Care Home Fees and Funding in England
Written and reviewed by the Care Home Accountants editorial team. Last reviewed 28 July 2026.
A resident's place is paid for in one of three ways: privately by a self-funder, with local authority support after a means test, or by the NHS. The route decides how much the home receives and how reliably it is paid.
This guide sets out the England rules for 2025/26. Scotland and Wales operate different systems, and the figures below do not apply there.
The Three Ways a Place Is Paid For
Self-funders pay their own fees in full. Local authority residents have part or all of their fee met by the council after a means test, often at a lower rate than the private fee. NHS Continuing Healthcare covers the whole package where a person has a primary health need.
Most homes carry a mix of all three, and the mix drives cash flow. Modelling that mix is part of how we keep the care home accounts aligned with the way money actually arrives.
Self-Funders and the Capital Limits
A resident with capital above the upper limit of £23,250 pays their own fees in full. These limits are frozen for 2025/26. There is no cap on the total a self-funder pays for care, because the £86,000 Care Act cost cap was cancelled in July 2024 and never took effect.
Self-funders usually pay the highest rate, so a home weighted towards private residents earns more per bed but carries the collection risk directly rather than through a council.
Local Authority Funding and the Means Test
Where capital sits between the lower limit of £14,250 and the upper limit of £23,250, the resident contributes a tariff income of £1 per week for each £250 of capital in that band. Below £14,250, capital is left out of the calculation and only income is assessed.
The detail of how councils assess and charge is set out in the government charging circular for 2025/26, which the local authority applies when it works out the resident's share.
NHS Continuing Healthcare
NHS Continuing Healthcare is a package arranged and funded by the NHS for a person whose primary need is a health need. Unlike local authority support, it is not means-tested, so the resident's capital and income are not assessed and the NHS meets the full cost of care and accommodation.
The NHS explains eligibility and assessment for NHS Continuing Healthcare, and a home with CHC-funded residents deals with the NHS as payer rather than the resident or council.
Why the Funding Mix Shapes Your Accounts
Each route pays at a different rate, on a different cycle, and with different paperwork. A change in the balance between self-funders, council placements and CHC feeds straight through to margin and working capital.
The underlying supply of care stays exempt from VAT whichever route pays, a point we cover in our guide to the welfare exemption, so the funding mix affects revenue and cash rather than the VAT treatment.