Updated: April 2022
1. How to fund your care – self-funders v state funded
Nearly half a million people in the UK live in a care home and around half of these fund themselves (self-funders) and the other half receive local authority funding (with a quarter of these paying top-ups).
The amount you pay towards your care will depend on where you live in the UK. If you live in England and Northern Ireland and have assets of more than £23,250, you will have to pay the full cost of your care and are referred to as a self-funder.
In Scotland, it is £28,750and in Wales, the care and care home fees threshold is £50,000
Anyone with capital below these amounts will qualify for some financial support. In England and Northern Ireland if you have capital below £14,250 you should get maximum support.
In Scotland, you need to have capital below £18,000 to be eligible for maximum support and in Wales, anyone with capital under £50,000 will receive fully funded care from the local authority.
If your savings or income fall below the threshold, the local authority should start paying for some or all of your care. You can ask the local authority to carry out a review while you are in residential care if your savings drop below the threshold or are about to, so it can take over paying the care costs.
The value of your assets is calculated by adding up your investments, savings and the equity from your property. Your property won’t be included as an asset if a husband, wife, civil partner, a close relative over the age of 60 or a dependent child or disabled relative lives with you.
In the means test only 50% of any jointly held capital, such as a savings account, is counted. Some types of capital and income, such as certain disability benefits or pensions are not included and also personal possessions are ignored. The means test will assume that you are in receipt of all of the benefits that you are entitled to, so you want to ensure that you are claiming them.
If your home is included in your means-test, it is disregarded for your first 12 weeks in a care home. Therefore if other capital assets and income are low, you may only become a self-funder after 12 weeks.
If you deliberately transfer ownership of a property into someone else’s name or money into someone else’s bank account to avoid paying for your care, it may be seen as a deprivation of assets and the local authority could refuse to fund your care.
It is advisable to register a Lasting Power of Attorney to give someone you trust control over decisions regarding your health, welfare and finances in case you lose the capacity to make these yourself in the future.
What is the maximum you have to pay for care home fees?
There is currently no cap on care home fees in the UK. However, if your capital falls below the lower threshold, your local authority may cover the full cost of your care.
The UK government announced on 7 September 2020 that from October 2023, no one in England will have to pay more than £86,000 in care costs during their lifetime. Once you have reached the cap, the ongoing care costs will be paid for by your local authority. This will be funded by a 1.25 per cent increase in National Insurance, coming into effect in April 2022.
However, daily living costs at a care home such as accommodation, food and energy bills will not be covered.
The savingsthreshold for care homes orreceiving support from local authorities will also change, and if you have capital between £20,000 and £100,000 you will receive some form of support. If you have less than £20,000, you will not have to pay for care from their assets but may have to contribute from their income.
This video will give you a brief overview of when you may get support from your local authority and in what scenario you must cover your care home fees yourself.
It is important for self-funders to establish how much the care home will cost each year, the benefits that you are entitled to, how much income you require and how best to generate this income from your assets.
It is very important to ensure that you plan properly to ensure that you do not have to move to a different care home at a later stage.
How much the care home will cost each year
If you or a relative are making your own financial arrangements with the care home, you need to make sure you have a contract spelling out the home’s obligations and fees. Find out if anything is an extra and how much notice the care home needs to give, if it wishes to increase the fees.
Which benefits are self-funders entitled to?
When you go into a care home, you can still claim a number of benefits and there are potential additional state benefits available. The two most common additional state benefits available are the Attendance Allowance and Funded Nursing Care (FNC) for Nursing Care Costs. You can still claim State Pension and other State Benefits. Also, some care and support in the care homes are free of charge.
Attendance Allowance (AA) / Personal Independence Payment (PIP)
Anyone over the age of 65, needing care and support on a daily basis, is eligible for Attendance Allowance (AA).
If you are under the age of 65, you may be eligible for Personal Independence Payment (PIP). This benefit is replacing the Disability Living Allowance for people aged between 16 and 64.
The Attendance Allowance is available if you pay for the care home cost yourself, but not if you are local authority funded. If you need help during the day, you will receive £61.85a week. If you need help during the day and night, or if you are terminally ill, you will get £92.40a week. The amount is paid tax-free and is not means-tested.
You have to claim Personal Independence Payment (PIP) before you reach 65 and you will have to undergo an assessment. There are two parts to PIP, the mobility component and the daily living component. The mobility component is paid in all circumstances whether you are self-funded or government-funded and it is £24.45 per week for the standard rate and £64.50 for the enhanced rate.
The PIP daily living component is paid to a person in a care home if they are paying for their own care and is £61.85per week for the standard rate and £92.40 for the enhanced rate.
Attendance Allowance isn’t available in care homes in Scotland, as everyone over the age of 65 in Scotland is entitled to free personal care, regardless of income, if the local authority has assessed them as needing it.
In England, Wales and Northern Ireland, even if a person is paying for their own care in a nursing home, they may still be able to get help with their nursing care costs, through Funded Nursing Care (FNC) or Continuing Healthcare Funding (CHC).
In Scotland, everyone, regardless of their income, assets or partner status, who is aged 65 and over, receives free personal and nursing (up to a certain limit) if they have been assessed by the local authority as needing it. They will still have to contribute towards their accommodation costs in the care home.
Nursing care costs - Funded Nursing Care (FNC) / Continuing Healthcare Funding (CHC)
Funded Nursing Care (FNC) / Nursing Care Contribution
You may be entitled to receive Funded Nursing Care (FNC) an NHS-funded nursing care contribution in England, Wales and Northern Ireland. The care home, social worker or GP can arrange to have your nursing needs assessed to find out if you are eligible. This money is only paid if a person who needs nursing care is in a care home that is registered to provide it.
The NHS will pay a flat rate contribution directly to the care home towards the cost of the nursing care.
FNC is a fixed amount each week which is paid to the nursing home. In England, as of 11th May 2022, the rate for this is £209.19, this is an increase of just over 11% from the previous year.
In Wales, it is £179.97 and in Northern Ireland it is £100. These figures may be updated later this year.
In Scotland everyone will get free personal and nursing care if they need it.
If you are a self-funder andpaying all your own fees, which include nursing costs, FNC might be deductedfrom the total bill. However, different care homes have different approaches to this, and in some casesFNC may be paid to the care home in addition to the fees stated to you, to make it possible to cover the cost of additional care required. You should check your contract and speak to the individual care home to find out whether receiving FNC will reduce your bill.
Continuing Healthcare Funding (CHC)
Continuing Healthcare Funding, funded by the NHS, is available in England, Wales and Northern Ireland. Unfortunately at the moment there is no guiding framework for Continuing Healthcare in Northern Ireland, which means that health and social care teams tend not to mention it. It is available, so you need to ask for it.
The Department for Health and Social Care and NHS England state in their National Framework for Continuing Healthcare, that CHC is not means tested and pays for the cost of a person’s care, funding a person’s health and social care (personal care) needs as well as their care home accommodation.
The care home, social worker or GP can arrange to have your nursing needs assessed to find out if you are eligible. CHC will pay for all your health care and as well as your personal care needs.
To be eligible you must have a ‘primary health need’ and a care and support package will be put in place that meets your assessed needs.
A person living with dementia may be eligible for NHS Continuing Healthcare funding which will cover the cost of their care. However, because people with dementia are often assessed as having social care needs rather than health care needs, they may be found ineligible.
State Pension & Other State Benefits
If you are of state pension age you will still be able to get a State Pension. The basic State Pension is £141.85a week. You can claim the basic State Pension if you’re a man born before 6 April 1951 or a woman born before 6 April 1953.
If you were born after these dates, you will be eligible for the full new State Pension, which is £185.15 per week. The actual amount you will get depends on your National Insurance record.
You will not have to pay council tax, if you move into a care home and there is no one living in your property.
Other state benefits might be available such as Pension Credit, Incapacity Benefit, Severe Disablement Allowance, Widow’s Pension, Bereavement Allowance, Widowed Parent’s Allowance, Industrial Injuries Disablement Benefit, Statutory Sick Pay, Employment and Support Allowance.
To find out more about how moving into a care home affects your pension, click here.
Some care and support in the care home must be free of charge
- Intermediate care, including reablement (for up to six weeks) paid by NHS
- Aids and minor adaptations to the home which cost less than £1,000 paid by NHS
- The NHS is responsible for funding any after-care in a care home, if the person with dementia has been assessed or treated in hospital under the Mental Health Act 1983
- NHS services
- any services that an authority has a duty to provide based on other legislation
You may also be eligible for other NHS services such as continence aids or specialist services such as chiropody, physiotherapy, pressure relief mattresses and mobility or communication aids.
Different ways self-funders can fund their care
There are a number of different ways that self-funders can fund their care, each with advantages and disadvantages. The main decision is often whether you keep or sell your home and then there are various options, some of which we have outlined below.
Keeping your home
Rent your home out
If you don’t want to sell your home to pay for your care, you can rent it out as long as the rental income covers the cost of your residential care. However, it is important to remember that rental income is taxable.
Deferred Payment Scheme
All local authorities in England, Scotland and Wales have to offer a deferred payment scheme to people living in residential care. In Northern Ireland there is no formal deferred payment system but it may still be available, you will have to contact your health and social care trust.
The deferred payment scheme means the local authority will pay for your care while you are alive and will claim the money back through the sale of your property after you die. You can only apply for the Deferred Payment Scheme if your savings are below the upper means test threshold.
Local authorities can charge arrangement fees to set up the loan, as well as interest on the loan from the day it is set up. You have to sign a legal agreement with the council. However you cannot use a deferred payment agreement to pay for a short, temporary stay in a care home.
Local councils in Scotland often use charging orders instead of deferred payment agreements. This places a legal charge on a property ensuring the creditor is paid the money owed to them when the property is sold.
To readmore about Deferred Payment Agreements, click here.
If you have a lot of equity in your home, you can consider raising the money for your care by mortgaging your property. However, with this option you will usually end up paying a relatively high level of interest which can make it an expensive way of paying for care.
For more information about equity release and the different options, click here.
Selling your home
High interest bank account
One option after selling your house is to find a high interest bank account and put all the cash from the sale of your property in there. The problem is that high interest accounts tend to lock your money away and you need to have it readily accessible so you can pay your care home fees. Also, bank interest rates have been exceptionally low for a good few years.
Invest to generate income
You can look to invest your money into cash bonds, equities or shares to generate income to pay for your care. As you need the money to pay for your care, it is not advisable to opt for high risk investments.
Take out a Care Fee Annuity
You can take out a Care Fee Annuity, which works as a payment plan giving a regular income similar to a standard retirement annuity.
The upside of this is the income is tax free if it is paid directly to the care provider and will provide a guaranteed income to pay for care costs for life.
The disadvantage is that the cost will vary according to your health and age and once you take out an immediate need care fee payment plan, if you change your mind or become eligible for Continuing Healthcare you won’t be able to cancel it and get your lump sum back. If you die six months after going into a care home, your family will lose the lump sum.
However, you can buy a guarantee to insure against dying early so they would still get a lot of the lump sum back but this can be expensive.
The annuity can allow you to effectively solve your care funding problem using some of your assets, which will hopefully help to protect the remainder of your assets.
For more information about taking out a Care Fee Annuity, also known as an immediate needs annuity, click here.
3. State funded care
Care Needs Assessment, Financial Assessment & Personal Budget
If you feel you may be eligible for state funded care, the first step to take is to get your local authority to carry out a care needs assessment. This will identify exactly what support and how much help you need. The needs assessment should look at your physical care needs, as well as your mental, emotional, psychological, social, cultural and religious needs.
See our section Care Needs Assessment for further details.
The local authority will then carry out a financial assessment which is a means test based on national guidelines and calculate how much you have to pay towards your care home fees. For further details see section How to fund your care – self-funders v state funded.
If you are eligible for local authority funding, then the local authority will set a personal budget. This comprises of the total cost of meeting your needs, the amount that you have to contribute and the outstanding amount that the local authority has to pay.
The amount you must pay will include money you receive from most of your benefits, such as State Pension and income you have from any assets. If the local authority does pay your care home fees, then any payments you receive for Attendance Allowance, Disability Living Allowance (DLA) or Personal Independence Payment (PIP) will stop after you have been living in the care home for 28 days.
It may feel like your privacy is being invaded when someone is asking details about your finances. However, if you refuse to answer questions about your finances, you may be charged automatically for your own care.
If you wish you can get a written statement from the local authority detailing their calculations and how much you should contribute.
How much will a local authority pay?
There is usually an upper limit on how much a local authority will pay for someone’s residential care costs. This is often called the usual or standard rate. The local authority may give you a list of local care homes and they must offer you at least one care home that is suitable for your care needs.
The best place to search for a care home is carehome.co.uk as this is the leading online reviews site for care homes and you can read reviews of care homes written by family members, friends and the care home residents themselves.
If there are no places in care homes available at your personal budget level, the local authority should organise a place in more expensive care home and increase your personal budget to cover the additional cost.
If your local authority is currently funding your care and you wish to move to a care home in another county to be closer to family, you can do this and it will still be responsible for paying for your care.
If there are no vacancies in your preferred care home, the local authority should place you on a waiting list for this home and then organise alternative arrangements in the interim period for another care home or care in your home with a high level of care.
How to pay top-up fees
If you or your relative sets their heart on a more expensive care home, the local authority may agree to pay for it, providing a third party, such as a family member, friend or charity pays the extra. You, as the resident, cannot pay this extra amount, which is often referred to as a top-up fee.
Local authorities can only ask for a top-up fee if you refuse a care home that meets your assessed needs and choose a more expensive home instead.
Whoever is paying the top-up fee will have to sign a contract with the local authority agreeing to pay the fee. The agreement will state what will happen if the fees change or if the top-up fees can no longer be paid.
The top-up fee can be paid either to the local authority or to the care home. If the top-up fee can no longer be paid, the local authority has the right to move the person to a cheaper care home that meets their assessed needs.
Personal expenses allowance (PEA) in a care home
If you are state-funded, benefits such as a state pension or a private pension will be paid towards the cost of care. However, you will still need an income each week. This is called the Personal Expenses Allowance and is a set amount that a person should be left with.
Personal Expenses Allowance for 2022/23 is:
- England: £25.65
- Scotland : £28.12
- Wales: £33.99 (in Wales it's called Minimum Income Amount)
- Northern Ireland: £28.01
The allowanceis for personal items such as stationery, birthday cards and toiletries.
This amount will not be taken into account by the local authority when it is calculating how much you should contribute towards your care. English local authorities have the discretionary power to increase the personal expenses allowance in special circumstances such as if the resident has property-related expenses or is supporting a spouse.
Making the move into a care home is a life-changing decision and not only for financial reasons. It can be difficult to know when the time is right, and many are forced to make quick decisions due to rapidly increasing health care needs. Thinking about residential care in advance can reduce some of the stress and knowing the signs of when someone might need more care than what can be provided at home can help you come to terms with the decision.
- When should someone with dementia move into a care home? - Caring for someone with dementia at home is hugely challenging and there will likely be a time when they need 24-hour support from experienced carers. Tips and advice on how to know when your loved one may need to go into a care home.
- How to choose a care home for someone with dementia - Advice and information on what to look out for when researching care homes in your area as some are better suited to look after people with dementia.
- When is the right time to put someone in a care home? - General advice on when it may be time for you or a loved one to go into a care home.
- Finding a care home - A comprehensive list of questions to ask when you visit a care home to ensure it is right for you or your loved one.
Article By: Sue Learner
Last Updated: 16 May 2022
In England, if your assets (including your home, providing that no-one else is living there) are worth £23,250 or more, you will usually have to pay the full cost of care home fees.
There is currently no cap on care home fees in the UK. However, if your capital falls below the lower threshold, your local authority may cover the full cost of your care.
When someone dies, their care home will issue an invoice for any outstanding care home fees. Next of kin will not have to pay this, but instead it will be taken from the person's estate.
The cost of standard 24 hours home care can for personal care is typically £150/day or £1050/week. For companionship needs without significant personal care, the 24 hours in-home care cost is £120/day or £850/week.
In most cases, the person with dementia will be expected to pay towards the cost. Social services can also provide a list of care homes that should meet the needs identified during the assessment.
What assets are taken into account? As part of the means test, assets taken into account for care home fees include savings, investments, property (including property that you own overseas) and business assets.
- Personal possessions;
- Surrendering value of a life insurance policy;
- Capital value of an annuity;
- Capital value of an occupational pension;
- Value of a Reversionary Trust (Trust Fund not land);
- Value of a Life Interest (Trust Fund and land).
It should be a positive discussion for both parties. If price isn't negotiable, consider added value for the same fee such as a larger room. Although finding a care home for a loved one is an emotional decision, don't take negotiations personally if they don't materialise in the way envisaged.
What am I allowed to keep for personal expenses? You are allowed to keep a minimum of £24.90 each week for your own personal use. People who receive pension credit (savings credit) could be entitled to a further £5.75 personal allowance per week.
Legally, you are not obliged to pay for your family member's fees. Whether they are your mother or wife, blood relative or relative by law, unless you have any joint assets or contracts you are not financially involved in their care.
You will still get your Basic State Pension or your New State Pension if you move to live in a care home. However, if your care home fees are paid in full or part by the local authority, NHS or out of other public funds, you may have to use your State Retirement Pension to pay a contribution to the cost of care.
When a care home resident who self-funds their care dies, any unpaid care home fees are charged to their estate. The care home will issue and invoice to the person in charge of the resident's estate, and the money can be taken from their bank account(s) or the sale of their property.
Can I be paid to care for a family member? Whilst someone is mentally capable, it is of course up to them what they do with their money and whether they want to pay a relative to provide their care. However, that cost must be affordable, sustainable and reasonable in relation to the amount of care they receive.
Set up an asset protection trust
Setting up an asset protection trust is the best way to protect your estate from being used for care home fees and to preserve your loved ones' inheritance. The asset protection trust options are: Protective Property Trust. Life Interest Trust.
Home care is more cost-effective
Contrary to popular belief, home care is typically cheaper than going into a residential care home or nursing home. In addition, if you are living in your own home, its value will not be included in means-test asset calculations which decide if you qualify for public funding.
The most popular way to avoid selling your house to pay for your care is to use equity release. If you own your own house, you can look at Equity Release. This allows you to take money out of your house and use that to fund your care.
Your aunt won't necessarily have to sell her home to pay for her care – it depends on her circumstances. Her local authority will assess her finances to see how much of her care fees she must pay herself. There are situations where her property wouldn't be included in this financial assessment.
Life expectancy is less if the person is diagnosed in their 80s or 90s. A few people with Alzheimer's live for longer, sometimes for 15 or even 20 years. Vascular dementia – around five years.
Aged care. Unlike social security, for aged care purposes, the family home is generally counted as an asset, unless specific criteria are met for exempting the home (these criteria are discussed below).
Always remember – you do not necessarily have to sell your house to pay for care! If you have a relative needing full time care, read this vital information on care fees and care funding – now. It will help you to: understand that you don't necessarily have to sell the house.
The average weekly cost for a UK residential care home is around £704 and the average monthly cost is £2,816. However, you'll find that costs vary greatly across countries and regions.
main home will not be taken into account in your financial assessment during the first 12 weeks of your permanent stay in a care home. This is known is a 12-week property disregard.
Unfortunately, there are no income or capital gains tax reliefs for care payments, whether made by those in care or those who are paying on behalf of a relative.
You can have up to £10,000 in savings before it affects your claim. Every £500 over that amount counts as £1 of weekly income. If you get Pension Credit guarantee credit, you can have more than £16,000 in savings without it affecting your claim.
Trusts can be set up to protect assets from various claims. Historically one of the reasons people settled assets into a trust was to protect those assets in the event the person went into a rest home later in life.
If you move into permanent residential or nursing care and you have a partner still living at home, you can choose to pass on half your private pension to them. This then means that 50 per cent of your private pension will be disregarded from the Financial Assessment.
Obviously, it will be very hard for you to manage just on your own state pension, but the good news is that you are likely to be able to claim pension credit to top up your income. Once your husband moves permanently into a care home you will be assessed as if you were a single person, just on the basis of your income.
The parent's property could be placed on the market and the sale proceeds used to fund their care if they are moving to a care home but only if no-one else is living in the property.
They will usually be moved to their room, or another private space, where they can lie in peace until the family have been notified, the Medical Certificate of the Cause of Death has been provided and the funeral provider chosen by the deceased's family is able to collect the body.
Does your spouse or partner have to pay for your care? If you're wondering whether one partner in a couple is liable for the other's care costs, generally speaking the answer is no.
A: As long as you are living in the marital home no-one will make you sell it and the property value will not be taken into account in determining how much, if anything, your husband must contribute to his care costs.
They may talk up voluntarism, but, if you can, you should have a paid job like they do. Most of all, never, never give up a job to be an unpaid carer. It will be terrible for you when the person you care for dies, unless your job is guaranteed to be held open for you.
You could get £69.70 a week if you care for someone at least 35 hours a week and they get certain benefits. You do not have to be related to, or live with, the person you care for. You do not get paid extra if you care for more than one person.
- Contact the Carer's Allowance Unit on 0845 6084321.
- Visit your local Job Centre Plus.
- or download an application form or complete the on-line application form.
- Paying a higher refundable accommodation deposit.
- Purchasing a funeral bond.
- Gifting to family members as long as it is within Centrelink exemption rules. ...
- Making sure that home contents are valued at fire sale value and not replacement value.
- Purchase a specialised annuity.
The annual average cost of a live-in caregiver is £44, 000 - £54,600 a year for full-time 1-to-1 care. This mean an approximate 24-hour live-in care cost in the UK of around £120-150/day. This can be reduced by having 6 days care per week or by family members coming to stay during holidays.
But sometimes, an elderly adult needs hands-on assistance all day and night. So, how much does 24/7 in-home care cost? The average cost of 24/7 care at home stacks up to around $15,000 a month, whether that's 24-hour companion care or home health care.
This UK home care supplier says that you can expect the cost of a 24-hour live-in caregiver to be from £1,075 per week for a single person, or £1,375 per week for couples.