Care Home Funding Guide: Understanding the Costs

Care home funding is one of the most confusing parts of arranging care for a loved one. The rules around who pays, how much, and when council support kicks in are not always clearly explained, and families often arrive at this process mid-crisis, under pressure, and without time to research.

This guide sets out how care home funding works in England in plain terms. We cover self-funding, local authority support, NHS Continuing Healthcare, and the financial assessment process, so you can go into every conversation with the council or a care provider knowing exactly where you stand.

If you are exploring care options for a family member and want to talk through how funding might work in your situation, our team at Living Developments is happy to help. Get in touch with us here.

What Does Care Home Funding Actually Cover?

Before you look at who pays, it helps to understand what the fees cover. At our homes, including Elmtree House in Merseyside, The Millfield in Keswick, and The Willows in Marton Moss, the weekly fee includes accommodation, all meals, personal care, medication management, laundry, and 24-hour staff support.

Some services, such as hairdressing, specialist outings, or certain therapies, may carry an additional charge. We are transparent about this from the outset so families can plan without surprises.

"One of the first things we tell families is exactly what is included in the weekly fee. We have seen what happens when that conversation is left until after a placement starts, and it is not fair on anyone. Transparency from day one is non-negotiable for us." -- Living Developments

Who Pays for Care Home Fees?

There are three main routes to funding care home fees in England.

Self-Funding

If your total capital (savings, investments, and in most cases the value of your home) is above £23,250, you are classified as a self-funder. This threshold remains unchanged for the 2025 to 2026 financial year. Self-funders pay the full cost of their care directly to the provider.

It is worth noting that the proposed reforms to raise this upper limit to £100,000, and to introduce an £86,000 lifetime cap on care costs, were scrapped by the Labour government in July 2024. The current thresholds remain in place.

If you are self-funding now but your capital is reducing over time, you have the right to approach your local authority for a financial assessment once your assets approach the threshold.

Local Authority Funding

If your capital falls below £23,250, you may be eligible for financial support from your local authority. The way this works in England is as follows:

• Above £23,250: You fund your own care in full.
• Between £14,250 and £23,250: You receive partial support. You also pay a "tariff income," calculated at £1 per week for every £250 of capital you hold above £14,250.
• Below £14,250: Your capital is disregarded. You still contribute from your income (pensions and benefits), but the council meets the rest.

Local authority funding is not automatic. You must first undergo a care needs assessment, then a financial assessment (also called a means test).

One important point: if the care home you choose costs more than the council's standard rate for your area, a third party (usually a family member) may be asked to contribute a "top-up fee" to cover the difference. This is a common arrangement and worth discussing with the council before any placement is agreed.

NHS Continuing Healthcare (CHC)

NHS Continuing Healthcare is a package of care funded entirely by the NHS for people who have a primary health need. It covers the full cost of care, regardless of your financial situation, and can be provided in a care home setting.

Eligibility is assessed using the NHS Decision Support Tool, which looks at the nature, complexity, intensity, and unpredictability of your needs. A diagnosis alone does not qualify someone. The assessment is holistic and looks at the full picture of a person's health.

If your loved one has significant, complex health needs, it is worth requesting an NHS CHC checklist assessment from your GP or hospital discharge team. Many families are not told they can do this.

For more detail on how NHS funding interacts with care home placements, see our article on NHS funding for care homes explained.

What Is a Financial Assessment and How Does It Work?

A financial assessment (sometimes called a means test) is carried out by your local authority once a care needs assessment has confirmed that residential care is the appropriate route. It looks at:

• Capital: Savings, investments, property (including your home in most cases), and other assets.
• Income: Pensions, benefits, and any other regular income.

Your home's value is usually included in a care home financial assessment. There are exceptions: if a spouse, partner, or dependent relative continues to live in the property, the council must disregard its value.

The financial assessment is free. The council uses the figures to calculate your contribution and confirm whether they will fund any portion of your care. You have the right to a written copy of the outcome.

It is illegal to deliberately transfer or give away assets to avoid care fees. Local authorities can investigate and, if they conclude assets were intentionally reduced to qualify for funding, they can assess you as if you still held those assets.

Other Sources of Funding Worth Knowing About

Attendance Allowance

Attendance Allowance is a benefit paid to people over State Pension age who need help with personal care because of a physical or mental disability. It is not means-tested. However, once you move into a care home funded by the local authority, Attendance Allowance usually stops after four weeks.

If you are self-funding, Attendance Allowance may continue and can help offset care costs. The current rates are £72.65 per week (lower rate) and £108.55 per week (higher rate).

Pension Credit

If you are self-funding in a care home and your income is low, you may still qualify for Pension Credit. This tops up income for people over State Pension age and can contribute meaningfully to care costs.

Deferred Payment Agreements

If your capital is tied up in property, your local authority may offer a Deferred Payment Agreement. This allows the council to fund your care and recover the cost from the sale of your home later (typically when the property is sold or on death). Interest is charged on the deferred amount, but it prevents families from having to sell a home urgently to fund care.

How Much Do Care Homes Cost in the North West?

Care home fees vary by region, provider, and level of care required. At Elmtree House, fees start from £800 per week for residential care. For accurate pricing at any of our three homes, we provide personalised quotes following a care assessment. Contact us to discuss your situation:

• The Willows (Lancashire): 01253 693961
• The Millfield (Cumbria): 017687 72099
• Elmtree House (Merseyside): 01925 291492

Frequently Asked Questions

Does my home always get included in the means test?

In most cases, yes. If you are moving into a care home, the value of your property is typically included in the financial assessment. The main exceptions are if a spouse, civil partner, or dependent relative lives there, or if a former carer of yours (who gave up their own home to care for you) continues to live there.

What if I disagree with the financial assessment outcome?

You have the right to challenge the outcome. Ask for a written copy of the assessment and request a review through your local authority's complaints process. Seeking independent financial advice from a specialist care funding adviser is also worthwhile.

Can I choose which care home if I am council-funded?

Yes, you have the right to choose any care home that meets your assessed needs, is willing to accept the council's standard rate, and has a place available. If you choose a home that costs more than the council rate, a top-up fee arrangement may apply.

Is there a cap on what I will have to spend on care?

No. The £86,000 lifetime cap that was proposed under the previous government was scrapped in July 2024. There is currently no cap on care costs in England.

Getting Help With Funding Decisions

Funding decisions can feel overwhelming, especially when they coincide with a difficult period for your family. We always recommend speaking with an independent financial adviser who specialises in care funding. They can assess your full picture and identify options you may not be aware of.

Our team is also on hand to answer questions about how fees work at our homes and to help you understand what to expect. If you are in the early stages of exploring residential or dementia care, visit our care homes page to learn more about what we offer across our three North West locations.

You can also read our guidance on how to choose a care home if you are weighing up your options more broadly.

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