One of the first questions families face when a loved one needs residential care is a simple but daunting one: who is going to pay for it? The honest answer is that it depends on your individual financial circumstances. Some people fund their own care entirely. Others receive support from their local authority. Many receive a combination of both.
Understanding how care home funding works in England before you need it puts you in a far stronger position. This guide explains the main routes to funding, how the means test works, what the current thresholds are for 2026, and what options exist if your property forms part of your assets.
At Merling Care, we believe families should never face these decisions without clear information. Our teams at Glebe House in Staines and Moorland House in Barton-on-Sea are happy to talk through funding options with you and help you find the right guidance.
In England, who pays for care home fees depends on a financial assessment of your income, savings, and assets. People with capital above £23,250 are expected to fund their own care. Those with less may receive support from their local authority. Some people receive NHS funding that covers all or part of their costs.
There are three broad routes to funding residential care:
Most people begin as self-funders, particularly those who own their own home, and may later qualify for local authority support as their assets reduce. The two systems can also operate alongside each other.
Before your local authority can contribute to your care costs, it will carry out a financial assessment, commonly known as a means test. This is a formal evaluation of your income, savings, and assets, carried out under the Care Act 2014.
The means test considers:
The outcome of the means test determines how much, if anything, your local authority will contribute. The process is handled by your local council’s adult social care team. Anyone who believes they may need care should request a care needs assessment first, followed by a financial assessment.
The capital thresholds that determine local authority funding eligibility have remained unchanged since 2010. For the financial year 2026 to 2027, confirmed by the Department of Health and Social Care (DHSC) in February 2026, they remain:
If your capital falls between £14,250 and £23,250, you will receive some local authority support. For every £250 (or part of £250) you hold above the lower limit, you are treated as having a “tariff income” of £1 per week, which is counted as a contribution towards your care.
The thresholds have been frozen for fifteen consecutive years. With average residential care costs in the South East running at around £50,000 per year, many families find that even modest savings take them above the upper limit. If you are approaching the £23,250 threshold, it is worth contacting your local authority early — Hampshire County Council, for example, recommends making contact when your capital reaches £40,000 or below, to allow time for assessment.
These thresholds apply to residential and nursing care placements in England. Different rules apply in Wales, Scotland, and Northern Ireland.
Capital includes most savings and assets you own at their current value. For care home placements, this typically includes:
What is generally excluded:
Your local authority has a legal duty to disregard the value of your home in specific situations. These are covered in the section below.
This is one of the most common concerns families have. The answer depends on who lives in the property after you move into care.
Your home is disregarded from the means test if:
The 12-week property disregard: For the first 12 weeks after you move permanently into a care home, your property value is automatically disregarded from the financial assessment. This provides a short window to make decisions about your property before it is included in the calculation.
If none of the above disregards apply and your property is included in your capital, you may still avoid having to sell it immediately, through a Deferred Payment Agreement.
A Deferred Payment Agreement (DPA) is an arrangement with your local authority that allows you to use the equity in your home to fund your care, without selling the property immediately.
Under a DPA:
To be eligible for a DPA, you generally need sufficient equity in your home to cover at least 12 months of care costs, be registered with the Land Registry, and either have the mental capacity to enter the agreement or have a legally appointed representative.
The maximum amount that can be deferred is calculated as the property value, minus 10%, minus the lower capital limit of £14,250. For example, a property worth £200,000 would allow a maximum deferred amount of approximately £165,750.
While a DPA is in place, you are entitled to retain a disposable income allowance of £144 per week from your income, rather than the standard Personal Expenses Allowance.
If your care is funded or part-funded by your local authority, you are entitled to keep a minimum weekly sum for personal use. This is called the Personal Expenses Allowance (PEA).
From April 2026, the PEA is £31.80 per week, confirmed by the DHSC in the 2026 to 2027 charging circular. This is intended for personal items such as clothing, newspapers, toiletries, and outings. It cannot be used to contribute towards care costs that the local authority has already contracted to pay.
Local authorities pay a set rate for care, based on the type of care needed and local market conditions. If your preferred care home charges more than this rate, a “third-party top-up” fee is required to cover the difference.
A third-party top-up can be paid by:
The person receiving care cannot ordinarily pay their own top-up from their income or savings, unless they are in a temporary placement or have a Deferred Payment Agreement.
If your capital is below the upper threshold of £23,250, your local authority is legally required to offer at least one care home option that meets your assessed needs at their standard rate, without requiring a top-up.
Deliberate deprivation of assets is when someone gives away money, property, or other assets specifically to reduce their capital below the means-test threshold in order to qualify for local authority funding.
Local authorities are permitted to treat you as if you still own the asset if they believe it was given away or spent with the intention of avoiding care costs. This can apply to:
There is no set time limit on how far back a local authority can look. Any financial decisions made in anticipation of care needs should be approached carefully and with independent financial advice.
If your capital is above £23,250, you are responsible for meeting the full cost of your care home place. This is known as self-funding.
Self-funders often pay higher fees than local authority-funded residents for equivalent care, because care homes receive a lower contracted rate from local authorities. It is worth asking any care home about their fee structure for self-funders and what is included.
Self-funders are entitled to:
Self-funders in nursing care homes also receive the weekly NHS-Funded Nursing Care contribution, currently £267.68 per week from April 2026, paid directly to the care home on their behalf. This reduces the amount they pay each week, even though they remain self-funding in all other respects.
You can read more about NHS funding for care homes, including how FNC and CHC work, in our companion guide: NHS Funding for Care Homes: FNC and CHC Explained.
The previous government announced a lifetime cap on personal care costs of £86,000, which would have meant that no individual would need to spend more than this amount on their personal care over their lifetime. This was due to be introduced in October 2025 but was scrapped by the incoming Labour government in July 2024.
As of April 2026, there is no cap on care costs in England. Individuals may continue to self-fund indefinitely until their capital falls below the £23,250 upper threshold.
At Merling Care, we accept both self-funded and local authority-funded residents. Our care is personalised and completely transparent, with plans readily available to staff and families at all times.
We understand that the financial side of care can feel overwhelming. Our teams are happy to explain how our fees work, what is included, and how NHS funding may reduce your costs. We can also help connect you with independent financial advice and local authority contacts.
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No. People with capital below £23,250 may receive local authority support. Those with primarily health-related needs may qualify for full NHS funding through Continuing Healthcare. However, anyone with capital above £23,250 is generally expected to fund their own care until their assets reduce to that level.
There is no fixed time limit. Local authority funding continues for as long as the person remains eligible based on their financial assessment and their care needs are assessed as requiring the placement. Financial assessments are reviewed periodically.
Yes, within limits. Under the Care Act 2014, you have the right to choose your preferred care home, provided it meets your assessed needs and the provider is willing to accept the council’s standard rate. If the home charges more, a third-party top-up will be needed.
This depends on your circumstances. Attendance Allowance and the care components of DLA and PIP typically stop after 28 days if your care is funded by the local authority. State Pension and Pension Credit continue to be paid and are taken into account in the financial assessment. Self-funders may retain Attendance Allowance.
You have the right to challenge the outcome. You can ask the local authority to review its decision, or escalate to a formal complaint. Independent financial advisers and organisations such as Age UK can help you understand whether the assessment has been carried out correctly.
A financial adviser who is a member of the Society of Later Life Advisers (SOLLA) specialises in care funding and can help you explore all available options. Your local authority is also required to provide you with information and advice on funding when you request a care needs assessment.