According to one media report, between 2000 and 2019 up to 330,000 homes were sold by pensioners to pay for their care costs. It claims the properties were sold to fund care for vulnerable elderly people, which included helping them get dressed or to wash themselves.

With this in mind, it’s not surprising that the issue of long-term care has risen up the political agenda in recent years. In April 2021, the BBC reported that care-home providers, health experts and politicians wrote to Boris Johnson calling for changes to the UK’s social care sector, which many feel is now broken.

Less than six months later, the prime minister responded by announcing his health and social care reforms in September 2021. Key to this was a 1.25 percentage point increase to both National Insurance contributions (NICs) and Dividend Tax.

The move aims to boost NHS funds and to help deal with the issue of social care. It’s expected to raise £36 billion over the next three years, and of this, £5.4 billion will go to social care in England.

So, does this mean your home will no longer need to be sold to pay for your care? Not necessarily. Read on to discover why.

Care costs could be in excess of £48,000 a year

An article by Which? revealed that the average cost of a residential care home in the UK was nearly £35,000 a year in 2019/20. A care home is different to a nursing home, as the latter uses registered nurses to care for people, whereas a care home typically uses assistants.

According to Which?, the average cost of a nursing home was £48,734 a year in 2019/20. This means that if you stay in care for two years, it could cost around £70,000 if you’re in a care home or almost £100,000 if you’re in a nursing home.

The article also pointed out that if you wanted to pay for care yourself, perhaps to enjoy better quality surroundings or to be in a home closer to family, you could pay more.

Currently there is no maximum on costs

Under existing rules, if you have assets valued between £14,250 and £23,250 you will be charged for your care on a sliding scale. If you have assets of more than £23,250 you will pay for your care and, as there is no maximum, you could find yourself facing extremely high fees in a relatively short period of time.

This is why local authorities, who typically provide the care, could ask you to sell your home to pay for the costs when you die. This is typically done under a deferred payment agreement (DPA), which means the authority agrees to fund your care on the understanding that it’s then repaid from the sale of your home when you die.

There are strict rules around DPAs, as for example, you cannot be asked to sell your house if a spouse is still living in it. This is why it could be a good idea to speak to a financial planner to ensure you fully understand your DPA, if you’re being asked to enter one.

The government says you will not pay more than £86,000

Under the prime minister’s reforms, after October 2023 you will not have to pay for your care unless you have assets of more than £100,000. If your assets are below £20,000, or fall below this level at any point, you will not have to pay anything towards your care.

Should you have between £20,000 and £100,000 your contributions will be based on a sliding scale, and you will not have to contribute more than 20% of your assets each year.

Mr Johnson also announced a maximum amount you’ll have to pay for care, which is £86,000. After this, the government will pay for your care.

Even with the limit, your home may not be safe

According to the Telegraph, while the £86,000 maximum sounds like good news it only covers “personal care”, such as washing and eating. It does not include the cost of food, rent or energy bills, which may mean you have to sell your home to settle these fees, and these could be significant.

The Telegraph reveals estimates by retirement firm Just Group that suggests someone paying £1,100 a week for residential care will typically spend around £350 on personal care. As the remaining £750 would not be considered personal care, it could fall outside the £86,000 limit.

The article explains that this means just £18,000 of your £57,000 annual care fees would be classed as personal care.

As such, it would take five years to reach your £86,000 maximum, during which time you could spend around £200,000 of your own money to fund your non-personal care costs, including food, rent or energy bills.

It should be remembered that the government has said it will consult with the industry late in 2021 regarding a limit for non-personal care costs. While this may help, it remains to be seen if any decision made will totally negate the need to sell your home.

Get in touch

Long-term care is a complicated area, and extreme care must be taken to ensure you do not fall foul of strict rules.

There may be solutions available to you to help you fund your care, such as insurance products you already own or certain new ones you may be able to use. You may also have certain investments that could reduce your exposure to care costs, or use trusts that could do this too.

If you would like to speak with us about your long-term care, or options that may be available to you, email us on hello@ardentuk.com or call on 01904 655 330.

Please note

This article is for information only. Please do not act based on anything you might read in this article. Contents are based on our understanding of HMRC legislation, which is subject to change.