Care home fees

Care home fees

The Care Act sets the national rules for paying for care home fees.

In England, there are two capital threshold limits:

• Upper threshold (limit) – If the financial assessment shows that your capital is above the upper threshold (£23,250), you will be expected to pay all your own care home fees.
• Lower threshold – If your capital is below the lower threshold (£14,250), the local authority will pay some of your care home fees

If your capital is under the lower threshold, then your income will be used to pay for your care, provided you are left with a minimum amount, known as a ‘personal expenses allowance’ (PEA).

If your capital is between the two thresholds, the local authority may start to contribute towards the care home fees, depending on your income. You must still be left with your PEA. A person with assets between the two capital limits will pay what they can afford from their income, plus a means-tested contribution from their assets (calculated as £1 per week for every £250 of capital between the capital limits).

Deprivation of assets

If you have an asset that you transfer to someone else to avoid it being used to pay for your care, this is a deliberate deprivation of assets. The local authority can assess you as if you still own the asset. Any attempt not to include an asset in the financial assessment may be seen by the local authority as a deliberate deprivation of assets. Examples of this are transferring money into someone else’s bank account, or transferring ownership of a property into someone else’s name.

Property and the financial assessment for care home fees

If you own your own home, this may be included in the financial assessment to determine who pays your care home fees.

However, your home will not be taken into account if one of the following people also lives in the property, and will continue to live there after you have moved into a care home:

• a husband, wife, civil partner or partner
• a close relative over the age of 60
• a dependent child
• a relative who is disabled or incapacitated.

If your house is also the permanent home of someone who has been caring for you, for as long as they are living there, your local authority has discretion to decide whether or not to include the value of the home in the assessment. This applies especially in cases where the carer has given up their own home to care for you.

The local authority may also allow the carer to continue to occupy the home while charging the care fees against the home. This is known as a deferred payment agreement (DPA) and it means the fees can be recovered by the local authority when the property is sold.

Where the value of your home is included in a financial assessment, it should not be taken into account for the first 12 weeks of you living in the care home. This is called the ‘12-week property disregard’. This may mean that, during this time, the local authority will pay or contribute towards the fees. This grace period can enable the family to arrange to sell the home, or speak to the local authority about other options.

If the home is not sold after 12 weeks, the local authority can continue to pay the care home fees via a DPA. This means the local authority will claim back the money it has paid in care fees once the home is sold.

Deferred payment agreements

By taking out a deferred payment agreement (DPA), you can ‘defer’ paying the costs of your care home until a later date. The local authority provides funding as a loan but it must be repaid when the property is sold.

An important change brought in by the Care Act is that local authorities can now charge arrangement fees to set up the loan. They can also charge interest on the loan from the day it is set up.

The Care Act states that all local authorities must operate a deferred payment scheme and offer deferred payments to people meeting the criteria for the scheme. A DPA must be offered to you if your property offers adequate security and if:

• your needs are to be met in a care home
• you have less than the upper capital limit (£23,250), excluding the value of your home
• your home is not occupied by a spouse or dependent relative.

It may also be possible to have a DPA to pay for your care and support if you live in a supported living environment (such as sheltered care or extra care housing).

If you intend to keep your original home, you may be able to pay for your supported living (care and accommodation rental) from your deferred payment scheme. Permission may be refused in certain circumstances, for example if the value or equity in the property is not enough to cover the loan.

DPAs are a complicated financial transaction, and the local authority should tell you about the scheme and how it works. They should signpost or tell you about written sources of information, advice and advocacy if necessary, and if they feel you might benefit from having a DPA.

In particular, the local authority should:

• consider your potential options if you lose capacity to make decisions, and offer forward planning advice on making arrangements for deputyship, Lasting power of attorney, and help from advocacy
• discuss the importance of planning how to use, maintain and insure your property
• keep you informed about the DPA as it continues with regular written financial statements, and provide necessary information on termination of the agreement.

For more information see Lasting power of attorney, or Deputyship.

Price limits and top-up fees for care home places

There is usually an upper limit on how much a local authority will spend on your care home fees. This is referred to as the usual, or standard, rate.

The local authority will normally tell you what their price limit is. Sometimes they will provide a list of care homes in the area within this budget and you can choose from this list. You may find a different care home in the area yourself that is within its budget. For more information see Care homes: when is the right time and who decides?.

Under the Care Act, the local authority must offer at least one care home option that meets your needs, but they should offer more than one. If it is not possible to meet your needs within their price limit, they must fund your care in a more expensive care home. No one should be asked to pay a top-up fee, unless the local authority has offered a suitable care home place within its budget that meets your needs, but you (or your carer, deputy or attorney) choose for you to stay in another, more expensive, care home.

They may agree to part-fund your place in a more expensive care home, as long as a third party (such as a relative or a charity) agrees to pay the difference. This difference is between what the local authority would usually expect to pay (based on your care needs and the local authority’s price limit) and the extra cost of the more expensive care home. This difference is often referred to as a top-up fee. In some cases this can now be paid by the person with dementia themselves for example, if they are receiving section 117 aftercare under the Mental Health Act.

Top-up fees may be paid to the local authority or to the care home directly. The local authority must ensure that the person paying the top-up is willing and able to meet the additional cost, and enters into a written agreement with the local authority. The agreement should include information about what will happen should fees change, or if circumstances change and fees cannot be paid.

If the top-up fee stops being paid, the local authority may move you to a care home within its budget. This new home must meet your assessed needs. To avoid this disruption, it is important to consider whether it is possible to continue to pay the extra amount for as long as is needed, bearing in mind that this might go up over time.

Personal expenses allowance (PEA)

The Personal expenses allowance (PEA) is the minimum amount of money you must be left with each week when you are contributing towards your care costs. You can’t be charged so much that you have less than this amount left, to spend as you wish. It is not a benefit, but your own money, made available to you.

There are some circumstances where the local authority can increase the amount of the PEA. If you have an occupational pension being paid to you whilst in a care home, it is possible to pass up to half of this to your spouse or civil partner who remains at home.

In England, the Personal expenses allowance rate for 2023/24 is £28.25 a week.

Benefits and care home fees

Certain benefits, such as the mobility part of Disability living allowance, or Personal independence payment, must not be taken into account in a financial assessment for paying for care. Some other benefits, for example the War widow’s pension, should only be partially counted.

Depending on the outcome of the financial assessment, benefits may be affected. If you are fully self-funding, you can still receive some benefits (such as Attendance allowance) – these can help towards paying care home fees. If the local authority is contributing towards these fees, then any benefits you are entitled to will go towards the cost of care (including your state pension, and any other income). In these cases you must be left with your Personal expenses allowance (PEA).

It may help to speak to your local Citizen’s Advice or Age UK for a benefits check to find out whether financial help is available. Your carer may also find this useful – in areas such as protecting their pension rights, for example. For more information see Benefits for people affected by dementia.