Care Home Costs UK: A Complete Breakdown

Understanding Care Costs

The cost of care varies depending on your loved one’s personal circumstances, the level of care they need, and where they live. Many families worry about how they’ll manage if savings run out while in care. Knowing what support is available and planning can reduce stress for you and your family.

According to Age UK, the average cost of residential care in England is around £1,000 per week, while some luxury residential homes can cost £1700 per week or more. Over a year, this can amount to £50,000 to £70,000 or higher, depending on location and care needs.

Government Support and Means Testing

In England, whether you receive financial help towards care costs depends on a means test carried out by your Local Authority. This assessment looks at your income and assets (including savings, investments, and in some cases, property).

The Capital Thresholds (2024-2025)

Upper threshold:

£23,250
If your savings and assets exceed £23,250, you will not qualify for financial assistance from your Local Authority until your capital drops below this threshold.

Lower threshold:

£14,250
If your assets are below £14,250, you may qualify for maximum financial support, with contributions based on income alone.

Between the thresholds:

£14,250 to £23,250
If your assets fall between these amounts, the Local Authority may provide partial assistance. You would still contribute a portion of your own funds towards care costs.

Important: These thresholds are current as of November 2024 and may be subject to change. Check with your Local Authority or visit GOV.UK for the latest information.

What Counts as Assets?

Most savings and assets are included in the means test, such as:

• Cash savings
• Investments and shares
• Property (in some circumstances)

When Your Home May Be Excluded

Your home may be excluded from the assessment if:

• Your spouse or partner still lives there
• A relative aged 60 or over lives there
• A disabled relative lives there
• A child under 16 lives there
• The care is temporary (respite care)
• You are within the first 12 weeks of permanent care (see 12-Week Property Disregard below)

The 12-Week Property Disregard

When moving into permanent care, if your savings are under £23,250, your property value can be disregarded for the first 12 weeks. This gives families time to arrange finances or begin the process of selling the property without immediate pressure.
After this period, if the property has not been sold, Local Authorities may offer a Deferred Payment Agreement.

Deferred Payment Agreements

A Deferred Payment Agreement is a loan from the Local Authority that allows you to defer paying care home fees until the property is sold.

How it works:

• The Local Authority pays the care home fees on your behalf
• When the property is sold, you repay the amount borrowed, plus interest
• This prevents the need to sell the home quickly under pressure

Important considerations:

• Interest is charged on the loan
• The property must be secured as collateral
• Not everyone is eligible, check with your Local Authority

For more information, visit GOV.UK and search for “deferred payment agreements.”

Attendance Allowance

Attendance Allowance is a non-means-tested, tax-free state benefit available to people aged 65 or over who require care due to a physical or mental condition for longer than six months.

The two rates (2024-2025):

• Lower rate: £72.65 per week (for care needed during the day or night)
• Higher rate: £108.55 per week (for care needed both day and night)

Can it be used in a care home?

Yes, Attendance Allowance can continue to be paid while someone is in a care home, as long as you are paying for the care yourself and it is not funded by the Local Authority.

To apply, visit GOV.UK and search for “Attendance Allowance.”

Protecting Your Finances with a Lasting Power of Attorney

A Lasting Power of Attorney (LPA) is a legal document that appoints someone to make decisions on behalf of your loved one if they can no longer make decisions or communicate their wishes. Setting up an LPA early can make things much easier when moving into care.

The Two Types of LPA

1. Property and Financial Affairs LPA
Covers financial matters, including managing bank accounts, paying bills, and arranging care payments.
2. Health and Welfare LPA
Covers health and care decisions, including medical treatment, where someone lives, and daily care preferences.

Why it matters:

If your loved one does not have an LPA and loses mental capacity, a Court of Protection Deputy may need to be appointed. This process can be time-consuming, expensive, and stressful at an already difficult time.

You can register an LPA through the Office of the Public Guardian at GOV.UK.

Care Fees Annuities

A Care Fees Annuity is a financial product that can be purchased using savings, property proceeds, or investments. It provides a regular, guaranteed, tax-free income to cover care costs.

How it works:

• A lump sum is used to buy the annuity
• The annuity pays out a fixed monthly income to cover care fees
• Remaining capital can be “ring-fenced” from future care costs and potentially passed on to family

Things to consider:

• Pricing depends on your loved one’s age, health, and required income
• Once purchased, the decision is usually irreversible
• Seek advice from a SOLLA-accredited financial advisor (Society of Later Life Advisers)

What Happens When Savings Run Low?

If your loved one’s funds begin to run low, there are additional options to explore:

1. Reassess All Available Assets

• Property, investments, and pensions
• Income from annuities or other passive sources
• Work with a SOLLA-accredited financial advisor to maximise long-term funding

2. Third-Party Contributions

Family or friends can contribute to a Third-Party Top-Up Agreement. This helps cover care costs not fully met by Local Authority funding, such as choosing a home that costs more than the Local Authority rate.

3. Apply for Local Authority Support

Once your loved one’s assets fall below £23,250, they may become eligible for Local Authority funding.

Steps for a Local Authority Assessment

If you think your loved one may be eligible for Local Authority support, you will need to arrange two assessments:

1. Care Needs Assessment
Evaluates what level of care is needed and whether residential care is appropriate.
2. Financial Assessment
Reviews income, assets, and contributions to determine eligibility and how much support may be available.

What you’ll need:

• Proof of income (pensions, benefits, etc.)
• Details of savings, investments, and property
• Evidence of care needs and any existing care arrangements

Contact your Local Authority’s Adult Social Care team to start the process.

Getting Professional Advice

Care funding can be complex, and every family’s situation is different. It is always worth seeking professional advice from:

• A SOLLA-accredited financial advisor
• Your Local Authority’s Adult Social Care team
• Citizens Advice or Age UK for free, impartial guidance

At Boutique Care Homes, our team can connect you with financial specialists and guide you through the process of understanding your options. We are here to support you every step of the way, without pressure or obligation.

SOURCES:
Age UK: https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/
GOV.UK – Financial assessment for care home costs: https://www.gov.uk/government/publications/charging-for-care-and-support
GOV.UK – Attendance Allowance: https://www.gov.uk/attendance-allowance
GOV.UK – Deferred Payment Agreements: https://www.gov.uk/deferred-payment-agreements
Office of the Public Guardian (LPA): https://www.gov.uk/power-of-attorney
Society of Later Life Advisers (SOLLA): https://www.societyoflaterlifeadvisers.co.uk/