Care home costs

Paying for a care in a residential care or nursing home can seem a complex subject. This page answers some common questions about care home costs, sets out the different options, the ways to pay and things to consider.

Please note that our information below is general guidance. It is not specific to anyone’s current circumstances, future goals or objectives.

Financial assessment

Your local authority will check how much help and what kind of care you need: this is the needs assessment.

Following on from that, the free financial assessment calculates the total cost of care and how much you’ll need to contribute. During the financial assessment it’s important to be open and honest about all your assets, so everything can be taken into consideration.

If you don’t want a financial assessment you can choose to pay for your care home yourself – this is called self-funding.

Savings threshold for care & nursing home fees

In England, if you have assets of more than £23,259, you’re what’s called a ‘self-funder’, meaning you’ll need to pay the full cost of your care.

Around half of care home residents are self-funders. The other half are state-funded and their care home is paid for by their local council.

Calculating your assets: what’s taken into account?

Your assets are considered to be your savings, investments and the equity from your home.

Your home won’t be included in the calculation if your husband, wife, civil partner, a close relative aged 60+ or a dependent child or disabled relative lives there. Your home also isn’t included in the means test for the first 12 weeks that you’re in a care home.

The means test will also take into account 50 percent of any capital held jointly, such as in a joint savings account.

Paying for a care home yourself (self-funding)

The cost of a care home will vary depending on where you live and what kind of care you need.

If you and/or your family are dealing direct with a care home, you need to know exactly what’s included in the fee. Questions you should ask include:

  1. Is anything we’ve discussed an ‘extra’? If so, how much will it cost?
  2. If the care home wants to increase its fees, how much notice does it need to give you?

As a self-funder, you choose your care home. And it’s not all about the cost.

Can I avoid selling my home to pay for a care home?

Unless your husband, wife, civil partner, a close relative aged 60+ or a dependent child or disabled relative is living in your home, you may have to sell it to pay for a care home.

If you do sell, there are options for what to do with the proceeds:

  • Bank account – choose a high interest account, but make sure your money isn’t locked away for a long period of time
  • Investment – to generate income
  • Care Free Annuity – a payment plan with a regular income. The income is tax-free if it is paid direct to your care home

If you don’t want to sell your home straightaway, there are options:

  • Renting out your home – use the income to go towards paying for your care home
  • Equity release – if you’re over 55 this lets you mortgage your home. However, there could be a relatively high interest rate to pay
  • Deferred payment scheme – if your savings total less than £23,250 your council pays for your care home. It then claims the money back from the sale of your home after your death

Local authority funding for care home costs

If your assets total less than £23,250 you’ll qualify for some support. In England, you should get maximum support if your assets are worth less than £14,000.

Also, if it looks like your savings or income will fall below the £23,250 threshold, your local council should start paying for some, or all, of your care.

If you’re in this situation, it’s a good idea to get in touch with your local council a few months before it happens, as there will be an assessment process to go through.

Your local council will pay you a personal budget to spend on your care. In some cases the council will arrange your place and pay for the care home directly. If you arrange your care home yourself, you’ll need to keep records on what you’ve spent the money on.

In either case, you have the right to choose which care home you live in. The council must give you at least one affordable choice.

If you prefer a care home that costs more than your personal budget, a family member of friend can pay a top-up fee to make up the difference.

When should I start financial planning for care home costs?

The earlier you start planning, the better. Talk to your family and find more information from the NHS about how to pay for care and support.

Financial advice disclaimer

The information above summarises how living in a care home is often financed. Agincare care homes are not authorised to provide investment or other financial advice and nothing on this page should be construed as such. We recommend you obtain independent financial advice from an adviser registered with the Financial Services Authority.