Care in later life is one of the most significant financial risks facing UK households, yet it is rarely planned for. The average stay in a care home is two to three years, and the costs can run to hundreds of thousands of pounds. Unlike the NHS, social care is not free at the point of use — most people are expected to contribute towards or fully fund their own care, depending on their financial circumstances.
How Much Does Care Cost?
Care costs vary significantly depending on the type of care, the level of need, and where in the country you live. London and the South East are considerably more expensive than other regions.
Typical UK Care Costs
| Type of Care | Typical Weekly Cost | Approximate Annual Cost |
|---|---|---|
| Residential care home | £800–£1,200 | £42,000–£62,000 |
| Nursing care home | £1,000–£1,500 | £52,000–£78,000 |
| Dementia care | £1,200–£1,800+ | £62,000–£94,000+ |
| Home care | £15–£25/hour | Varies by hours needed |
Costs are indicative averages and vary significantly by region. London and the South East are typically 20–40% more expensive. Sources: LaingBuisson, Care Home UK.
Who Pays for Care?
In England, your local authority carries out a financial assessment (means test) to determine how much the individual contributes towards their care costs. The key thresholds are:
Means Test Thresholds (England)
- Upper threshold
- £23,250
- Above this: you pay the full cost of your care (self-funder)
- Lower threshold
- £14,250
- Below this: local authority pays (you may still contribute from income)
Between the two thresholds, you are expected to contribute £1 per week for every £250 of assets above £14,250 (known as "tariff income"). Your home is included in the means test if you move into residential care — unless your spouse, partner, dependent relative, or someone aged 60+ still lives there.
The Care Cap
England has introduced a lifetime cap of £86,000 on the amount any individual will need to spend on their personal care costs. Once you have spent this amount, the local authority will take over funding your personal care. However, the cap does not cover accommodation costs (often called "hotel costs") — the daily living costs of food, heating, and housing. These are estimated at around £200 per week and must be paid by the individual indefinitely, even after the cap is reached.
In practice, the total amount someone spends on care can therefore be significantly more than £86,000. Only the personal care element of your fees counts towards the cap, and only amounts you actually pay (not any local authority contribution) are included in your running total.
Scotland operates a different system: personal care is free for those aged 65 and over, though you still pay for accommodation. Wales has a weekly cap on non-residential care costs. Northern Ireland has its own separate system.
NHS Continuing Healthcare
NHS Continuing Healthcare (CHC) is a package of care arranged and fully funded by the NHS for individuals with a "primary health need". If you qualify, all your care costs — including accommodation — are paid for by the NHS, regardless of your financial circumstances. It is not means-tested.
However, qualifying for CHC is difficult. The assessment focuses on the nature, intensity, complexity, and unpredictability of your care needs. Only a relatively small proportion of care home residents qualify. If you believe you or a family member may be eligible, request a CHC assessment from your local NHS Integrated Care Board.
Funding Options
For self-funded care, there are several approaches available:
- Savings and investments: Using existing savings, ISAs, or investment portfolios to pay fees as they arise. The simplest approach, but your capital depletes over time.
- Property: Selling your home to release capital, using equity release to access funds while remaining in the property (before entering care), or entering a deferred payment agreement with the local authority (the council pays your fees and recoups the cost from your estate after you die).
- Immediate needs annuity: A specialist insurance product where you pay a lump sum and the insurer pays a guaranteed, tax-free income directly to your care home for the rest of your life. This removes the uncertainty of not knowing how long care will be needed, but the lump sum is lost if you die shortly after purchase.
- Pension income: Using pension drawdown or annuity income to meet ongoing care costs. Be aware of the tax implications — pension withdrawals are taxed as income.
- Investment bonds: Can provide a tax-efficient way to hold capital and make withdrawals for care fees, with the 5% annual withdrawal allowance used without immediate tax liability.
Deprivation of Assets
Deliberately reducing your assets to fall below the means test thresholds — for example, by giving your home to your children or making large gifts — is known as deprivation of assets. Local authorities have the power to investigate and, if they determine that you disposed of assets with the intention of avoiding care fees, they can assess you as if you still owned those assets. This means you could be charged the full cost of your care regardless of the gifts you have made.
There is no specific time limit — the local authority will look at whether the intention was to avoid care fees at the time the gift or transfer was made, regardless of how long ago it occurred. This applies to gifts of property, money, and other assets.
Planning Ahead
The earlier you begin planning for potential care needs, the more options you have. While long-term care insurance was once available in the UK market, it is now extremely rare and most policies have been withdrawn. Planning today therefore focuses on building sufficient savings and investments, understanding how your assets (including your home) may be used to fund care, and structuring your finances to give you the most flexibility.
Trusts are sometimes suggested as a way to protect assets from care fees, but their effectiveness has been significantly limited by the Care Act 2014. Any trust set up with the primary intention of avoiding care fees can be challenged by the local authority under the deprivation of assets rules. Trusts may still have a role in broader estate planning, but they are not a reliable care fees avoidance strategy.
Seeking Specialist Advice
Care fees planning is a specialist area. SOLLA (the Society of Later Life Advisers) maintains a directory of accredited advisers who have demonstrated expertise in advising on care funding. A specialist care fees adviser can help you understand your funding options, assess whether NHS Continuing Healthcare may be applicable, advise on the best way to use your home to fund care, and explore whether an immediate needs annuity is appropriate.
If you are considering selling a home or accessing pension savings to fund care, professional advice is particularly important — the decisions are often irreversible and the sums involved are large. For broader retirement planning context, see our retirement planning guide. If equity release is being considered, our equity release guide explains how it works. For estate planning alongside care fees, see our succession planning guide.
This guide is for general information only and does not constitute financial advice. The information is based on publicly available data from GOV.UK, the NHS, and other government sources. Always seek professional advice before making financial decisions about care funding. Figures and thresholds are subject to change — check official sources for the latest values.