The new rules for care home payments for the 2026 to 2027 financial year have now been confirmed by the Department of Health & Social Care. While many people were expecting significant reforms to social care funding, the latest announcement instead confirms updated allowances and financial thresholds used by local authorities when assessing what someone should contribute towards the cost of their care.
Although these changes may appear small, they can affect how much financial support someone receives, how much income they can keep and how local authorities calculate contributions towards care costs. Understanding these rules is an important part of later life planning and can help families make informed decisions before care becomes necessary.
What Are the New Rules for Care Home Payments?
Every year, the Government reviews the financial figures used by local authorities when carrying out care and support assessments under the Care Act. These assessments determine whether an individual qualifies for financial assistance towards residential care, nursing care or care provided at home.
For the 2026 to 2027 financial year, the Government has confirmed updates to several key areas including capital limits, the Personal Expenses Allowance, the Minimum Income Guarantee and the Savings Credit disregard.
The announcement does not introduce a new care costs cap or major reforms to the way care is funded. Instead, it updates the financial thresholds that local authorities must use when assessing eligibility for financial support.
For anyone concerned about paying for future care, these figures provide an important indication of how contributions will continue to be calculated.
Capital Limits for Care Funding
One of the most important aspects of the new rules for care home payments is the confirmation that the capital limits remain unchanged.
The upper capital limit remains £23,250, while the lower capital limit remains £14,250.
These limits have remained frozen since 2010 despite inflation and increasing care costs.
In general terms, if your capital exceeds £23,250, you will usually be expected to pay the full cost of your care. If your capital falls between £14,250 and £23,250, you may be expected to contribute towards your care costs while receiving some financial assistance. Individuals with capital below £14,250 are generally not expected to contribute from their capital, although their income will still be taken into account during the financial assessment.
Exactly how these rules apply depends on individual circumstances, including the type of care required, where the care is provided and which assets are included within the assessment.
Personal Expenses Allowance
For individuals receiving local authority funded care in a residential care home, the Personal Expenses Allowance has increased for the 2026 to 2027 financial year.
The allowance has risen from £30.65 per week to £31.80 per week, representing an increase in line with inflation of 3.8%.
The Personal Expenses Allowance is the amount residents are allowed to keep from their income after contributing towards their care fees. It is intended to cover every day personal spending such as clothing, toiletries, haircuts, newspapers and other personal purchases.
Although the increase is relatively modest, it ensures that individuals receiving local authority support retain a slightly higher amount of money for their personal day to day needs.
Minimum Income Guarantee
The Minimum Income Guarantee protects a minimum level of income for people receiving local authority funded care outside of a residential care home.
For the 2026 to 2027 financial year, the Government has increased the Minimum Income Guarantee by 7% for people below Pension Credit age and by 3.8% for those who have reached Pension Credit age.
The updated weekly rates include:
- £106.85 for each child where the adult is responsible for and lives in the same household as that child.
- £95.40 for a single person aged 18 or over but under 25.
- £120.40 for a single person aged 25 or over but below Pension Credit age.
- £241.45 for a single person who has reached Pension Credit age.
- £116.80 for a lone parent aged 18 or over.
- £94.55 where one or both members of a couple are aged 18 or over.
- £184.30 where one or both members of a couple have reached Pension Credit age.
Additional premiums also apply in certain circumstances.
Individuals receiving the disability premium receive £51.55, while the enhanced disability premium is £25.15 for single people.
For couples, the disability premium is £36.75 and the enhanced disability premium is £18.10.
People receiving a carer premium receive an additional £55.25.
These figures are designed to ensure individuals continue to retain enough income to meet their essential living costs while contributing towards their care.
Savings Credit Disregard
The Savings Credit disregard has also increased for the 2026 to 2027 financial year.
Individuals receiving Pension Credit while living in residential care can now retain up to £7.30 per week, increased from £7.05.
For couples, the amount has increased from £10.60 to £11.00 per week.
Although these changes are relatively small, they ensure the allowance continues to increase broadly in line with inflation.
What Do These Changes Mean for Families?
For many families, these updates will not dramatically alter how care is funded, but they do reinforce the importance of understanding how financial assessments work.
Many people assume they will automatically receive financial support towards care fees, while others believe they will always need to sell their home to pay for care. In reality, care funding depends on a range of factors including savings, income, property ownership and personal circumstances.
Understanding the financial thresholds allows individuals and families to make informed decisions well before care becomes necessary. Early planning can also reduce uncertainty during what is often a stressful time.
Planning Ahead for Later Life
Although no major care funding reforms have been introduced this year, the annual updates serve as a reminder of the importance of planning ahead.
Legal planning can often provide greater certainty for both individuals and their families. Having an up to date Will ensures your wishes are clearly recorded, while a Lasting Power of Attorney allows trusted individuals to make financial or health decisions if you become unable to do so yourself.
Some people may also benefit from discussing estate planning or trusts where appropriate. While there are strict rules surrounding deprivation of assets, obtaining professional legal advice can help families understand the options available and avoid making decisions that may have unintended consequences.
Preparing early allows families to focus on future care with greater confidence rather than making important legal and financial decisions during a crisis.
How Lyons Bowe Can Help
Planning for later life involves more than simply understanding care home fees. It is about ensuring your finances, property and legal affairs are organised to protect both you and your loved ones.
At Lyons Bowe Solicitors, our Wills and Probate team can help you prepare for the future with clear legal advice. Whether you are updating your Will, putting Lasting Powers of Attorney in place or discussing wider estate planning, we are here to help you make informed decisions with confidence.
If you would like advice about planning for later life or protecting your family’s future, our team is here to support you every step of the way.
If you have any questions about the circular, email dhsc.publicenquiries@dhsc.gov.uk
Get in contact with Lyons Bowe here.
By Darrell Collins
Last updated 21 July 2026
