How Care Home Funding Works in the UK
A plain-English guide to the UK's care home funding system — covering the means test, capital thresholds, tariff income, property rules, and what happens when your money runs out.
The Three Routes to Funding
When someone moves into a care home in the UK, there are three main ways the costs can be met. Which route applies depends primarily on the person's health needs and financial position.
NHS Continuing Healthcare
The NHS pays all costs if the primary need is a health need. Not means-tested.
Local Authority Funding
The council contributes if capital is below £23,250 (England). Means-tested.
Self-Funding
You pay the full cost if capital exceeds £23,250. May qualify for Attendance Allowance.
The Financial Assessment (Means Test)
If you are not eligible for NHS Continuing Healthcare, your local authority will carry out a financial assessment — commonly called a means test — to determine how much you should contribute towards your care costs.
The means test looks at your capital (savings, investments, and potentially your property) and your income (pensions, benefits, and other regular income). It does not look at the assets of your children or other family members.
Capital Thresholds (England, 2026/27)
| Capital Level | What Happens |
|---|---|
| Above £23,250 | You are a self-funder and pay the full cost of your care. The council does not contribute. |
| £14,250 – £23,250 | Partial funding. The council contributes, but you pay a "tariff income" of £1/week per £250 above £14,250, plus your income contribution. |
| Below £14,250 | The council covers most costs. You contribute only from your income, keeping at least £30.65/week as personal expenses. |
Source: GOV.UK Social Care Charging Circular 2026/27.
What Is Tariff Income?
If your capital falls between £14,250 and £23,250, you are in the "partial funding" band. The council assumes you can contribute £1 per week for every £250 of capital above the lower threshold. This is called tariff income.
Example
If your capital is £18,250, that is £4,000 above the lower threshold of £14,250. Your tariff income is £4,000 ÷ £250 = £16/week. This is added to your income contribution to calculate your total weekly payment.
As your capital reduces, your tariff income decreases and the council contributes more. Once your capital falls below £14,250, tariff income no longer applies.
Property and the Means Test
Your home may be included in the financial assessment, but there are several important exceptions where it is disregarded (excluded).
If your spouse, civil partner, or a dependent relative (such as an elderly parent or disabled child) still lives in the property, it must be fully disregarded from the assessment.
When you first move into permanent residential care, your property is disregarded for the first 12 weeks. This gives you time to make arrangements without immediately having to sell.
After the 12-week disregard, you may be able to enter a Deferred Payment Agreement with the council. This means the council pays your care costs and recovers the debt from your property when it is eventually sold.
If no one lives in the property and no DPA is in place, the property value is included in your assessable capital after the 12-week disregard period.
How Income Is Assessed
In addition to capital, the means test considers your income. Almost all income is included: State Pension, private or occupational pensions, Pension Credit, rental income, and most benefits. However, you are always left with a Personal Expenses Allowance (PEA) of £30.65/week (2026/27) to spend on personal items.
The means test assumes you are claiming all benefits you are entitled to. If you are not claiming Pension Credit or other benefits, the council may still include them in the assessment as if you were receiving them. It is therefore important to claim everything you are entitled to.
Benefits to check
- • State Pension (check you are receiving the full amount)
- • Pension Credit (Guarantee Credit and Savings Credit)
- • Attendance Allowance (if self-funding)
- • Council Tax Reduction
- • Housing Benefit (if in sheltered accommodation)
Devolved Nations: Scotland, Wales & Northern Ireland
Care funding rules are devolved, meaning they differ across the four nations of the UK. The rules described above apply to England. Here is a summary of the key differences:
| Nation | Upper Threshold | Key Difference |
|---|---|---|
| Scotland | £35,000 | Free personal care (£248.70/wk) and free nursing care (£111.90/wk) available regardless of capital, following a needs assessment. |
| Wales | £50,000 | Single upper threshold of £50,000 — the most generous in the UK. No lower threshold or tariff income system. |
| Northern Ireland | £23,250 | Same thresholds as England. Administered by Health and Social Care Trusts rather than local councils. |
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