Are you concerned about how to pay for care home costs in 2025? With significant policy changes, many people in the UK are wondering how these new rules for care home payments will affect them.
Originally, the government proposed key reforms, including a care fee cap and higher thresholds for state-funded support, to make social care more affordable. However, these plans have now been scrapped by the new Labour government.
So, what does this mean for care home residents and their families? In this guide, we’ll break down how care home payments currently work, what the scrapped reforms would have meant, and what alternative financial strategies are available.
How Do Care Home Payments Work in the UK?
Care home costs in the UK are determined based on a financial assessment of an individual’s income, savings, and assets. There are three main categories of care home funding:
- Self-funders: Individuals with assets exceeding £23,250 (in England) must pay for their own care.
- Partially funded residents: If assets fall between £14,250 and £23,250, the local authority contributes to care costs, but the individual still pays part of the fees.
- Fully state-funded residents: Those with assets below £14,250 receive full financial support for their care, although some contributions from income may still be required.
Care home fees typically cover personal care (such as assistance with washing, dressing, and medication management), but accommodation, food, and utility costs are additional expenses that residents must pay for separately.
What Were the Proposed Changes to Care Home Payments?
How Would the Care Fee Thresholds Have Changed?
In 2021, the government outlined a new plan in their Build Back Better: Our Plan for Health and Social Care policy, which aimed to change how care home fees were funded.
The key reforms included:
- Raising the lower asset threshold from £14,250 to £20,000, allowing more people to qualify for fully state-funded care.
- Raising the upper asset threshold from £23,250 to £100,000, enabling more people to receive partial government support for care home fees.
Under these rules, the financial assessment process would have worked as follows:
| Savings & Assets | Proposed Rule (Scrapped in 2024) | Current Rule |
| Over £100,000 | Pay full care costs until assets fall below £100,000 or reach the care cap | Pay full care costs if assets exceed £23,250 |
| Between £20,000 and £100,000 | Pay a means-tested contribution while receiving some government support | Pay a means-tested contribution if assets are between £14,250 and £23,250 |
| Less than £20,000 | Local authority fully funds care (income contributions may apply) | Local authority fully funds care if assets are under £14,250 |
These reforms were due to be introduced in October 2025, but the new Labour government cancelled them, stating that this move would save the UK £1.1 billion by 2026.
What Was the 2025 Care Fee Cap, and Why Was It Scrapped?
One of the most significant reforms was the introduction of an £86,000 lifetime cap on care costs. This meant that no one would pay more than £86,000 for personal care during their lifetime. However, this excluded accommodation, food, and other non-care expenses.
Here’s how it was supposed to work:
- Once an individual spent £86,000 on personal care, they would no longer need to pay for further care-related expenses.
- If their total assets exceeded £100,000, they would self-fund care until they either reached the cap or their assets dropped below £100,000.
- Those below the £100,000 threshold would have received means-tested financial support from their local authority.
This care cap was originally set to launch in October 2023, was delayed to October 2025, and then ultimately scrapped in 2024.
What Costs Would the Care Cap Have Covered?
The cap only applied to personal care costs, including:
- Help with washing, dressing, and mobility assistance
- Support with medication and health needs
- Personal hygiene care
The cap did not apply to:
- Accommodation and rent in a care home
- Food and utility bills
- Lifestyle activities and entertainment
Real-Life Example of How the Care Cap Would Have Worked?
Let’s consider Harry, who had £350,000 in savings and moved into a care home in January 2024, paying £60,000 per year:
| Year | Total Paid | Personal Care Cost | Accommodation & Other Costs | Cumulative Care Cost |
| Year 1 | £60,000 | £24,000 | £36,000 | £24,000 |
| Year 2 | £60,000 | £24,000 | £36,000 | £48,000 |
| Year 3 | £60,000 | £24,000 | £36,000 | £72,000 |
| Year 4 | £50,000 | £14,000 | £36,000 | £86,000 (Cap Reached) |
Had the care cap been implemented, Harry would have stopped paying for personal care after Year 4, but he still would have needed to pay for accommodation and living expenses.
Since the cap was scrapped, individuals will continue paying indefinitely unless they qualify for local authority funding.
How Would the New Rules for Care Home Payments Have Worked in Scotland, Wales, and Northern Ireland?
The proposed care fee cap and revised funding thresholds were designed specifically for England. If the reforms had been implemented, they would not have applied to other parts of the UK.
However, each nation within the UK has its own separate rules for care home funding, meaning that the way care fees are assessed and paid for varies significantly.
Care Home Funding in Scotland
In Scotland, the local authority provides free personal care to those over 65 who are assessed as needing it, regardless of their financial situation. However, individuals still have to pay for accommodation, food, and other living expenses.
The upper and lower financial thresholds for care home funding in Scotland were updated in 2024:
- Lower limit: £21,500: If a person’s assets fall below this, the local council covers the full cost of their care.
- Upper limit: £35,000: If assets exceed this, the person must fully self-fund their care.
If someone’s savings fall between these limits, they contribute to their care on a sliding scale based on their financial situation.
Care Home Funding in Wales
Wales has the most generous care funding thresholds in the UK. The upper threshold for care home fees is £50,000, meaning that individuals with assets below this amount can apply for local authority support.
- Home care (care provided at home): The upper asset threshold is £24,000, meaning that people with assets below this amount can receive state funding for care services at home.
- Residential care (care homes): The upper asset threshold is £50,000, ensuring that more people qualify for financial support.
Unlike in England, there is no lower threshold in Wales, meaning that individuals do not need to contribute all their savings down to a minimum level before qualifying for local authority support.
Care Home Funding in Northern Ireland
Northern Ireland follows a similar system to England, with funding thresholds that have remained unchanged.
- Lower threshold: £14,250: If an individual’s assets fall below this amount, they are eligible for full local authority funding for care.
- Upper threshold: £23,250: Those with assets above this amount must fully self-fund their care.
If a person’s assets fall between these amounts, they will receive partial financial support, with contributions based on a means-tested system.
What Should You Do to Plan for Care Home Costs in 2025?
Since the proposed reforms have been scrapped, it is more important than ever for individuals and families to proactively plan for care home costs.
With care fees continuing to rise, having a clear financial strategy can help ensure that care needs are met without creating undue financial strain.
Understand Your Financial Situation
The first step is to assess your total assets, including:
- Savings and investments
- Property ownership
- Pension income
- Any other financial resources
If your assets exceed £23,250 (England and Northern Ireland), £35,000 (Scotland), or £50,000 (Wales), you will likely need to self-fund your care.
Consider Long-Term Care Insurance
- Long-term care insurance is designed to cover the costs of care services, including residential care and home care.
- Some policies provide a lump sum payment when care is needed, while others offer monthly payouts to cover ongoing costs. Investing in a care insurance policy at an early stage can help mitigate future expenses.
Explore Deferred Payment Agreements
- A Deferred Payment Agreement (DPA) allows individuals to delay care home payments until after they sell their home.
- This is particularly useful for homeowners with limited cash savings but significant property wealth. The local council pays the care costs upfront, and the amount is recovered later when the property is sold.
Seek Professional Financial Advice
A financial advisor can help navigate the complexities of care home funding and suggest the best ways to structure finances. They can provide guidance on:
- The best savings and investment plans for long-term care
- Whether equity release is a viable option
- Tax-efficient ways to cover care costs
Conclusion
The cancellation of the care fee cap and revised funding thresholds means that many individuals will continue to self-fund their care unless their assets fall below the current financial thresholds.
While the proposed £86,000 cap would have provided cost limits, its removal means that care costs remain open-ended, requiring careful financial planning.
With the rising cost of care, it is essential to assess your financial situation, explore funding options, and seek professional advice to ensure you are prepared.
Whether through long-term care insurance, deferred payment agreements, or means-tested local authority support, planning ahead can help individuals and families navigate care home payments more effectively.
Staying informed about future government policies and understanding the different care funding rules across the UK will be crucial in managing care home costs in 2025 and beyond.
FAQs
What are the current care fee thresholds in England?
If you have over £23,250 in assets, you must self-fund your care. If your savings fall below £14,250, the local authority will fully fund your care, but you may still need to contribute from your income.
Why was the £86,000 care fee cap scrapped?
The Labour government cancelled the care fee cap in 2024, stating that the decision would save £1.1 billion by 2026 and allow for alternative social care funding plans.
Does the care fee system work differently in Scotland, Wales, and Northern Ireland?
Yes, funding thresholds vary across the UK. Wales has the highest upper limit (£50,000) for care home funding, while Scotland offers free personal care to residents over 65. Northern Ireland follows a similar system to England, with an upper threshold of £23,250.
What care costs are not covered by local authority funding?
Even if you qualify for local authority funding, you will still need to pay for accommodation, food, utility bills, and entertainment costs, as these are not considered personal care expenses.
Can I receive financial support for care at home instead of a care home?
Yes, individuals receiving care at home may qualify for means-tested support through their local council. In Wales, the upper asset threshold for home care is £24,000, while in England and Northern Ireland, financial support depends on income and savings.
