Care Home Fees Funding Options: How to Pay for a Loved One’s Care in the UK

There’s no handbook for helping someone into care. It’s emotional, often urgent, and rarely straightforward. The financial side adds another layer of pressure.

If you’re reading this after a difficult conversation over Christmas or having recently faced the reality of a relative’s declining health, you’re not alone. January is often the point where families start asking the hard questions. By February, the practical decisions begin.

One of the biggest questions is: how do we pay for care, and what are our options?

In this article, we’ll walk you through the main funding options in England. The rules in Wales, Scotland and Northern Ireland are significantly different.

We’ll explain the rules around self-funding and explore how tools such as care annuities, property sales and investments can support longer term planning. Whether you’re just starting to explore the topic or actively making decisions, this guide is designed to help you feel more informed, more in control and less alone.

Quick Summary: Care Home Funding in the UK

• You’re usually responsible for funding care if assets exceed £23,250, referred to as the upper capital limit
• A care needs assessment is required to determine eligibility for funding and the type of care needed
• The local authority’s judgement plays a key role in determining eligibility and support
• Common funding routes include annuities, property sale and investing savings
• Each option has advantages and limitations depending on health, timeframes and priorities
• Local authority support may become available when funds fall below the upper capital limit

Who Pays for Care if They Own a Property? Understanding Self-Funding Rules

In England, if someone has more than £23,250 in savings, assets or property, they are expected to pay for their own care home fees. This is known as self-funding.

This usually includes the value of their home, unless a spouse or dependent relative still lives there. If you are self-funding, you may need to sell your home to pay for care unless your partner continues living in it.

Many families are surprised to learn that giving away assets to avoid self-funding is unlikely to be effective. Local authorities assess what is known as deliberate deprivation of assets and may still include transferred assets in their calculations.

Self-funders are generally able to choose their care home and make arrangements directly with the provider. This can offer greater choice, but it also places responsibility on the family to ensure fees remain affordable over time.

If you are unsure whether you need to pay for care, you can ask your local council for a financial assessment.

Rising Care Home Costs: Why Planning Early Matters

On average, residential care costs around £5,192 per month. Nursing care increases this to around £6,140 per month. Costs vary significantly by region, type of care and quality of facilities.

Care homes providing specialist services such as dementia care often charge higher fees. There is no cap on care home fees for self-funders and costs have risen significantly in recent years.

Local Authority Funding Options: What Support is Available?

When assets fall below the upper capital limit, the local authority may contribute to care costs following a financial assessment.

The individual is usually required to contribute most of their income, while being left with a small Personal Expenses Allowance for personal spending.

If the chosen care home charges more than the council’s standard rate, a top up payment may be required from family members.

Understanding how these assessments work helps families plan for transitions between self-funding and local authority support.

Nursing Care and NHS Funding

If nursing care is required, NHS funded nursing care may be available. This is a fixed weekly contribution paid directly to the care home to cover nursing costs, regardless of income or assets.

For more complex needs, NHS Continuing Healthcare may cover the full cost of care. Eligibility is based on health needs and involves a detailed assessment.

These routes can significantly reduce costs where applicable, so it is important to explore them early.

Funding Options: Common Routes to Consider

Most families use one or a combination of the following approaches. There is no single right answer. The most suitable option depends on health, life expectancy, cash flow needs, estate planning priorities and personal preferences.

1. Immediate Care Plan: Annuity Based Funding

An immediate needs care annuity provides a guaranteed income for life, paid directly to the care provider in exchange for a one-off lump sum.

This can offer certainty and remove the risk of running out of money if care is needed for longer than expected. The income is usually tax free when paid directly to the care provider.

Potential benefits include:

• Guaranteed income for life
• Protection against longevity risk
• Predictable cash flow for care fees
• Potential to preserve the rest of the estate

Potential limitations include:

• Significant upfront cost
• Limited flexibility, often irreversible once set up
• Value will be eroded by inflation unless you choose an escalating option and depends on how long care is required
• Payments may stop upon death, optional capital protection features may increase cost

For some families, certainty and peace of mind are the priority. For others, flexibility and access to capital are more important.

2. Deferred Care Plan: Annuity That Starts Later

A deferred care annuity works in a similar way, but payments start after an agreed period.

This can suit families who can fund care initially but want to insure against longer term costs.

Potential benefits include:

• Lower upfront cost than immediate annuity
• Protection against long term care risk
• Ability to self-fund initially

Potential limitations include:

• No income during the deferred period
• Ongoing exposure to care costs before payments begin
• Pricing depends on health and life expectancy
• Value will be eroded by inflation unless you choose an escalating option and depends on how long care is required
• Limited flexibility, often irreversible once arranged
• Payments may stop upon death, optional capital protection features may increase cost

3. Selling the Property and Property Based Options

Selling the home is one of the most common funding routes.

It provides a lump sum that can be used to pay fees directly and removes the need to manage a property.

Potential benefits include:

• Immediate access to capital
• Simplicity
• No ongoing property management

Potential limitations include:

• Irreversible decision
• Funds may be depleted over time
• Reduced estate for beneficiaries

Property based alternatives to an outright sale

In some circumstances, families may consider alternatives to selling immediately, such as deferred payment agreements with the local authority or lifetime mortgages, often referred to as equity release.

A lifetime mortgage is a loan secured against your home and allows homeowners, typically aged 55 or over, to access some of the value tied up in their home without selling it straight away. The most common form is where interest rolls up and the loan is repaid when the homeowner dies or moves into long term care.

Potential benefits include:

• Access to tax free cash without selling the home
• Ability to remain in the property for as long as possible
• Flexibility in how funds are used, including to support care costs
• Option to protect a portion of the property’s value for beneficiaries in some plans

Potential limitations include:

• Interest rolls up over time, reducing the value of the estate
• May not meet your needs if you wish to move or sell your home
• Early repayment charges may apply
• Reduced inheritance for beneficiaries
• Not suitable for short term funding needs in many cases

Lifetime mortgages can be helpful in certain situations, particularly where there is a strong desire to retain the property or where other sources of funding are limited. However, it is a long-term financial commitment and should be considered carefully as part of a wider care funding and estate planning strategy.

4. Investing to Support Care Costs

Investing savings or sale proceeds can help generate income and potentially extend how long funds last.

This approach can suit families who want to balance income needs with preserving capital.

Potential benefits include:

• Flexibility
• Potential to generate income
• Opportunity to preserve some capital
• Ongoing control over assets

Potential limitations include:

• Investment risk and market fluctuations – the value of an investment and the income from it could go down as well as up and investors may not get back the amount originally invested.
• Requires active management
• Returns are not guaranteed

Investing for care requires careful planning to match income needs, timeframes and risk tolerance.

What Happens When the Money Runs Out?

If funds fall below the upper capital limit, local authority support may become available. However, this can sometimes lead to changes in care arrangements.

Planning in advance helps avoid disruption and provides greater continuity of care.

Avoiding Surprise Costs

Additional charges for services such as hairdressing, outings or specialist treatments can increase overall costs.

Understanding what is included in care home fees helps family’s budget more accurately.

When to Seek Financial Advice

Care funding decisions involve significant sums and long-term consequences.

Specialist advice helps families compare options, understand trade-offs and create a plan that reflects both financial and personal priorities.

Final Thoughts: Get Clarity Before You Act

There is rarely a perfect solution. The right approach depends on your family’s circumstances, values and priorities.

What matters most is understanding your options and making informed decisions rather than reacting under pressure.

We help families plan early, weigh up the alternatives and put practical funding strategies in place so that care can be funded with confidence and dignity.

Feeling Unsure About the Next Step?

We’re here to help you make sense of it all. You’ll get clear advice, thoughtful planning, and the time to talk things through properly.

Whether you’re actively making decisions or just want to understand your options, we’re always happy to help.

If you would like to get in touch, you can call our Hawsons Wealth Management team on 0114 229 6557 or contact us using the form below.

Disclaimer

An annuity is an irreversible decision; once purchased, you cannot usually change your mind or cancel the contract. The level of income provided depends on your age, health, and prevailing interest rates at the time of purchase. Inflation will reduce the spending power of a level annuity over time.

The value of your investments can fall as well as rise. You may not get back what you invest. The content on this page does not constitute financial advice.

Information accurate on 3rd March 2026.

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