Who pays for care home costs?

A guide to social care funding for older people

Most NHS services are generally free at the point of use, but social care is a different story altogether. Depending on someone’s financial situation, paying for care home fees rather than getting public funding may be required.

Millions of people need care in a residential facility or at home. It’s high on the political agenda, and potentially a confusing and worrying issue for older people and their families.

This guide looks at some of the most important issues around paying for care home fees and at-home social care:

• Who qualifies for funding towards their care home costs?
• How does funding for care at home work?
• What happens if I don’t qualify for care funding?
• How to avoid selling your house to pay for care
• Are next of kin responsible for care home fees?
• Selling your parents’ house to pay for care
• How to protect an inheritance from nursing home costs
• Where to get more information about care funding
• Equity release to pay for care

Please note: This article is provided for information purposes only and does not represent financial advice. If in doubt, you should seek independent financial advice.

Who qualifies for funding towards their care home costs?

Let’s start our review of options for meeting care home costs with a look at what funding is available. The procedure and criteria for assessing eligibility differs slightly across each country in the UK. However, it typically starts with assessing someone’s care needs, and what they can do by themself. 

A care plan is then created, including confirmation of how much it will cost. A financial assessment ‘means test’ is then carried out to see how much the individual can afford in terms of paying for care home fees.

The financial assessment for care home costs involves looking at the individual’s assets/capital. This includes their property wealth (less any outstanding mortgage), stocks and shares, and savings. 

If someone else is living in your home, the assessment won’t usually include your property’s value if the other person is any of these:

• Your partner.
• Your former partner (in some circumstances).
• A dependent child of yours under 18.
• A sick or disabled relative.
• A relative aged 60 or over.
  

Capital limits for care home costs

The capital limits used when assessing if you need to pay for your care home costs in England and Northern Ireland are as follows for 2022/23:

• You wouldn’t qualify for local authority funding towards the cost of a care home if you have more than £23,250 in assets (known as the upper capital limit).
  
• If your assets are less than the upper capital limit, but above the lower capital limit of £14,250, you may need to contribute towards your care home costs. This will be based on affordability, taking account of your assets and income.
  
• If your assets are less than £14,250, you may still need to contribute towards your care home costs. How much you contribute will be based only on your income level.

Here you can find information about the capital limits for Wales and Scotland.

How does funding for care at home work?

When it comes to at-home care, the upper and lower capital limits are at the discretion of each local authority. They won’t be lower than the ones stated above for care homes, but may be higher in some cases. 

Also, your property value will NOT be included in the financial assessment. This also applies if you need to go into a care home temporarily. 

People often require reablement. This is short-term care at home after leaving hospital, or after a fall or short illness. It’s free for up to six weeks, with no means testing involved. When someone needs care at home for more than six weeks, there is a process to assess who pays for it. 

If you are eligible for care at home, your local authority or another organisation will typically arrange the care for you. In some circumstances however they may pay you directly and you would arrange the care. 

Where to get more information about care funding

Please note that care funding works differently in each country of the UK. Further information is available on these websites:

• England: Age UK or the NHS.
• Scotland: Age Scotland or Care Information Scotland.
• Wales: Age Cymru or the Welsh Government.
• Northern Ireland: Age NI, NI Direct or your Health and Social Care Trust.

What happens if I don’t qualify for care funding?

If an individual isn’t eligible for help with care home costs or at-home care costs, they may have to pay for care for themselves. Even in this case, the local authority should still carry out a free needs assessment to check what level and type of care is required.   

If you are a self-funder, you may decide to arrange the care you need with care providers directly. Alternatively, you may be able to ask your local authority to arrange the care, and then pay the local authority. 

How to avoid selling your house to pay for care

There are ways that someone may be able to avoid having to sell their home to pay for care home costs. One alternative is a ‘deferred payment agreement’, which is available in England, Wales and Scotland. There isn’t a formal deferred payment system in Northern Ireland, although it may be possible to make a similar arrangement. 

Under a deferred payment agreement, the local authority agrees to pay your care home costs. It’s a type of loan that will be repaid at a later date through the sale of your home, either before or after you pass away.

This will of course need to be set up properly. Local authorities have processes to do this, for example by asking the Land Registry to put a legal charge on your property until the debt is repaid.

A deferred payment agreement may be suitable if you don’t wish to sell your home, for example if someone else also lives there. This is quite uncommon however, as if someone else is living in your home its value will often be excluded from the financial assessment.

There may also be ways to ring-fence a home from care home fees and specialist solicitors can advise you.

Are next of kin responsible for care home fees?

There is often confusion about whether next of kin are responsible for care home fees. People may worry that they are responsible for their partner’s care or their parents’ care, for example.

The fact is that you are not responsible for someone else’s care home fees – even if you are their next of kin. Of course, children and other family members often contribute towards their loved ones’ care fees, but they are not legally obliged to do this. 

For a couple with a jointly-owned property for example, if the spouse or partner who doesn’t need care still lives in the property, its value isn’t usually included in the means testing. 

An underlying principle is that a partner who does not require care must not suffer financial hardship as a result of means testing of their partner’s assets.

Age UK has an excellent paying for care factsheet that explains further.

Selling your parents’ house to pay for care home costs

If your parent lives alone and goes into permanent residential care, their house will likely be included in the means testing. It may therefore need to be sold to help fund the care home costs.

This is a potentially complex subject and you may wish to read Age UK’s selling your home guide for more information.

How to protect an inheritance from nursing home costs

One potential way to protect assets from care home fees is to change the way a property is owned. It may be possible to change from ‘joint tenants’ ownership to ‘tenants-in-common’.

This would enable the first of a couple to die to leave their share of the property to someone other than their spouse. That share of the property would then have to be disregarded when assessing the remaining person’s assets, should they require care. 

Protecting assets from care home fees is potentially a complex subject. We strongly recommend therefore that you seek legal advice to explore options for protecting an inheritance from nursing home costs.

Something to bear in mind is the ‘deprivation of assets’ legislation. This prevents you from deliberately getting rid of your assets to avoid or reduce your contribution to care costs. You may fall foul of the Care Act 2014 if you transfer assets ‘with the intention of avoiding charges’ for care.

Equity release to pay for care

Equity release may be an option for someone who is unable or unwilling to access their financial assets to pay for care costs. 

For example, someone may wish to buy a care annuity to pay for care at home for the rest of their life. If they don’t wish to dip into their savings to do this, a lump sum lifetime mortgage could be an alternative way to fund the annuity. 

It is essential that you get advice on equity release. This is especially true when it comes to an issue as potentially complex as equity release and care home fees or at-home care costs. 

If you would like to discuss options for using equity release to pay for care costs, please call us on 0808 178 3055 or request a call back and we’ll arrange a no-obligation appointment with an adviser.