Care Home Fees and Financial Assessment Letters Explained (UK 2026)

April 2026 update: The government has confirmed that the £86,000 cap on personal care costs has been delayed indefinitely. For now, the £23,250 capital threshold still determines whether your local council contributes to your care home fees — and for many families, that letter explaining how much they owe arrives without any explanation of how the figure was reached.At a glance

• If your capital (savings, investments, property) is above £23,250 in England, you must fund your care home place entirely — the council will not contribute.
• If your capital falls below £14,250, the council covers the full care cost and you only contribute from your income.
• Between those two figures, you pay a weekly "tariff income" of £1 for every £250 of capital you hold above the lower threshold.
• Your home is usually counted as capital — but not if your spouse, civil partner, or a qualifying relative still lives there.
• You keep a Personal Expenses Allowance of at least £30.15 per week (England, 2025/26) — the rest of your income goes towards your care.
• You have a right to request a review of the assessment within 28 days of receiving the decision letter.
• Not financial or legal advice: This article explains the rules in plain English. For your specific situation, speak to an independent later-life financial adviser or Citizens Advice.

A letter from the council telling you how much you or a family member must contribute to care home fees is one of the most stressful documents a family can receive. It arrives at a difficult time, uses technical language without explanation, and often gives a figure that feels either unfair or unexpectedly large.

Understanding what the letter is actually telling you — and where the numbers come from — is the first step to checking whether it is correct. A surprising number of financial assessment letters contain errors: an asset that should have been disregarded, an income source that was counted twice, or a property that qualified for an exemption but wasn't given one.

This guide walks through what a care home financial assessment is, how the local authority works out your contribution, and what to do if you think the figure in the letter is wrong.

What is a care home financial assessment?

When a local authority arranges a care home place for someone, they are legally required to carry out a means test to work out how much the person will contribute. This test looks at two things: capital (what you own) and income (what you receive each week or month).

The outcome of the assessment is called the assessed charge — the weekly amount you will pay towards the cost of care. The letter from the council should state this figure clearly, alongside a breakdown of how they calculated it.

The rules are set out in the Care Act 2014 and the associated statutory guidance. Councils must follow them. If the letter you receive doesn't match the rules, you can challenge it.

The capital thresholds that decide who pays

In England, there are two capital thresholds that structure the assessment:

• Above £23,250: You are classed as a "self-funder." The council will not contribute to your care costs, though they may still arrange the placement on your behalf.
• Between £14,250 and £23,250: You pay a "tariff income" of £1 per week for every £250 (or part of £250) you hold above the lower threshold, on top of your income contribution.
• Below £14,250: Capital is disregarded entirely. The council funds the care cost, and you contribute only from your income — minus your Personal Expenses Allowance.

These thresholds have been frozen for several years and were not changed in April 2026.

What counts as capital — and what doesn't

Capital means money and assets you own. The council will include:

• Bank and building society accounts, including ISAs and premium bonds
• Shares, unit trusts, and other investments
• Property — including your home, rental properties, and land
• The surrender value of any investment bonds

However, certain assets are disregarded and should not appear in the assessment. These include:

• Personal possessions — furniture, jewellery, one vehicle used for personal transport
• The value of a prepaid funeral plan
• The face value of life insurance policies (only the surrender value counts, if applicable)
• Personal injury compensation held in trust or administered by the Court of Protection

The family home — the most contested part of the assessment

Your main home is usually included as capital if you move permanently into a care home and no one else lives there. This is the part of the assessment that causes the most distress for families.

But there are important mandatory disregards — situations where the council must not count your home:

• Your spouse or civil partner still lives in the property
• A dependent relative who is aged 60 or over, or who is incapacitated, still lives there
• A carer who gave up their own home to look after you still lives there
• A relative who is under 16 and whom you are legally responsible for still lives there

If any of these apply, the home must be left out of the capital figure. If the council has included it anyway, that is a clear error to challenge.

How income contributions work

Even if the council covers your care costs because your capital is below the lower threshold, you still contribute from your income. The council adds up most of your weekly income — state pension, private pensions, certain benefits — and that becomes your contribution to the care home fees.

You are entitled to keep a Personal Expenses Allowance (PEA) each week. In 2025/26, this is at least £30.15 per week in England. Everything above the PEA goes towards your care. The PEA is meant to cover personal spending — toiletries, clothes, newspapers — so it is worth checking the letter confirms this is being preserved.

Certain income is disregarded, including the daily living component of Personal Independence Payment (PIP) and Attendance Allowance, once someone is living in a care home that is fully funded by the council.

Struggling to make sense of your care home assessment letter?

Upload the letter to Clarify and ask your question in plain English. Clarify reads the document, finds the relevant figures, and explains exactly what the council has calculated — so you know what to check and whether anything looks wrong.

Try Clarify free

What to check on the assessment letter

A proper financial assessment letter should set out, in writing:

1. The total capital figure the council has used
2. A list of capital assets included, with their values
3. Any tariff income calculation (if your capital is between the two thresholds)
4. Your income sources and the weekly amounts counted
5. Any income disregards applied
6. Your Personal Expenses Allowance figure
7. Your final assessed weekly charge
8. The date from which the charge applies
9. Information about how to request a review

If any of these are missing, you are entitled to ask for a full written explanation. The council cannot simply give you a number without justifying it.

Deferred Payment Agreements

If your home has been included in the capital assessment but you are not in a position to sell it immediately, you can apply for a Deferred Payment Agreement (DPA). Under a DPA, the council effectively lends you the money for your care costs. You repay the loan, plus interest, when the property is eventually sold — typically when you die or when you choose to sell.

Councils must offer DPAs to anyone who meets the criteria. Interest rates are set nationally and are currently around 3–4% per year. The agreement is secured against the property, similar to a charge on a mortgage. You do not have to use a DPA — but if the property is included and you can't afford fees without selling, it is worth asking about before assuming a sale is inevitable.

NHS Continuing Healthcare — a completely different route

If the primary reason someone needs care is a health need rather than a social care need, they may qualify for NHS Continuing Healthcare (NHS CHC). This is funded entirely by the NHS — no means test, no capital threshold — and covers the full cost of the care home place.

The assessment is separate from the local authority means test. It is carried out by a multidisciplinary team and looks at the nature, complexity, and unpredictability of someone's health needs. If you are already paying for care and you believe the primary need is health-based, it is worth requesting an NHS CHC assessment from the Integrated Care Board.

If someone was eligible for NHS CHC in the past but was not assessed and was charged for their care during that period, they may be able to claim a refund — this is called a backdated CHC claim and is worth investigating.

How to challenge an assessment you think is wrong

You have a formal right to request a review of the financial assessment. Most councils require you to do this within 28 days of receiving the decision letter. Act quickly — waiting too long can limit your options.

When you write to challenge the assessment:

• State clearly which part of the assessment you believe is wrong
• Explain the reason — for example, that an asset should have been disregarded, or that a property should be exempt because your spouse still lives there
• Quote the relevant regulation or guidance if you can (the Care and Support Statutory Guidance is publicly available)
• Send the letter by recorded delivery and keep a copy

If the internal review doesn't resolve the dispute, you can escalate to the Local Government and Social Care Ombudsman, who investigates complaints from members of the public free of charge.

Want to check whether your assessment letter adds up?

Upload the financial assessment letter to Clarify and ask it to identify the capital figures, income sources, and any disregards applied. You can then compare each item against the rules — and know exactly what to dispute if something doesn't look right.

Check your letter with Clarify

Frequently asked questions

What is the capital threshold for care home fees in England in 2026?

The upper threshold is £23,250. If you have capital above this, you fund your care entirely. The lower threshold is £14,250. Below this, capital is disregarded and the council covers the cost of care, with you contributing from income. These figures were not changed in April 2026.

Does my home count as capital in the means test?

Usually yes — if you have permanently moved into a care home and no one else lives in the property. However, the home must be disregarded if your spouse, civil partner, a dependent relative over 60, an incapacitated relative, or a carer who gave up their home for you still lives there. If any of these apply and the council has included the property, that is an error you can challenge.

What is tariff income and how is it calculated?

If your capital is between £14,250 and £23,250, you pay a tariff income of £1 per week for every £250 (or part of £250) of capital above the lower threshold. So if you have £18,250 in capital, that is £4,000 above the lower threshold, giving a tariff income of £16 per week, added to your income contribution.

What is the Personal Expenses Allowance and what should it cover?

The Personal Expenses Allowance (PEA) is the amount you keep from your weekly income even when it is being counted towards care costs. In England it is at least £30.15 per week in 2025/26. It is meant to cover personal spending — clothes, toiletries, small luxuries. The council must confirm your PEA in the assessment letter.

Can I appeal if I think the financial assessment is wrong?

Yes. You have a right to request a formal review of the assessment, usually within 28 days of receiving the decision letter. If the council upholds their decision and you still disagree, you can complain to the Local Government and Social Care Ombudsman, who investigates free of charge.

What is a Deferred Payment Agreement?

A Deferred Payment Agreement (DPA) is an arrangement where the council effectively lends you the money for your care costs, secured against your property. You repay the loan plus interest when the property is sold — usually when you die or when you choose to sell. Councils are legally required to offer DPAs to eligible people and cannot force a property sale.

What is NHS Continuing Healthcare and how is it different?

NHS Continuing Healthcare (NHS CHC) is a fully funded NHS package of care for people whose primary need is a health need. Unlike local authority care funding, there is no means test and no capital threshold — the NHS pays the full cost. The eligibility assessment is separate and is based on health needs, not finances. If you think health needs are primary, ask the Integrated Care Board for an NHS CHC assessment.

Are the rules different in Scotland, Wales, and Northern Ireland?

Yes. In Scotland, personal care is free for everyone over 65 regardless of assets (Free Personal and Nursing Care), though the accommodation element is still means-tested with different thresholds. In Wales, the capital threshold is £50,000 — much higher than England. Northern Ireland broadly follows similar rules to England but is administered through the Health and Social Care Trusts. Check with your local authority for the exact figures and rules that apply.

Related articles

• Reading a Lasting Power of Attorney in plain English (UK 2026)
• Probate letters explained: a plain English guide (UK 2026)
• Understanding your DWP benefits letter (UK 2026)
• What your pension statement actually means (UK 2026)

This article is general information only and does not constitute financial, legal, or social care advice. Care home funding rules are complex and depend on your individual circumstances. For advice on your specific situation, speak to an independent financial adviser who specialises in later-life care, your local Citizens Advice bureau, or the charity Age UK, which offers free guidance on care funding.