What the 2025 government cap on care fees will mean for you

At a glance

• The cap on care fees is scheduled to be introduced in October 2025.
• The changes are aimed to reduce the huge financial burden individuals experience when paying for the essential care and support.
• Speak to an adviser well in advance of you or a relative needing care. They can help you all understand the true costs involved and how they can be covered tax efficiently.

Major reforms to the social-care system were voted through parliament by MPs in November last year, including to limit the cost of personal care to £86,000 per person over their lifetime. This was originally due to be introduced in October 2023 – this is now scheduled for October 2025. Until then, the current funding rules still apply.

What’s the changes on the cap on care fees

From October 2025, the key changes the government propose are:

•    Introduce a ‘cap’ on how much an individual has to spend on personal care costs over their lifetime, set at £86,000

•    Increase the capital thresholds for means-tested social care funding to £20,000 and £100,000.

Why are the changes important?

The cost of residential care has rocketed by 11% to just over £46,000 per year – and that’s without nursing costs1. In cities such as London and Brighton, the annual figure is over £50,000¹.

Due to the way the care-fees cap is calculated, many people will still pay tens or even hundreds of thousands of pounds more for their care.

The changes are aimed to reduce the huge financial burden that individuals and their families experience when paying for the essential care and support to help retain their health and dignity in their twilight years.

A financial adviser can help you and your family understand these changes and what they mean for you.

How does the system currently work?

Currently, there’s no limit to the amount that someone can pay for social care during their lifetime. Because of this, many families find that their assets are swallowed up by care-home costs.

Social care is means-tested. Under today’s rules, only those with assets under £23,250 qualify for financial support from their local authority.

If the assets are over £23,250, you will have to pay the full cost of your care. If you are being cared for in your own home, that figure only takes into account any savings, stocks or shares you have.

How the cap will work

When the government says that no one will pay more than £86,000 for their care, that doesn’t include all the costs incurred in a person’s care. What it means is that each individual has a metaphorical calculator that adds up just the cost of their ‘care’ – meaning the nursing and assistance they need, whether it’s with washing and dressing, feeding themselves or managing health problems. This applies to care received either in someone’s own home or in a residential care home.

The crucial point is that any costs such as room and board in a care home or utility bills will not count towards the £86,000 cap.

Under the new system the poorest will receive more support in paying for care. But for the majority, the reality is that someone who isn’t eligible for local-authority help (because they have assets above the thresholds) will be paying the full cost of their later-life care for many years – until the bill for the ‘care’ component hits £86,000.

After that point, the ‘care’ costs will be covered, reducing the overall bill for the individual.

What you can do to plan ahead

Speak to a financial adviser well in advance of you or a relative needing care. They can help you all understand the true costs involved and how they can be covered tax efficiently.

The prospect of needing care isn’t something that anyone wants to dwell on during their retirement planning, but ideally these conversations should be taking place decades before you reach that point.

The bill for long-term care is unlike any other you will pay. Deciding how a parent, spouse or loved one is cared for is such an emotive area and it’s rarely a decision made by a single person – it’s something that the whole family will have a say in.

Care costs can increase over time as a person’s needs become more complex. And crucially, you cannot say at the outset how long a person will need care for.

In addition, the intricacies of the social-care system vary between local authorities, so families find it confusing to navigate. Although we welcome reform to how care is funded, in its current form the social-care cap will likely mean a greater need for financial advice for families.

To understand the Government’s planned reforms and how they may affect you speak to us now.

Source

¹UK Care Guide – The data is based on a survey of care homes between December 2022 and February 2023. Each care home had a minimum of 25 beds. The costs provided are for those residents privately funding all their care.

SJP Approved 20/07/2023