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One of the biggest concerns families will encounter when arranging residential care is understanding how the care will be paid for. Care home fees can vary significantly, and many families are unsure whether they will have to pay the full cost themselves or whether their local authority will contribute.
This is where means testing comes in. It is not simply a test of whether someone is “wealthy”. The assessment considers a person’s financial circumstances to determine how much they can reasonably contribute towards their care.
The rules surrounding care funding can seem complicated, particularly when property is involved. However, understanding the basics can make the process much easier to navigate.
What Is Means Testing for Residential Care?
A means test looks at someone’s entire wealth. This includes:
- Savings.
- Bank accounts.
- ISAs.
- Investments.
- Stocks and shares.
- Property.
- Land.
The purpose is to determine whether the local authority should contribute towards their eligible care costs and, if so, how much the individual should contribute. Not every asset is automatically included. There are specific rules about which forms of capital can be disregarded when a financial assessment is carried out.
This will be conducted by the local authority. The process can vary slightly between councils, so families should contact their local authority for the exact procedure. However, the assessment will usually require evidence of finances, including bank statements and information about income and property.
However, means testing doesn’t determine whether someone needs care. There are two assessments for care: a financial assessment and a care needs assessment. While a care needs assessment determines whether a person has eligible care needs and the appropriate type of care, a financial assessment will determine whether they qualify for financial assistance.
Your finances will not affect whether your care needs are assessed. A local authority must assess an adult who appears to have care and support needs, regardless of their financial circumstances.
This means that needing care and being able to afford care are two separate questions.
Will I Pay For My Own Care?
One of the most common questions families have is how much someone can have in savings before they become responsible for paying for their own care. For the 2026/27 financial year in England, the lower capital limit is £14,250, and the upper capital limit is £23,250. These limits apply to capital that has not been disregarded under the financial assessment rules.
If someone’s capital is above £23,250, they will generally be responsible for the full cost of their care. Consequently, if someone’s capital falls below £14,250, they will not be expected to contribute to their care fees at all.
However, if their capital is between £14,250 and £23,250, they may receive local authority support. Depending on their place within this range, their own contribution to their fees will shift. The statutory guidance currently uses a tariff income calculation of £1 per week for every £250 of capital between the two limits.
These figures are reviewed by the government, so families should always check the current thresholds rather than relying on an older calculation.
How Are Income and Property Treated?
Income can include rented properties, state or private pensions, or benefits. Legislation governing income can be complicated.
Someone living in a care home must be left with a Personal Expenses Allowance (PEA) rather than having all of their income taken towards care costs. This has recently increased due to current inflation. As the exact figures are subject to change, consult the GOV.co.uk website for current figures.
Property may be disregarded in certain circumstances where another qualifying person continues to live there, such as a partner. There is also a 12-week property disregard in certain circumstances when someone enters permanent residential care. This can give families some time to consider their options rather than requiring the property to be taken into account immediately.
If a person’s property is included in their assessment and they are struggling to pay their care fees without selling it, a Deferred Payment Agreement may be an option if they meet the relevant criteria.
A Deferred Payment Agreement can allow someone to delay paying some care costs that are tied to the value of their home, rather than having to sell the property immediately. The exact terms and eligibility requirements should be discussed with your local authority. Because property rules can be complicated, families should seek advice about their individual circumstances rather than assuming that the home must be sold.
How Are Attendance Allowance and Other Benefits Treated?
Benefits can interact with care funding, depending on the type of benefit received, how their care is funded, and whether they are paying for their care privately or receiving support from the local authority or NHS.
Attendance Allowance is a common benefit for older people who need help with personal care or supervision because of a disability or health condition. Whether it continues after moving into a care home can depend on who is paying towards the person’s care costs. For example, Attendance Allowance is generally not payable if someone is receiving certain types of local authority funding towards their care or NHS-funded care.
Other benefits, such as Pension Credit, Universal Credit or Housing Benefit, can also be affected by moving into residential care. The rules vary depending on the individual’s circumstances, so families should check how a move into care could affect their existing benefits before making financial decisions.
If your loved one receives benefits, speak to the local authority financial assessment team or a benefits adviser before making assumptions about their care costs. You can also check the latest guidance from GOV.UK, as benefit rules and thresholds can change.
What Happens During a Financial Assessment?
Although the process can seem intimidating, a financial assessment allows the local authority to understand the person’s financial circumstances. The process will usually involve several stages.
- Your care needs are assessed
The local authority first needs to understand what care and support the person requires. This assessment should consider their individual needs and circumstances. - Your financial circumstances are reviewed
If the local authority is going to charge for the care, it will carry out a financial assessment to establish what the person can afford to contribute. - You provide financial information
You may be asked to provide evidence relating to savings, income, investments and property. Having this information ready can make the process easier. - Your contribution is calculated
The local authority will use the information provided to calculate how much the person can reasonably contribute towards their care. - You receive information about the assessment
The local authority should provide a written record explaining how the assessment was carried out, what the charge will be, and how often it will be paid.
If you are unsure about any part of the calculation, ask the local authority to explain how it reached the figure.
What If the Care Home Costs More Than the Council Will Pay?
A financial assessment determines what the person can afford to contribute, but this does not necessarily mean that every care home will cost the same.
Local authorities have arrangements for funding care placements, and there may be situations where a preferred care home costs more than the amount the local authority would normally pay.
In these circumstances, an additional payment, sometimes referred to as a third-party top-up, may be required.
This is something families should ask about when comparing care homes.
Before choosing a home, ask:
- What are the home’s weekly fees?
- What does the fee include?
- Does the local authority normally fund placements at the home?
- Could an additional payment be required?
- Could fees change if the resident’s care needs increase?
Understanding the full cost before moving into a care home can prevent unexpected financial pressure later.
Can Care Home Fees Change After the Means Test?
Care costs are not necessarily fixed for the entire time someone lives in a care home. There are several reasons why the amount someone pays can change. For example, their:
- Care needs may increase.
- Income may change.
- Savings may change.
- Financial circumstances may change.
- Care arrangements may change.
A person’s assessed contribution can also be affected if their financial circumstances change. This is why families should keep the local authority informed about significant changes and ask for the financial assessment to be reviewed when appropriate.
It is also important to distinguish between the care home’s fees and the resident’s assessed contribution. The amount a care home charges and the amount the individual is assessed as being able to pay are not necessarily the same figure.
What If You Disagree With a Financial Assessment?
If you believe a financial assessment is incorrect, you do not simply have to accept the figure provided. Start by asking the local authority to explain how the contribution was calculated. Check that:
- All financial information is correct.
- The correct income has been recorded.
- Any relevant capital disregards have been considered.
- Property has been treated correctly.
- Any changes in circumstances have been included.
The local authority should provide information about how the assessment was calculated. If you still believe something is wrong, ask about its review or appeals process. For more complicated circumstances, independent financial advice can also be useful.
Understanding Your Care Funding Options
Understanding how means testing works can make the financial side of choosing residential care feel much less daunting. While the rules can be complicated, families do not have to work everything out alone. Your local authority can explain the assessment process, while independent financial advice can be valuable if your circumstances are more complicated.
If you are considering residential care for a loved one, speak to your local authority about a care needs and financial assessment. Most importantly, don’t let uncertainty about funding prevent you from asking for help. Understanding your options early can make choosing the right care and planning for the costs much easier.
