Care home fees and your home: what the means test counts
Whether a local authority helps with care home fees depends on a financial assessment. This sets out the capital limits, when a house is left out of them, and what happens to people who give property away.
By Robert Festenstein, Head of Legal
Updated 21 September 2026
6 min read
The short version
- In England the upper capital limit is £23,250 and the lower limit is £14,250 for 2026 to 2027; in Wales there is a single limit of £50,000 for residential care.
- Capital between the two English limits produces a tariff income of £1 a week for every £250, which is added to what a person pays from their income.
- The value of a home is disregarded for the first 12 weeks of a permanent care home stay, and indefinitely where a qualifying relative still lives there.
- A deferred payment agreement lets the local authority secure the fees against the house so it does not have to be sold during the person's lifetime.
- There is no time limit on deprivation of assets: a local authority can treat somebody as still owning property they gave away if avoiding fees was a significant reason.
- Where a couple own as tenants in common, a will that leaves a share into trust for the survivor can protect that share without anybody giving anything away.
How the financial assessment works
Care in a care home is means tested. When somebody needs a permanent placement, the local authority carries out a needs assessment first and then a financial assessment, and the second one decides who pays.
The financial assessment looks at capital and at income. Capital covers savings, investments, and property, including land and second homes. Income covers state and private pensions, most benefits and any rent received. The two are treated differently: income is applied to the fees subject to a protected personal allowance, while capital is tested against fixed limits.
The framework in England sits under the Care Act 2014 and the statutory charging guidance. Wales has its own rules under the Social Services and Well-being (Wales) Act 2014, and the figures differ substantially, which matters for anybody with a house on one side of the border and a care home on the other.
The capital limits in England and Wales
In England for 2026 to 2027 there are two limits. Above the upper capital limit of £23,250, a person pays the full cost of their care. Below the lower capital limit of £14,250, capital is ignored entirely and they contribute only from income.
Between the two, a tariff income is assumed: £1 a week for every £250 of capital, or part of £250, above the lower limit. Somebody with £20,000 is treated as having £23 a week of extra income, whether or not the capital produces anything.
A resident whose fees are met by the local authority keeps a personal expenses allowance of £31.80 a week for 2026 to 2027, and everything else from their income goes towards the fees.
Wales works differently. For residential care there is a single capital limit of £50,000: above it a person pays in full, at or below it the local authority contributes and the person pays from income subject to their own protected minimum. There is no tariff income band in the Welsh residential scheme.
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When your home is counted
For a permanent care home placement, the value of the person's home is capital and is counted, subject to the disregards below. Because most homes are worth far more than any capital limit, that single fact decides the outcome for most people.
The valuation is the market value less any mortgage secured on it and less 10% where there would be costs of sale. A share in a jointly owned property is valued as a share, which is worth less than a proportionate slice of the whole, because the willing buyer of a part share has to accept a co-owner in occupation.
Where care is being provided at home, the value of the home the person lives in is not counted at all. That distinction is one reason the choice between home care and residential care has financial consequences as well as practical ones.
When your home is disregarded
Several disregards take a property out of the assessment.
The twelve-week property disregard applies to the first twelve weeks of a permanent stay, giving the family time to arrange matters without the house being counted. It is available where capital apart from the house is below the upper limit.
A mandatory disregard applies for as long as the property remains the main home of the person's husband, wife, civil partner or unmarried partner; a relative aged 60 or over; a relative who is incapacitated; or a child of the resident aged under 18. This one has no time limit, so a home occupied by an elderly sibling is left out of account indefinitely.
A discretionary disregard can be applied to anybody else living there, and a common example is a carer who gave up their own home to look after the person. It is a discretion, so it has to be asked for and reasons given.
Deferred payment agreements
Where the home is counted and somebody does not want to sell it, a deferred payment agreement allows the local authority to meet the fees and secure the debt against the property, usually by a legal charge. The money is repaid when the house is eventually sold or from the estate.
Local authorities have to offer one where the person meets the criteria, which include having capital other than the home below the upper limit and having a property that can be charged. Interest is charged and an administration fee applies, and both are set nationally.
It is worth asking about early. A family that sells a house in a hurry to fund the first year of fees often finds afterwards that a deferred agreement was available and would have preserved the choice.
Giving assets away, and what happens next
Transferring a house to children to keep it away from care fees is the most common piece of advice families give each other, and it is the one most likely to fail.
A local authority carrying out a financial assessment can decide that somebody has deprived themselves of an asset. The test is whether avoiding or reducing a charge for care was a significant reason for the transfer, and it does not have to be the only reason. Where the authority reaches that conclusion, it treats the person as still holding notional capital of the value given away, and charges accordingly.
Two things surprise people. There is no seven-year rule here: the seven years everybody has heard of belongs to inheritance tax and has nothing to do with care charges, and a local authority can look at a transfer from any point in the past. And the authority has recovery powers, so it can pursue the person who received the asset for the amount of the charge, within six months of the transfer, and can in some circumstances apply to court to set a transfer aside.
Timing and evidence are what matter. A transfer made years before any health problem, for a reason that stands up on its own, is much harder to attack than one made shortly after a diagnosis.
Trusts, and why they rarely solve it
Schemes marketed as asset protection trusts, family protection trusts or home protection trusts offer to hold the house outside the assessment during somebody's lifetime.
Where the person transferring the house keeps the right to live in it, the same deprivation test applies to the transfer into trust as to an outright gift, so the trust adds cost without adding protection. These arrangements also carry consequences that are often not explained at the point of sale: an immediate inheritance tax charge where the value exceeds the nil rate band, ten-year and exit charges, loss of the residence nil rate band because the home no longer passes to direct descendants on death, and a capital gains position on sale that can be worse than doing nothing.
The Solicitors Regulation Authority and the Office of the Public Guardian have both published warnings about how these products are sold. Any arrangement of this kind deserves advice from somebody who is not being paid to sell it.
What actually helps
For a couple who own their home together, there is a legitimate structure that works with the rules instead of against them.
They sever the joint tenancy so they own as tenants in common in defined shares. Each then makes a will leaving their share, on death, into a trust which gives the survivor the right to occupy the property for life, with the share passing afterwards to the children. Nothing is given away during anybody's lifetime, so there is no transfer to attack.
The effect is that when the first partner dies, half the house is held in trust and is not the survivor's capital. If the survivor later needs care, the local authority assesses their own half. Whether this is appropriate depends on the family, and it needs to be weighed against the inheritance tax position, including the residence nil rate band, before it is put in place.
NHS continuing healthcare
Where somebody's need for care is primarily a health need, the NHS meets the full cost of their care wherever it is provided, and no means test applies at all. This is NHS continuing healthcare, and it is assessed against the nature, intensity, complexity and unpredictability of the needs.
It is worth pursuing where there are substantial health needs, particularly with advanced neurological conditions, and a refusal can be challenged through a local review and then an independent review. Families are frequently told a person is ineligible without the full assessment being carried out.
Frequently asked questions
Will I have to sell my house to pay for care?
Not necessarily. For a permanent care home stay the value of your home is counted as capital, but it is disregarded for the first twelve weeks, and disregarded indefinitely while it remains the main home of your husband, wife or partner, a relative aged 60 or over, an incapacitated relative, or a child of yours under 18. Where it is counted, you can ask for a deferred payment agreement so the council meets the fees and secures the debt against the property instead.
Can I give my house to my children to avoid care fees?
You can transfer it, but the local authority can treat you as still owning it. The test is whether avoiding or reducing a care charge was a significant reason for the transfer, and it does not need to be the only reason. There is no time limit, so the seven-year rule people quote does not apply here — that belongs to inheritance tax. The council can also pursue the person who received the property for the amount of the charge.
What are the capital limits for care home fees?
In England for 2026 to 2027 the upper capital limit is £23,250 and the lower is £14,250. Above the upper limit you pay in full. Between them you pay a tariff income of £1 a week for every £250 of capital above the lower limit, on top of your income contribution. Below the lower limit your capital is ignored. Wales has a single residential care limit of £50,000, above which you pay in full.
Are asset protection trusts worth it?
Usually not for care fees. If you keep the right to live in the property, the transfer into trust faces the same deprivation of assets test as an outright gift, so it adds cost without protection. These arrangements can also trigger an immediate inheritance tax charge above the nil rate band, ten-year and exit charges, and the loss of the residence nil rate band because the home no longer passes to direct descendants. Take advice from somebody who is not selling the product.
How much money am I left with if the council pays?
In England, if the local authority meets your care home fees you keep a personal expenses allowance of £31.80 a week for 2026 to 2027, and the rest of your income goes towards the fees. The allowance is intended for personal items such as toiletries, clothing and newspapers. Wales operates a different protected minimum. Some authorities will increase the allowance in particular circumstances if you ask them to.
Is there any care the NHS pays for in full?
Yes. Where somebody's need for care is primarily a health need, NHS continuing healthcare covers the full cost wherever the care is provided, with no means test and no contribution from capital or income. Eligibility is assessed against the nature, intensity, complexity and unpredictability of the needs. Families are often told somebody is ineligible without a full assessment being completed, and a decision can be challenged by local review and then independent review.
Sources & further reading
This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 21 September 2026. AD Solicitors Limited is a recognised body regulated by the SRA (no. 8011228).
A solicitor with more than two decades' experience in commercial law, dispute resolution, insolvency and judicial review. Robert acts for businesses, directors and individuals on the matters that carry real consequence — and leads AD Solicitors.
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