capital: Savings, investments, and property. The value of your home is excluded if a partner, dependent child, or certain other relatives live there permanently.
- Deliberate Deprivation of Assets: Councils have measures to prevent people from intentionally giving away money or assets to avoid paying care fees. This is referred to as 'deprivation of assets'.
Understanding Top-Up Fees
If you prefer a residential home that is more expensive than the rate your local authority has assessed as necessary for your needs, a 'top-up' or 'third party payment' is required.
- This extra amount must be paid by someone else, like a family member or charity, not the resident themselves (with some rare exceptions).
- Crucially, the council must first demonstrate that there is at least one suitable and available care home within your assessed personal budget. If no suitable home exists at the council's standard rate, they must increase their contribution.
Other Funding Sources and Allowances
NHS-Funded Nursing Care (FNC)
If you are in a nursing home and do not qualify for full NHS Continuing Healthcare, you may be eligible for FNC. This is a weekly, non-means-tested contribution from the NHS towards the nursing care component of your fees. In England, the FNC rate is currently £254.06 per week for 2025/26.
Personal Expenses Allowance (PEA)
Regardless of your financial contribution, the council must ensure you are left with a minimum weekly Personal Expenses Allowance for your personal use. This amount varies by region and should not be used towards care fees. In England (2025/26), this is at least £30.65 per week.
Deferred Payment Agreements
If you own your home but lack the immediate funds to pay for residential care, your council may offer a Deferred Payment Agreement. This allows you to delay paying some or all of your care costs until your property is sold or you pass away. This is an optional arrangement.
Comparison of UK Financial Thresholds
| Country | Lower Capital Limit (Capital disregarded) | Upper Capital Limit (Self-funder) | Note on funding structure |
|---|---|---|---|
| England | £14,250 | £23,250 | Contributions based on income and tariff income in middle band. |
| Scotland | £21,500 | £35,000 | Free personal care and nursing care payments available. |
| Wales | £50,000 | £50,000 | Single threshold for residential care. |
| Northern Ireland | £14,250 | £23,250 | Similar means test structure to England. |
Case Studies: Real-World Scenarios
Case Study 1: The Self-Funder
- Scenario: Jane has savings and investments totalling £50,000 and needs permanent residential care in England. She passes the care needs assessment.
- Outcome: As her capital is above the £23,250 upper limit, she must pay the full cost of her care. She will need to use her income and capital to cover the fees. If her capital falls below the upper limit, she can be reassessed by the local authority.
Case Study 2: The Partial Funder
- Scenario: Mark has a pension and savings of £18,000. He needs residential care in England. He passes the care needs assessment.
- Outcome: His capital is between the lower and upper limits. The council will pay some fees. Mark will contribute most of his pension income, plus a tariff income of £1 per week for every £250 of his savings over £14,250. His Personal Expenses Allowance will be protected.
Case Study 3: The Council-Funded Resident
- Scenario: Susan has a state pension and savings of £10,000. She requires residential care in England.
- Outcome: Her capital is below the £14,250 lower limit, so it is disregarded. The council will pay for her care up to the cost of a suitable home. Susan will contribute most of her state pension, but is guaranteed to be left with the Personal Expenses Allowance for her personal use.
Conclusion
The amount a local authority pays for residential care is never a simple fixed figure; it is the result of a detailed financial assessment. An individual's income and capital are the primary factors, with varying thresholds across the UK's constituent countries. Potential residents and their families should be aware of the rules governing means tests, property valuation, and top-up fees. Understanding these regulations is key to navigating the care funding system and ensuring the best possible outcome. For more detailed information on funding and financial assessments, it is recommended to visit Age UK's financial assessment information.
