UK Care Home Funding Explained: Who Pays What in 2025/26

By Len Burgess, Senior Care Advisor · Published 7 May 2026

Working out how to pay for residential or nursing care is one of the most stressful financial puzzles families face. The system is genuinely complicated, the rules vary across the four UK nations, and the figures shift each April.

Working out how to pay for residential or nursing care is one of the most stressful financial puzzles families face. The system is genuinely complicated, the rules vary across the four UK nations, and the figures shift each April.


This guide explains how UK care home funding actually works in 2025/26, who pays what, and the practical options open to you, whether you're planning ahead or already in the middle of arranging care for a parent.


If you'd rather see the numbers for your own situation first, our care funding calculator will give you a personalised estimate in under two minutes.


The starting point: a means test decides who pays

Whenever someone needs to move into residential or nursing care in England, the local council carries out two assessments. The care needs assessment establishes that care is genuinely required. The financial assessment, better known as the means test, works out whether the council will help pay for it.


In England and Northern Ireland, the means test uses two thresholds that have now been frozen at the same level for the 15th consecutive year:


Capital level Status Who pays Above £23,250 Self-funder You pay 100% of the fees £14,250 – £23,250 Partial support You contribute, council tops up Below £14,250 Full support Council pays (you still contribute from income)


Wales is significantly more generous: the threshold for residential care is £50,000. Scotland sits in the middle at £35,000 for residential care, but also offers free personal care for over-65s regardless of income, worth roughly £248 per week towards an older person's care home fees.


Between the two English thresholds, you contribute what's known as a tariff income of £1 per week for every £250 of capital you hold above £14,250. So someone with £20,000 in savings would pay roughly £23 a week from their capital, in addition to their income contribution.


What counts as your "assets"?

This is where the system catches a lot of people out. The means test counts:



It does not count personal possessions, the value of pre-paid funeral plans, or money held in personal injury trusts.


What about the family home?

The home is the single biggest issue for most families, and the rules are more nuanced than people often assume. Your home is disregarded, meaning it's not counted at all, in several specific situations:



If none of these applies, the home counts as capital from week 13 onwards, and most homeowners become self-funders at that point.


Are the first 12 weeks in a care home free?

This is a common Google question, and the answer needs a bit of care. The 12 weeks aren't free; you still contribute everything you can from savings and income. What's free is the value of your home being ignored during that window.


So if you have less than £23,250 in non-property assets, the council will fund you for those 12 weeks even though you own a house. After that, unless something else changes, you'll typically need to either sell, set up a Deferred Payment Agreement, or start paying privately.


How income is treated separately

Even when you qualify for council funding, all your income is counted: state pension, private pensions, Attendance Allowance (which usually stops once the council is paying), and most other benefits.


You're allowed to keep a small Personal Expenses Allowance for personal items, toiletries, clothes, hairdressing, and the odd treat. For 2025/26, this is £30.65 per week, up from £30.15 the previous year.


A typical example: if your weekly income is £220 and the home charges £950, you'd contribute £220 − £30.65 = £189.35, and the council pays the rest at the rate it has agreed with the home.


Residential homes vs nursing homes, the NHS contribution

The difference matters financially. A residential home provides personal care: help with washing, dressing, meals, and prompting medication. A nursing home has registered nurses on the premises 24 hours a day for residents with more complex medical needs.


If someone is in a nursing home and assessed as needing nursing input, the NHS pays a flat weekly contribution called NHS-funded Nursing Care (FNC), regardless of the resident's wealth. Even self-funders receive it. The money goes directly to the home.


For 2025/26, the FNC rate is £254.06 per week (standard) or £349.50 per week (higher rate, payable only to a small group of legacy cases assessed before 2007). From 1 April 2026, the standard rate rises to £267.68 and the higher rate to £368.24, a 5.4% uplift announced in March 2026.


Effectively, a self-funder in a nursing home pays around £254 less per week than the headline fee suggests.


NHS Continuing Healthcare, the full-funding route

If someone's needs are primarily health-related rather than social-care-related, the NHS pays 100% of all costs, accommodation, personal care, nursing, everything. This is called NHS Continuing Healthcare (CHC), and it's not means-tested.


CHC eligibility doesn't depend on diagnosis but on the nature, intensity, complexity and unpredictability of the person's needs. In practice, it's hard to qualify: only around 21% of people who go through the standard assessment are awarded it. Around 52,000 people in England receive it at any one time.


It is absolutely worth pursuing if a family member has complex, deteriorating or unstable health needs. Many people who qualify aren't told about it by hospital teams. If a relative is being discharged from the hospital with significant health needs, ask explicitly about a CHC checklist assessment, the first stage of the process.


What about the £86,000 cap on care costs?

A lot of people are still searching for this, but the £86,000 lifetime cap was scrapped by the government in July 2024. It had been planned for October 2025, alongside a more generous upper threshold of £100,000. Both reforms were cancelled by the Chancellor as part of wider spending decisions.


The current rules, £23,250 threshold, no lifetime cap, are what apply now and for the foreseeable future. Baroness Louise Casey is leading an independent commission on a future National Care Service, but no replacement reforms have been timetabled.


Deferred Payment Agreements: when you own a home but have no cash

A common scenario: someone has very little in savings but owns their home. They'd be a self-funder once the 12-week disregard ends, but can't physically pay £1,400-a-week fees while waiting for a sale.


A Deferred Payment Agreement (DPA) is the legal answer. The council effectively lends you the money for your fees, secured against the property as a charge. The debt is repaid when the home is eventually sold, often from the estate after death.


Interest is charged on the deferred amount, typically 1.45% above the Bank of England base rate, which currently puts it at around 4% per year. Most councils also charge a small administrative set-up fee.


The big advantage is breathing space: the family doesn't have to dump the property into a bad market or fire-sale to a developer to fund care. The downside is that interest accumulates and reduces the eventual inheritance.


"Can I just give my house to my children to avoid care fees?"

This is one of the most-searched questions on the topic, and the honest answer is: probably not, and it can backfire badly. The legal concept that catches people is deliberate deprivation of assets. If a council believes you've deliberately reduced your wealth to avoid paying care fees, they can carry out the financial assessment as if you still owned those assets.


The transferred amount is treated as "notional capital" and counted against you anyway.


The myth that there's a "seven-year rule" for care fees is just that, a myth. The seven-year rule is for inheritance tax, where it does exist. For care fees, there is no time limit at all. Councils can look back as far as they consider necessary, five years, twenty years, or longer. What matters is intent and timing: was care reasonably foreseeable when the gift was made?


What is generally fine:


What's likely to be challenged:


If a council finds deliberate deprivation, they can recover charges from the person who received the asset, or pursue County Court action. Trusts are not a guaranteed shield either — they can be challenged on the same grounds.


Are family members liable for care home fees?

No. Care fees belong to the resident, not their relatives. Local authorities and care homes cannot legally pursue children, siblings or other relatives for unpaid fees based on family relationship alone.


The only situations where a relative becomes financially involved are when they choose to: pay a third-party top-up (the difference between the council's standard rate and a more expensive home of the family's choosing), or sign a contract themselves.


If a care home asks a family member to sign as a "guarantor" or co-signatory, take legal advice before agreeing, you may be taking on personal liability you don't realise.


Do dementia patients pay care home fees?

Yes, by default, dementia is treated as a social care need rather than a health need, so the standard means test applies. This is widely seen as unfair (cancer patients receive their care free through the NHS, while dementia patients can lose most of their estate paying for theirs), but it remains the legal position.


The exception is where dementia is sufficiently advanced and complex that the person qualifies for NHS Continuing Healthcare, in which case the NHS pays everything. Anyone caring for a relative with advanced dementia should always pursue a CHC assessment.


What if you genuinely can't afford care?

The system is designed so that nobody is left without care because they can't pay. Once your assets fall below £23,250, the council steps in with partial funding; below £14,250, they fund in full (subject to your income contribution). If a family is struggling to pay during the gap between care starting and selling a home, the Deferred Payment Agreement bridges it. If care needs are primarily medical, NHS Continuing Healthcare covers 100%. The principle of universal access to care still holds, even though the financial cost to the individual is often eye-watering.


Where to get help

UK care funding is complex enough that getting independent advice is almost always worth the time. Three sources are particularly worth knowing:



Your local council's adult social services team is the formal starting point: they're legally required to carry out the needs assessment and means test free of charge.


The bottom line

UK care funding is complicated, but the underlying logic is more straightforward than it first appears. The means test decides whether you self-fund or get council help. Your home is sometimes counted, sometimes not, depending on who else lives there and whether you're in the first 12 weeks.


The NHS contributes a flat amount towards nursing care and pays in full for those with primarily health-based needs. And while there are legitimate ways to plan, there's no clever loophole that lets you give assets away once care is on the horizon, councils will see straight through it.


The single most important thing families can do is plan early, ideally before care is needed. That means understanding the rules, getting a power of attorney in place, having an honest family conversation about preferences and finances, and, for anyone with significant assets, speaking to a SOLLA-accredited adviser about how to make savings last. Leaving these decisions until a hospital discharge meeting is rarely a good place to start.


If you're at the beginning of this journey and wondering what your own family might face, our [care funding calculator] is the quickest way to get a personalised picture: enter your circumstances, and you'll see, in plain English, who's likely to pay what, what support you may be entitled to, and what your options are from there.


About this guide: Information correct as of November 2025, reflecting 2025/26 thresholds and the announced 2026/27 FNC uplift. Care funding rules change each April — bookmark this page or use our [care funding calculator] for current figures.


This guide is for general information. CareAssura is not a regulated financial adviser. For decisions involving your own circumstances, please seek advice from a SOLLA-accredited adviser, a solicitor specialising in elderly client work, or your local Age UK.

Sources

Frequently asked questions

Who pays for care home fees in the UK?

It depends on your assets. In England and Northern Ireland, if you have more than £23,250 in capital you're classed as a self-funder and pay 100% of fees yourself. Between £14,250 and £23,250 you contribute partially and the council tops up. Below £14,250 the council pays, though you still contribute from your income. Wales is more generous with a £50,000 threshold, and Scotland sits at £35,000 with free personal care for over-65s on top. The NHS pays in full only for those who qualify for NHS Continuing Healthcare, where needs are primarily health-related.

Will my house be counted in the care home means test?

Sometimes. Your home is disregarded entirely if a spouse, civil partner or unmarried partner still lives there, if a relative aged 60 or over lives there, if a child under 16 you support lives there, or if a disabled relative of any age lives there. There's also a 12-week property disregard at the start of permanent care, giving families breathing space to decide whether to sell, rent it out, or set up a Deferred Payment Agreement. If none of these apply, the home is counted as capital from week 13 onwards, and most homeowners become self-funders at that point.

Can I give my house to my children to avoid care fees?

Probably not, and trying can backfire. Councils can apply the rule of "deliberate deprivation of assets" if they believe you reduced your wealth specifically to avoid care fees. They'll assess you as if you still owned those assets, and treat the transferred amount as "notional capital." Contrary to popular belief, there is no seven-year rule for care fees (that rule applies to inheritance tax). Councils can look back as far as they think necessary, and what matters is intent and whether care was reasonably foreseeable at the time of the gift. Trusts aren't a guaranteed shield either.

What is the £86,000 care cost cap and does it still apply?

It doesn't; the £86,000 lifetime cap on personal care costs was scrapped by the government in July 2024. It had been due to come in from October 2025, alongside a more generous £100,000 upper means-test threshold, but both reforms were cancelled as part of wider spending decisions. The current rules, a £23,250 upper threshold and no lifetime cap, are what apply now and for the foreseeable future. Baroness Louise Casey is leading an independent commission on a future National Care Service, but no replacement reforms have been timetabled.

What is a Deferred Payment Agreement and how does it work?

A Deferred Payment Agreement (DPA) is a legal arrangement where your local council effectively lends you the money to pay care fees, secured against your property as a charge. The debt is repaid later, usually when the property is sold or from the estate after death. It's particularly useful for people who own their home but don't have the cash to pay weekly fees while waiting for a sale. Interest is charged on the deferred amount, typically around 1.45% above the Bank of England base rate, which currently works out to roughly 4% per year, and most councils also charge a small set-up fee. The main benefit is avoiding a forced sale in a poor market; the trade-off is that interest reduces the eventual inheritance.