Long-term care costs: planning ahead so you’re covered

Long-term care planning is like a suitcase you've been meaning to unpack. It's been parked in the hallway for months, slightly in the way, gathering dust and handing out stubbed toes.

Inertia is understandable. Nobody wants to picture frailty or talk numbers that big over a Sunday roast.

But one in four people over 65 need help with basic daily tasks like dressing or washing, and if you move into a care home the bill can easily reach £50,000 a year.

Planning ahead gives you control. You decide whether to stay in your home with carers popping in or to move somewhere with round-the-clock support. It also spares your family the panic of making rushed decisions on your behalf.

This guide walks you through how much different types of care cost and how to navigate the system.

What is long-term care and how much does it cost?

Long-term care sits on a spectrum, with costs rising as the level of support increases.

At one end, you have carers who stay in your home or visit each day to help with meals, medication and other tasks. Home care arranged privately often starts at around £25 an hour.

Or it can involve moving into a residential home where support is always on hand. With this option, you're looking at an average cost of £949 a week.

If you need medical support, a nursing home may be the answer, with healthcare staff on hand day and night. That medical oversight comes at an even steeper cost: £1,267 a week on average.

There are also middle-ground options, such as supported housing or assisted living, where you keep much of your independence but have help nearby when you need it.

NHS vs Social Care: don't count on a free ride

A lot of people assume the NHS will pick up the tab for long-term care. After all, this is the country that, under Clement Attlee, built a health service on the promise of care from cradle to grave, free at the point of use.

Not so fast.

The line between healthcare and social care is so blurry it borders on absurd. As Dominic Carter of the Alzheimer's Society put it: "There's a growing and angry understanding that... if you develop dementia, most of the responsibility for paying for care will fall on you and your family..."

And it's not just dementia. If you're floored by Parkinson's, multiple sclerosis, or whatever rare condition Dr House usually takes 45 minutes and an ad break to diagnose, the bill will most likely still be yours.

NHS Continuing Healthcare (CHC): who qualifies?

There is one narrow exception where the NHS can cover the full cost of care, but it's not the kind of safety net you can trust to catch you if you fall. This is called NHS Continuing Healthcare (CHC), and on paper it's for anyone whose needs are deemed "primarily medical" rather than social.

But the stats show that nationally only about one in five people who go through the assessment process are approved. Where you live seems to matter too: in some parts of the country, only 7% of applicants make it through, while in others it's closer to 40%. There are around 52,000 people receiving CHC in England currently.

If you do qualify, the NHS picks up the entire bill, from nursing to accommodation, and there's no means test.

For most families, CHC is a mirage on the horizon; they're told their needs are "social", not medical, and the costs stay firmly on their shoulders.

Care costs at a glance

Paying for care isn’t cheap, and where you live makes a big difference.

Residential care homes cost an average of £949 per week (or £49,348 per year), according to Age UK.

Nursing homes are pricier still, averaging £1,267 per week – nearly £66,000 a year.

Prices vary across the country. Which? reports the highest average care costs in London at £1,710 per week, while the North East was the cheapest at £1,076.

NHS-Funded Nursing Care: the modest lifeline

If you don't meet the bar for full NHS CHC but you end up in a nursing home and need a qualified nurse on hand, there's a smaller pot of support called NHS-funded nursing care. Currently, that works out to £250 a week in England, and it's paid straight to the home to cover the nursing element of care.

Region	NHS funded nursing care payments (weekly)
England	£254.06 (2025/26)
Scotland	£369.15 (2025/26)
Wales	£213.18 (2024/25)
Northern Ireland	£100.00 (2025/26)

It's not means-tested, so you get the same amount whether you're a millionaire or scraping by. What it doesn't do is touch the rest of your bill. The food, the accommodation, and the day-to-day support all still come out of your pocket (or the council's, depending on your means, as we'll see in the next section).

If you're in a standard residential home or receiving care in your own house, you can't get NHS-Funded Nursing Care at all.

Local Authority-funded social care

To get help from your local council, you first have to undergo a care needs assessment followed by a financial assessment.

In England, the rule of thumb is that if you have assets above £23,250, you are what's politely called a "self-funder": you'll pay 100% of your own care costs.

And you'll probably pay more for the privilege: private residents are typically charged 41% more than councils for the same room, adding up to an average premium of £12,000 a year.

With around half of care home residents self-funding according to the latest ONS figures, that's a cost many families are feeling firsthand.

Source: ONS, Care homes and estimating the self-funding population, adapted from figure 5

Assets counted include savings, investments and property (your home equity might be counted, depending on if you're moving into care and whether a spouse or dependant still lives in your home).

If your assets are below £23,250, the council starts contributing, and if you're below a lower threshold (£14,250 in England), you pay only from your income and the council covers the rest. There's a sliding scale between the lower and upper threshold where you contribute what you can from your income plus a little extra ("tariff income") worked out as £1 per week for each £250 of assets between £14,250 and £23,250.

Your assets	Who pays	Council contribution?	Notes
Over £23,250	You (100%)	❌ None	You're classed as a "self-funder"
£14,250-£23,250	Shared	✅ Yes, partial help	You pay from income plus a "tariff income" of £1/week for every £250 over £14,250
Below £14,250	Mostly council	✅ Yes, full help	You only contribute from your income, assets no longer factor in

In other words, your assets will be drawn down until there's almost nothing left.

What about the rest of the UK?

Social care is a devolved matter, so Scotland, Wales, and Northern Ireland have their own rules. Scotland provides free personal care to all who need it, regardless of income; however, that only covers the care element (like help with washing or dressing), not accommodation in care homes. Scotland's asset thresholds for care home costs are higher than England's at £35,000. Wales has a much higher capital limit (£50,000). And Northern Ireland's thresholds are the same as England's (upper limit £23,250).

If you live in:	Lower savings and capital threshold for maximum local council funding	Upper savings and capital threshold for any local council funding
England	£14,250	£23,250
Scotland	£21,500	£35,000
Wales	Not applicable	£50,000
Northern Ireland	£14,250	£23,250

Reforms incoming?

You may have heard that England was due to bring in a lifetime £86,000 cap on personal care costs and raise the capital limits to £20,000 and £100,000. That package was cancelled in July 2024.

However, a new independent commission led by Baroness Louise Casey is looking at long-term reform, with the final recommendations not expected until 2028.

Deferred payment agreements (DPA): property-backed loans from the council

If most of your wealth is tied up in your house, a Deferred Payment Agreement (DPA) can stop you from having to sell it straight away to pay care home bills.

The council covers the care fees, puts a legal charge on your property, and gets repaid when the house is eventually sold (usually after death).

You still contribute most of your income towards your care costs and the DPA comes with an interest rate charge (around 4% currently, with its value periodically adjusted based on the gilt rate). A weekly allowance (of £144, called the Disposable Income Allowance) is left for maintaining the property empty.

You're given a twelve-week grace period in which the property is "disregarded" while you sort out the DPA, meaning the council covers most of your care costs if your remaining assets don't exceed the thresholds.

If your spouse or another qualifying relative still lives in the house, the property's value is excluded from your assets, meaning you won't have to run down its value to pay for care costs.

Qualifying relatives include:

• Your spouse, partner, former partner, or civil partner (unless you're estranged),
• An estranged or divorced partner who is a lone parent
• A relative aged 60 or over,
• A child of yours aged under 18, or
• An incapacitated relative (for example, someone receiving disability benefits).

The council can extend the exemption to include other people at its own discretion, as long as there's no hint that it's just a manoeuvre to preserve your inheritance. And no, you can't game the system by moving someone in after you've gone into care: they need to have been genuinely living there as their main home before your admission.

The only exception is where the council uses its "discretion to disregard" the property to stop someone in certain vulnerable categories from becoming homeless.

Use of DPAs is rising fast. Councils signed more than 3,200 new agreements in 2024, up 35% year-on-year. Total outstanding debt across all councils sits at £343 million, up 40% since 2020.

Planning ahead to reduce the cost of care

Thinking ahead about where care money will come from, should you ever need it, can help limit the hit to your estate.

If you don't have enough liquid assets, you could end up using a DPA, which as we've seen comes with roughly 4% annual interest while the council covers your bills.

Knowing that in advance lets you weigh up whether it's cheaper to take that route or to free up cash from pensions, ISAs, or other investments.

Using your own assets

The most straightforward approach is to fund care fees through what you already have: pension income, ISAs, investments, rental income, etc.

If you need to sell investments that are outside of tax wrappers, you'll need to factor in possible capital gains tax charges.

Renting out a second home or even the main home if someone has moved into care is an option. Keep in mind that if you take out a Deferred Payment Agreement (DPA) against a property, you'll need the council's written consent first. They'll usually agree, as long as the tenancy is a standard assured shorthold tenancy with an initial six-month term and a month's notice period.

Insurance and annuities: capping care costs

The government may have shelved its plan for a lifetime cap on care costs, but you can create your own version. An immediate needs annuity (sometimes called a care fees plan) lets you hand over a lump sum to an insurer in exchange for a guaranteed income for life to cover your care fees.

Live five years, or twenty, and the payments keep coming. It's the closest thing to capping your personal risk, but it comes with the trade-off that you need to hand over a large chunk of capital upfront.

Whether it works out cheaper than paying as you go, only God, nature, or an actuary with a very powerful computer model could tell you before signing. It's the kind of question you only get to answer with hindsight.

If you direct the payments from the annuity directly to a registered UK care home provider, the payouts are tax-free; if you route the cash through yourself, however, normal income tax applies.

Pricing is based on the hard facts:

• Your age
• Your health
• Your target income, and
• Whether you want the income to rise each year by a fixed amount to track inflation.

The poorer your health, the cheaper the premium because the insurer expects to pay out for fewer years. There's also a deferred-start option: if you can cover the first year or two of care from your own funds, you can set the annuity to start later for a lower price.

You can buy one of these through a specialist independent adviser (the Society of Later Life Advisers (SOLLA) keeps a directory) and you should expect a medical questionnaire and for your GP to be contacted. Always make sure the insurer is covered by the FSCS for 100% of your premium in case they collapse.

One disadvantage of paying a lump sum upfront is that it locks you in. After the cooling-off period, you can't cancel, so if you're later awarded NHS Continuing Healthcare (CHC), the NHS will fund your care but your annuity still exists. At this point, the income can be redirected to you, albeit as taxable income. Even if you are rejected for CHC before buying the annuity, changes in your medical condition later on could mean you become eligible.

Releasing home equity vs DPA

DPAs are only an option if you're moving into a care home. If you prefer to stay at home and need cash for carers and home adaptations, you'll have to explore other ways to tap into your home's equity.

One option is a lifetime mortgage. These are available from around age 55 and are loans secured against your home, with interest rolling up until the last borrower dies or enters permanent care.

Lifetime mortgage plans sold by members of the Equity Release Council, an industry body, carry built-in safeguards. The interest rate will be fixed or capped for life, you have the right to stay in your home until you die or move into care, and you can usually transfer the loan to another suitable property if you move.

There's also a no negative equity guarantee, the option to make partial repayments, and any early repayment charge is waived if you need to move into care.

Another way to use your house as a bank account is a home reversion plan. The difference here is you sell a share of your house for less than market value, but you keep the right to live there. This is not a loan, meaning there's no interest to pay; instead, the equity release provider patiently waits to collect their share of the proceeds when the house is sold, usually after the last living borrower passes away or moves into permanent long-term care. The cash released is tax-free, but holding it as cash could affect means-tested benefits.

Trusts, gifting and estate planning: tread carefully...

Planning ahead with trusts or gifts in the context of care fees is a legal minefield, and can be confusing even for financial planning pros.

Councils can treat assets you've shifted out of reach as if you still own them. This is called deprivation of assets, and there's no fixed look-back period. What matters is your intention and whether the need for care was reasonably foreseeable at the time. If deprivation is found, the council can treat the disposed-of asset as "notional capital" when working out your means test, and if that pushes you over the capital limit, you'll be forced to self-fund your care.

The common misconception is that the "seven-year rule" protects gifts from social care assessments, but it doesn't. That rule is about inheritance tax, not care fees. Social care assessments focus on intention, not just dates.

Family trusts

Many people set up family trusts years in advance to manage inheritance tax and to pass wealth in a way that aligns with the benefactor's desires. If the trust was created long before any realistic expectation of needing care, and avoidance wasn't a major motive, it's less likely to be challenged.

Official guidance confirms that councils must prove both intention and foreseeability before calling deprivation. For example, a trust set up following a significant medical diagnosis would raise red flags.

Life-interest trusts in wills

A common strategy for couples is a will trust where, when the first spouse dies, their share of the family home passes into a trust for the children, while the surviving spouse has the right to live there. Later, if the survivor needs care, the council should assess only the survivor's share as capital. Income they receive from the trust may still be counted, but the underlying capital is not theirs.

It's essential to speak to a licensed adviser before setting up any type of trust to make sure it's the right instrument for your goal.

Comparing ways to fund care costs at a glance

Option	How it works	Best for	Pros	Cons
Deferred Payment Agreement (DPA)	Council pays care home fees, secured against your property. Repaid when property is sold (usually after death).	Homeowners moving into care homes	Avoids forced home sale, and if qualifying relative lives in house, property value is excluded	Debt grows until repaid, and you still need to contribute from income
Immediate needs annuity	Lump sum to insurer → guaranteed care-fee income for life	Those wanting to cap total costs	Guaranteed income, and closest thing to capping personal risk	Large upfront payment
Lifetime mortgage	Loan secured on your home; interest rolls up until death or permanent care	Staying in your own home	Stay in your own home for life with no negative equity guarantee	Interest compounds and reduces estate value
Home reversion plan	Sell a share of your home below market value; provider paid when property sold	Staying in your own home	No repayments while you're alive, and guaranteed right to live in home	Lose share of property value, so estate gets less
Family trusts	Transfer assets into trust for inheritance planning	Early planners wanting asset control	Can ring-fence assets if set up early enough	Risk being forced to self-fund if care needs were foreseeable
Life-interest trusts in will	On first death in couple, half of home into trust for kids. Survivor can live there	Couples wanting to protect home for children	Survivor's share only counted for care means test	Surviving spouse cannot inherit assets, and can be complex to manage

Gifting assets

Gifting has clear uses in inheritance tax planning. You get an annual £3,000 exemption, can make small gifts of up to £250 per person, wedding gifts up to £5,000 for a child or £2,500 for a grandchild, and there's no limit for regular gifts out of surplus income. Larger gifts are "potentially exempt transfers" and fall out of your estate for inheritance tax if you live seven years.

Taper relief can reduce the tax between years three and seven. However, if you gift your home but continue living in it without paying market rent that counts as a "gift with reservation of benefit" for inheritance tax, which is not allowed.

Check out our guide on preserving wealth across generations for more details on inheritance tax planning.

But none of this shields you from social-care rules. A gift made when you're healthy and independent is less likely to be challenged. On the other hand, a gift made after your health has begun to decline and when care needs are on the horizon is almost certain to be treated as deprivation.

What's considered acceptable use of your money

If you think your savings are destined to be swallowed by care costs, it's tempting to splash out on something outrageous like a guitar signed by John Lennon or a diamond-encrusted bidet.

But, under council rules, these purchases would almost certainly be treated as deprivation of assets. In other words, you'd still be assessed as if you had the money, and you'd lose the cash and any hope of extra help with fees.

That said, it is still your money, and you can do with it as you please (within reason). Guidance from Age UK makes clear that you can still, for example:

• Pay off genuine debts.
• Make reasonable home improvements.
• Cover living costs and holidays that match your usual lifestyle.

Councils are expected to consider your explanation and supporting evidence before deciding whether deprivation has really taken place.

Bottom line

Care costs don't wait for anyone, and neither should your planning. The earlier you line up your options, the more control you keep over where you live, who looks after you, and what's left for your family. If you leave it too long, the choices (and the money) could vanish faster than you think.

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