Care Fees Means Test UK (2026): The Capital Thresholds, What Counts, and How the Assessment Works

When you apply to a local authority (council) for help with the costs of care in a residential or nursing care home, the council carries out a 'financial assessment' (means test) to determine how much you should contribute towards your care costs. The legal framework is the Care Act 2014 and the Care and Support (Charging and Assessment of Resources) Regulations 2014 (the 'Charging Regulations'): (1) TWO SEPARATE ASSESSMENTS: first, the council must carry out a care needs assessment (Care Act 2014 s.9), entirely separately from the financial assessment, to establish that you have eligible care needs that the council is required to meet. Only after establishing eligible needs does the financial assessment determine how much you pay. IMPORTANT: the financial assessment does NOT determine whether you receive care, it determines the cost contribution only; (2) THE CAPITAL THRESHOLDS, THE CORE RULE: (a) ABOVE £23,250 (upper capital limit): you are treated as able to fund your own care entirely (known as a 'self-funder'). The council is not required to contribute to your care costs while you have capital above this level. The council can arrange your care for you (on a discretionary basis) even while you self-fund, and can be required to arrange it if you ask them to; (b) BETWEEN £14,250 AND £23,250 (tariff income band): the council contributes to your care costs but you must also make a contribution from your capital. For every £250 (or part thereof) of capital you have above £14,250, a 'tariff income' of £1 per week is added to your assessed weekly income. Example: capital of £20,000 → (£20,000 − £14,250) = £5,750 above lower threshold → £5,750 ÷ £250 = 23 tariff income units → add £23/week to your assessed income; (c) BELOW £14,250 (lower capital limit): no capital contribution is required. Only your income is assessed; (3) INCOME ASSESSMENT: in addition to (or instead of) capital, your income is assessed. Most income is included: State Pension; private/occupational pension; benefits (most but not all); rental income from property; annuity income. The council must leave you with a Personal Expenses Allowance (PEA) of at least £30.15 per week (2025-26) as a guaranteed personal budget for your own spending. If your assessed income exceeds the full care cost, the council may still contribute, it does not take all income. The MIG (Minimum Income Guarantee) applies in the home to protect non-residential income but PEA is the residential equivalent.

The Charging Regulations (Schedule 1) specify what is and is not counted as capital in the care home means test: (1) WHAT COUNTS AS CAPITAL, INCLUDED IN ASSESSMENT: (a) Savings accounts (current; savings; ISAs; fixed-term deposits); (b) National Savings products (premium bonds; NS&I bonds; NS&I ISAs); (c) Shares, unit trusts, OEICs, investment bonds; (d) Investment property (if not disregarded, see below); (e) Any land you own; (f) Most trust capital if you are entitled to demand it; (g) Money owed to you (loans receivable); (h) Equity in property if it is assessable; (2) WHAT DOES NOT COUNT AS CAPITAL, EXCLUDED FROM ASSESSMENT: (a) Personal possessions: furniture; clothing; vehicle; jewellery; personal items of sentimental value, these are entirely excluded regardless of value; (b) Capital value of a property subject to a MANDATORY DISREGARD (see FAQ 3): if the property disregard applies, the full equity is excluded from the capital assessment; (c) Life interest trust capital: if you have a life interest in a trust (IPDI, Immediate Post-Death Interest), you have the right to income but NOT to demand the trust capital. Trust capital in which you have only a life interest (income right) is NOT your capital for means test purposes, a critically important point for couples who use life interest trusts in their wills; (d) Discretionary trust capital: if capital is held in a discretionary trust and you have no right to demand it (the trustees have full discretion whether and when to distribute), that capital is excluded from the means test. However, any distributions actually received from the trust ARE income; (e) Personal injury trust capital: capital received as compensation for personal injury and placed in a personal injury trust is excluded under Schedule 1 to the Charging Regulations, this protects people with injury compensation from being required to spend it on care; (f) Surrendered pension value: the capital value of an undrawn pension fund is NOT counted. Pension funds are treated as income-producing assets, not capital, you are assessed on the pension income you could receive (or do receive), not the lump sum value of the pot. Note: from April 2027, pension funds will enter the IHT estate (Finance Act 2024), but this does NOT change the care fees means test treatment of pension capital; (3) THE £2,500 DISREGARD FOR PERSONAL CAPITAL: there is a £2,500 amount of capital that is disregarded for 52 weeks if it was received as compensation for loss of income or benefit, to allow it to be used for its intended purpose.

At the start of a permanent stay in a care home, the value of your main home is disregarded (excluded from the capital assessment) for the first 12 weeks: (1) HOW THE 12-WEEK DISREGARD WORKS: when you first enter a care home on a permanent basis, the value of your home is ignored for the first 12 weeks of that permanent placement. During those 12 weeks, the council assesses your contribution based on your non-property capital and income only. This means: (a) You may pay significantly less (or nothing) towards your care during the first 12 weeks even if you own a property worth much more than £23,250; (b) The 12-week period allows you time to arrange a Deferred Payment Agreement (DPA) or plan for the sale of the property; (2) WHAT HAPPENS AFTER 12 WEEKS: at the end of 12 weeks, if the property has not been sold and no DPA is in place, the property value enters the capital assessment. At this point: (a) If property value + other capital > £23,250: you are a full self-funder; (b) If no DPA is arranged: you may face immediate pressure to sell; (3) THE DEFERRED PAYMENT AGREEMENT (DPA): after the 12-week disregard expires, you can apply for a DPA under Care Act 2014 ss.34-36. The council agrees to defer recovering the care cost attributable to property equity until after your death or when the property is sold. A legal charge is placed on the property. Interest accrues at the government rate (OBR GDP deflator, currently lower than commercial equity release). The DPA allows you to remain in the care home without immediately selling your home; (4) MANDATORY PERMANENT PROPERTY DISREGARDS: the 12-week disregard is separate from the mandatory permanent disregards (Charging Regulations Reg.18), if a qualifying person (spouse; civil partner; cohabiting partner; relative aged 60+; disabled/incapacitated relative; dependent child under 18) is living in the property as their only or main home, the council MUST permanently disregard the property throughout the care recipient's stay. This is not time-limited, it applies for the entire duration of the care placement; (5) DISCRETIONARY DISREGARD (REG.18(2)(c)): the council has discretion to disregard the home if an unnamed carer (who gave up another home to care for the resident before they entered care) lives in the property. This is not automatic, the council must exercise its discretion reasonably.

When one member of a couple enters a care home, the means test assesses ONLY the care home resident, not the couple's combined assets. This is a fundamental rule that many families do not know: (1) CAPITAL ASSESSED INDIVIDUALLY: only the assets legally belonging to the person entering care are included in their capital assessment. The assets belonging to the other spouse/partner are NOT included. For this purpose: (a) Joint savings accounts: split equally between the couple, each is treated as owning 50% regardless of who deposited what; (b) Property: if owned jointly, the resident's beneficial share (usually 50%) is the assessable capital, subject to the mandatory disregard if the non-resident spouse/partner remains living in the property; (c) Pensions: only the resident's pension income is assessed; (2) THE MANDATORY PROPERTY DISREGARD (REG.18): if the non-resident spouse, civil partner, or cohabiting partner (living as spouse/civil partner, no minimum period) continues to live in the jointly-owned family home as their only or main home, the full property value is permanently disregarded, both the resident's and non-resident's share. The council cannot include ANY part of the property value in the means test while the qualifying person lives there; (3) MINIMUM INCOME GUARANTEE (MIG) FOR NON-RESIDENT SPOUSE: the assessment of the resident's income must not leave the non-resident spouse with income below the Pension Credit Standard Minimum Guarantee (approximately £218.15/week for a single person in 2025-26). If the resident's assessed income contribution would leave their partner below this level, the contribution is reduced; (4) WHAT HAPPENS TO THE HOME ON THE NON-RESIDENT'S DEATH: if the non-resident spouse/partner dies, moves into care themselves, or permanently leaves the property, the mandatory disregard ends. At that point, the property value becomes assessable capital for the care home resident. A DPA should be arranged immediately at that point; (5) ESTATE PLANNING IMPLICATIONS: a life interest trust (IPDI, IHTA 1984 s.49A) created in the first spouse's will means the survivor has a right of occupation in the property (through the trust) but does NOT own the capital outright. On the survivor's eventual care home entry: the trust capital is NOT the survivor's capital for means test purposes. This is the most effective legal protection for married couples, but the trust must be created in the will BEFORE care becomes reasonably foreseeable.

Several legitimate estate planning strategies can reduce the care home means test's impact, and several apparent strategies are myths that carry serious risks: (1) WHAT WORKS, LEGITIMATE STRATEGIES: (a) Life interest trust in wills (IPDI): the most powerful legitimate tool for married couples. In both spouses' wills, the family home passes into an IPDI life interest trust on first death. The surviving spouse has a right of occupation/income for life, but the capital is held in trust. When the surviving spouse enters care, the trust capital is NOT their capital for the means test. The trust must be created before care is reasonably foreseeable; (b) Claiming Attendance Allowance: £108.55/wk higher rate (2025-26); non-means-tested; not counted as income in the means test; claim as early as possible; (c) NHS Continuing Healthcare: if primary health need, 100% NHS funding, entirely outside the means test; (d) Deferred Payment Agreement: preserves the home for the lifetime of the resident; avoids forced sale; government interest rate; (e) Mandatory property disregards: ensure the council correctly applies Reg.18, many councils initially fail to apply the spousal disregard; challenge in writing citing Reg.18 if wrongly omitted; (2) WHAT DOESN'T WORK, MYTHS AND RISKS: (a) Giving the house to children to avoid care fees: Care Act 2014 s.70, deprivation of assets. The council can treat you as still owning the property (notional capital) if it decides the main reason for the gift was to avoid or reduce care fees. There is NO fixed look-back period, councils can go back as far as they choose. 'Reasonably foreseeable' is assessed at the date of the gift: age, health, existing diagnosis, and even family conversations about care can make care foreseeable; (b) Property protection trusts: the same deprivation of assets rules apply if set up when care is reasonably foreseeable; courts have consistently upheld council assessments of PPTs as deprivation; SOLLA (Society of Later Life Advisers) guidance is clear that PPTs do not provide reliable protection if care was foreseeable; (c) Spending assets to reduce capital (legitimate spending is fine; deliberate spend-down to reduce the means test is deprivation); (3) PROFESSIONAL ADVICE: means test planning is a specialist area. SOLLA-registered advisers, specialist solicitors, and independent financial advisers specialising in care fees can provide regulated advice. Mistakes (especially gifts and trusts set up without proper advice) can be reversed by the council with serious financial consequences.