What is the means test?
The means test — formally called the financial assessment — is the process used by your local authority to work out how much you should pay towards the cost of residential care. It is carried out under the Care Act 2014 and the associated Care and Support (Charging and Assessment of Resources) Regulations 2014.
The assessment looks at two things: your capital (savings, investments, property, and other assets) and your income (pensions, benefits, and any other regular payments). The local authority uses these figures to decide whether you fall into one of three categories:
Above the upper threshold (£23,250)
You are a 'self-funder' and are expected to pay the full cost of your care. The local authority will not contribute — but you are still entitled to a needs assessment and can ask the council to arrange your care on your behalf.
Between the thresholds (£14,250 – £23,250)
You make a contribution towards your care costs. The local authority calculates a 'tariff income' based on your capital and adds it to your actual income to determine your weekly contribution.
Below the lower threshold (£14,250)
Your capital is disregarded entirely. The local authority assesses only your income and you keep a Personal Expenses Allowance (currently £28.25 per week) for personal spending.
Key point: The means test only decides who pays for care — not whether you need it. You have a legal right to a needs assessment regardless of your financial position. Never let a local authority skip the needs assessment because they assume you can afford to pay.
The capital thresholds: £23,250 and £14,250
The entire means test revolves around two numbers. The upper capital limit is currently £23,250. If your total assessable capital is above this figure, you are considered able to fund your own care in full. The local authority will not make any financial contribution.
The lower capital limit is £14,250. Capital below this figure is completely disregarded. If your total capital is below £14,250, the local authority will assess only your income when calculating your contribution.
These thresholds have not changed since 2010, despite successive governments promising reform. The Health and Care Act 2022 included provisions to raise the upper limit to £100,000 and the lower limit to £20,000, but implementation has been repeatedly delayed. As of March 2026, the original thresholds remain in force and there is no confirmed date for the new limits to take effect.
It is worth noting that care home fees in England average £800–£1,200 per week for residential care and higher for nursing care. At these rates, capital above the upper threshold can be depleted within two to three years. Once your capital falls below £23,250, you should contact your local authority immediately to request a financial assessment.
What counts as capital — and what doesn't
The local authority will look at a wide range of assets when calculating your capital. Understanding what is included and what is excluded can make a significant difference to the outcome.
Capital that is counted
Capital that is excluded
Important: Joint accounts are assessed on the basis of your beneficial share. If you hold a joint account with your spouse, the local authority should normally treat 50% as yours — but they may ask for evidence of who contributed what. Keep records of where funds came from.
How your property is treated
For most families, the family home is the largest single asset — and the question of whether it counts in the means test is often the most stressful part of the process. The rules are as follows:
Your property is disregarded (not counted as capital) if it is still occupied by any of the following:
The local authority also has discretion to disregard property occupied by someone who does not fall into the categories above — for example, a carer who gave up their own home to care for you. This is discretionary, not mandatory, so you may need to make a case.
If your property is not disregarded, it will be counted as capital. However, during the first 12 weeks of a permanent care home placement, the value of your property is automatically disregarded. This is the 12-week property disregard, and it gives you time to decide what to do without facing immediate pressure to sell.
After the 12-week period, you can enter a deferred payment agreement (DPA) with the local authority. Under a DPA, the council pays your care fees and places a legal charge on your property. The debt is repaid when the property is eventually sold — typically after death. This means you should never be forced to sell your home during your lifetime to pay for care. The DHSC-set interest rate from 1 January 2026 is 4.75% APR, applied on a compound basis.
Tariff income: the contribution calculation
If your capital falls between the lower and upper thresholds (£14,250 – £23,250), the local authority uses a formula called tariff income to calculate your contribution. The calculation assumes that for every £250 of capital (or part thereof) above £14,250, you have £1 per week of notional income.
For example, if your total capital is £18,250, the calculation works like this:
Capital: £18,250
Minus lower threshold: £18,250 - £14,250 = £4,000
Divide by £250: £4,000 / £250 = 16
Tariff income: 16 x £1 = £16 per week
This £16 per week is added to your actual income (pensions, benefits, etc.) to produce your total assessed income. You then pay that amount towards your care fees, minus a Personal Expenses Allowance of £28.25 per week, which you keep for personal spending such as toiletries, clothing, and phone bills.
Certain income is also disregarded, including the mobility component of Disability Living Allowance or PIP. The local authority should provide a written breakdown of the calculation. If you do not understand how your contribution has been worked out, ask for a full explanation in writing.
Deprivation of assets: what you must not do
One of the most common questions families ask is whether they can give away money or transfer property before the means test to reduce their assessable capital. The short answer is: do not do this.
The Care Act 2014 gives local authorities the power to treat you as still owning assets that you have deliberately deprived yourself of in order to reduce your liability for care costs. This is known as deprivation of assets. If the local authority concludes that avoiding care costs was a “significant motivation” for the disposal, they can add the value back to your capital when calculating your contribution.
There is no fixed time limit. The local authority can look at disposals made years earlier if they believe the intention was to avoid care charges. However, they must demonstrate that avoiding charges was a significant factor — not just that the disposal happened to reduce your capital.
Key point: If you gave away assets at a time when you had no reason to anticipate needing care, this is unlikely to be treated as deprivation. But if you transferred your home to your children after a dementia diagnosis, the local authority will almost certainly challenge it. If you are considering any disposal of assets, take independent legal advice first.
How to prepare for the financial assessment
The financial assessment is usually conducted by a financial assessor from the local authority, either in person or by post. Being well-prepared can ensure you are not overcharged and that all applicable disregards are applied correctly.
Gather your financial documents
Collect bank statements (all accounts), pension statements, benefit letters, property deeds, investment valuations, and insurance policies. The assessor will need to see evidence of all your capital and income.
Check what should be excluded
Review the list of capital disregards above. If your property is occupied by a qualifying person, make sure this is clear. If you have assets in a personal injury trust or from a compensation scheme, have the documentation ready.
Understand your income
List all sources of income: state pension, private pensions, Attendance Allowance, Pension Credit, and any other regular payments. Note that the mobility component of DLA/PIP is fully disregarded and some other benefits may also be excluded.
Ask about a deferred payment agreement
If your property will be counted as capital and pushes you above the upper threshold, ask about a deferred payment agreement before the assessment. The local authority is obliged to offer this if you meet the criteria.
Request the calculation in writing
After the assessment, ask for a written breakdown showing exactly how your contribution was calculated. Check every figure against your own records. If you disagree with any part, you have the right to request a review.
The needs assessment must come first
Before the local authority can carry out a means test, they must first complete a needs assessment under Section 9 of the Care Act 2014. This determines whether you have eligible care and support needs — and if so, what type of care is required to meet them. The full Care Act assessment framework— needs, carer's and financial assessments, plus the national eligibility regulations — is covered in our 2026 family guide.
The needs assessment is not means-tested. Everyone is entitled to one, regardless of their financial position. It examines your physical, mental, emotional, and social care needs, and produces a care and support plan setting out what support you require.
Only after the needs assessment confirms that you have eligible needs does the local authority carry out the financial assessment to determine who pays. This sequence matters because:
Don't forget CHC: If your loved one has significant health needs, they may qualify for NHS Continuing Healthcare, which is fully funded by the NHS and completely free — no means test at all. Always check CHC eligibility before accepting that local authority-funded care is the only option.
Frequently asked questions about the care home means test
What is the means test for care home funding?
The means test is a financial assessment carried out by your local authority to determine how much you should contribute towards the cost of residential care. It looks at your capital (savings, investments, and in some cases property) and your income (pensions, benefits, and other regular payments). The result determines whether you pay the full cost yourself, make a contribution, or have all fees paid by the local authority.
What are the current capital thresholds?
In England, the upper capital limit is £23,250 and the lower capital limit is £14,250. If your capital is above £23,250, you are expected to fund your own care in full. Between £14,250 and £23,250, you make a contribution based on 'tariff income' — the local authority assumes £1 per week of income for every £250 of capital above £14,250. Below £14,250, your capital is disregarded entirely. These thresholds apply in England; Wales, Scotland, and Northern Ireland have different limits.
Does my home count as capital in the means test?
Your home is disregarded (not counted) if it is still occupied by your spouse or civil partner, a dependent child under 18, a relative aged 60 or over, or a relative who is incapacitated. If none of these apply, your property may be counted as capital — but not during the first 12 weeks of a permanent care home placement (the 12-week property disregard). After that period, you can enter a deferred payment agreement with the local authority to avoid having to sell immediately.
What is deprivation of assets?
Deprivation of assets occurs when someone deliberately reduces their capital to fall below the means test thresholds — for example, by giving away savings or transferring property to a family member. If the local authority believes you disposed of assets to reduce your care costs, they can assess you as if you still owned those assets. There is no time limit on how far back the local authority can look, though in practice they focus on disposals made when care was foreseeable.
Do I still need a needs assessment before the means test?
Yes. Before any financial assessment takes place, the local authority must carry out a needs assessment under the Care Act 2014 to determine whether you have eligible care needs. The means test only decides who pays — it does not decide whether you need care. Even if you have significant capital, you are entitled to a needs assessment and to have the local authority arrange your care if you request it.
Can I choose which care home I go to if the council is paying?
Yes. Under the Care Act 2014, you have the right to choose your preferred care home, provided it is suitable for your assessed needs, available, and the provider is willing to accept the local authority's terms. If the home costs more than the local authority would normally pay, a third party (such as a family member) can make a 'top-up' payment to cover the difference. The local authority must still contract with the home directly.
Related guides
Care Home Fees Explained
What care homes cost, what's included, and how fees vary across England.
Care Home Funding Guide
All the ways to fund care home fees — local authority, NHS, self-funding, and top-ups.
12-Week Property Disregard
How the 12-week disregard works, who qualifies, and what to do when it ends.
CHC Eligibility
Could your loved one qualify for fully-funded NHS care? Check the eligibility criteria.