Deprivation of assets and care home fees: what councils can and cannot do
How councils in England assess care home fees, and how they decide whether a gift, a trust or unusual spending counts as deprivation of assets.
How are care home fees worked out in England?
Care home fees in England are assessed in two stages, because the council first assesses whether you have eligible care needs and then, if it decides to charge, carries out a financial assessment of your income and capital. The Department of Health and Social Care's charging circular for 2026 to 2027 confirms that the capital limits have stayed at their existing level, so the upper limit is £23,250 and the lower limit is £14,250. If your capital is above the upper limit you pay the full cost of a care home yourself, whilst capital below the lower limit is ignored, and anything between the two is treated as producing an assumed income of £1 a week for every £250, known as tariff income.
Each person is assessed on their own resources, because the statutory guidance says a council has no power to assess a couple on their joint means, and if the council helps with your fees you keep a personal expenses allowance, which rose to £31.80 a week in April 2026. Where your needs are mainly health needs, the NHS may assess you for NHS continuing healthcare, which is arranged and paid for entirely by the NHS and is not means-tested.
When is your home left out of the means test?
Your home is left out whenever you receive care somewhere other than a care home, and it is also left out if you move into a care home whilst certain people carry on living there. Annex B of the statutory guidance, on the treatment of capital, says the council must disregard the value of your main or only home if it is still lived in by people who include your partner or civil partner (unless you are estranged), a relative aged 60 or over, a relative who is incapacitated, or your child under 18, provided they have lived there since before you went into the care home. Councils can also choose to ignore the home in other cases, for example where a carer gave up their own home to look after you, although the guidance says a relative moving in purely to protect an inheritance would not justify it.
When none of those disregards applies, the council must still ignore the value of your home for the first 12 weeks after you move into a care home permanently, so that you have time to decide how to pay rather than being forced to sell at a moment of crisis. It also applies if an existing disregard ends unexpectedly, for instance because the partner living there dies or moves into care.
What is a deferred payment agreement?
A deferred payment agreement is an arrangement in which the council pays, or lends you, the cost of your care home fees and recovers the money later from the value of your home, so that you are not forced to sell it during your lifetime. Chapter 9 of the statutory guidance says councils must offer one to people who need a care home place, whose home is not disregarded, who have no more than £23,250 in other assets and who can give adequate security, which usually means the council taking a legal charge over the property. The money is deferred rather than written off, so it is repaid when the home is sold or from your estate, when it falls due 90 days after the death, and councils can add interest (capped at a national maximum) and administration charges to the amount owed.
A council must not enter into an agreement with someone who lacks the mental capacity to make it unless proper arrangements are in place, such as an attorney or deputy acting for them, which is one practical reason people set up a lasting power of attorney well before care is needed. The deferred amount becomes a debt your executors settle before the estate is shared out, and our guide to what an executor does sets out where paying the estate's debts fits into their role.
What counts as deprivation of assets?
Deprivation of assets means intentionally reducing your capital or income to pay less towards your care, at a time when you knew you needed care and support. Annex E of the Care and Support Statutory Guidance gives these as common ways it can happen:
a lump-sum gift to someone else
a sudden burst of spending that is out of character with how you spent money before
transferring the title deeds of a property to someone else
putting assets into a trust that cannot be revoked
converting savings into something the means test ignores, such as personal possessions
reducing your assets by living extravagantly, gambling being the guidance's example
buying an investment bond that includes life insurance
The guidance is equally clear about where the rule stops, saying that people should be able to spend the money they have saved as they wish, that deprivation should not be assumed automatically, and that paying off a debt, even one that is not yet due, must not be treated as deprivation. A gift only matters if the asset would otherwise have counted in the means test, which is why the guidance's own example of handing a family member a painting you already owned is not deprivation, whereas buying one with your savings shortly before entering a care home in order to give it away might be. Age UK's factsheet on deprivation of assets adds that councils should not adopt blanket policies treating particular spending, such as buying a funeral plan, as deliberate deprivation.
How far back can the council look?
There is no fixed look-back period, because Annex E sets no time limit and asks instead about the circumstances when the asset was given away or spent. The council should consider whether avoiding care charges was a "significant motivation" in the timing of the disposal, and whether, at that moment, you could reasonably have expected both to need care and to have to contribute to its cost. The guidance says it would be unreasonable to find deprivation where you were fit and healthy when you made the gift and could not have foreseen needing care, so the question turns on foreseeability and purpose rather than on how many years have passed.
This is where care fees and inheritance tax part company. For inheritance tax, a gift to another person usually falls out of your estate once you have lived for seven years after making it, as our guide to the 7 year rule for inheritance tax explains, whereas Age UK's factsheet points out that the inheritance tax gifting rules do not apply to social care and that any past disposal can be looked at. A gift made more than seven years ago can still be questioned if care was foreseeable at the time, and one made last year whilst you were in good health may not be, so the allowances in our guide to reducing inheritance tax legally answer the tax question but not the care one.
Can you give your house to your children to avoid care home fees?
You can give your house away, but transferring the title deeds is one of the examples Annex E lists, so if avoiding care home fees was a significant reason and you could foresee needing care, the council can still treat you as owning it. Age UK's factsheet also points to risks that exist whether or not deprivation is found, because once the home belongs to someone else you no longer control it, and the new owner's divorce, for example, could affect your position. If you carry on living there rent-free, GOV.UK's inheritance tax guidance still counts the home as part of your estate.
Cash gifts and transfers into a trust are judged in the same way, so the label on an arrangement matters far less than your reasons and your health at the time. A trust in your will works differently, because it deals with your own share of an asset after your death, and our guide to wills with trusts and property protection trusts explains what those trusts can and cannot do. Independent advice is sensible before relying on any arrangement presented as a way to protect a home from care fees.
What happens if the council decides you have deprived yourself of assets?
The council's first step is to charge you as though the deprivation had not happened, which means treating the money or property as notional capital you are assumed still to have. If you turned savings into something worth less than you paid, the difference is counted as notional capital instead. It is also up to you to show that you no longer have an asset, and the guidance lists a deed of gift, a trust deed, receipts and proof that debts were repaid as acceptable evidence.
Where the asset was transferred to someone else in order to avoid charges, section 70 of the Care Act 2014 lets the council recover the difference between what it would have charged you and what it did charge from that person, but never more than the benefit they received, and in proportion where there was more than one recipient. If you disagree with a decision you can use the council's complaints procedure and then go to the Local Government and Social Care Ombudsman, and Age UK suggests giving the council clear, specific reasons for the gift together with evidence, such as bank statements.
How is it different in Wales, Scotland and Northern Ireland?
Wales: The Welsh Government's guide to charging for social care gives a single capital limit of £50,000 for residential care, the figure set in the Welsh charging regulations since April 2019, and Age Cymru's May 2026 factsheet confirms that capital below that figure is ignored completely rather than producing tariff income. Wales also has a 12-week property disregard and deferred payment agreements, and councils look at the timing and motive of a transfer when deciding whether deprivation has occurred.
Scotland: Personal and nursing care are funded at a flat weekly rate for any adult assessed as needing them, which from 1 April 2026 is £260.30 for personal care and £117.10 for nursing care, and you are means-tested for the rest of the fees. The Scottish Government's 2026 circular on charging for residential accommodation raised the upper capital limit to £36,750 and the lower limit to £22,750 from 6 April 2026. Its guidance says deprivation can be considered for assets disposed of at any time, although recovering charges from the person who received a gift is limited to transfers made in the six months before moving into the care home or after moving in.
Northern Ireland: Care is arranged through Health and Social Care Trusts, and nidirect's guide to paying care home fees currently gives the same £23,250 and £14,250 limits as England, with your home counted 12 weeks after a permanent move unless certain people still live there. A Trust can treat an asset you gave away to reduce your charge as if you still owned it and recover the cost from you or from the person who received it, whilst MoneyHelper notes that there is no formal deferred payment scheme in Northern Ireland.
What to do next if you are planning for care costs
Ask your council for a needs assessment when care starts to look likely, since the financial assessment follows it.
Keep a simple record of any large gift, with the date, the amount and the reason, since the burden of showing what happened to an asset falls on you.
Make a lasting power of attorney so that someone you trust can deal with a financial assessment, or a deferred payment agreement, if you lose capacity.
Ask about an NHS continuing healthcare assessment if your needs are mainly health needs, which Age UK says you can request through your local integrated care board.
Start with free information from Age UK or MoneyHelper, and take regulated advice before transferring a home or setting up a trust, for example from a solicitor regulated by the SRA or an FCA-regulated financial adviser accredited by the Society of Later Life Advisers.
The same records help later, because when someone dies their family or executors have to find and tell every bank, utility, insurer and subscription they held, which is far quicker when there is a clear list. If that work does fall to your family, Legacy Trail's free notification service can contact the private-sector companies for them.
Frequently asked questions
In England there is no set time limit, and Age UK's factsheet says any past disposal of assets can be considered. What limits the council is the test itself, because it should consider whether avoiding care charges was a significant motivation in the timing and whether you could reasonably have foreseen needing care when you made the gift.
Not as a general rule, because the statutory guidance says each person is assessed on their own resources. The exception is where you transferred an asset to them to avoid charges, in which case section 70 of the Care Act 2014 lets the council recover the shortfall from them, capped at the benefit they received.
No. The seven-year rule belongs to inheritance tax and decides whether a gift is taxed when you die, whilst the care means test asks why and when you made the gift. A gift can fall outside your estate for inheritance tax and still be treated as deprivation for care fees.
Not necessarily. In England the home is ignored for the first 12 weeks of a permanent stay and for as long as a partner or qualifying relative still lives there, and where it is counted, a deferred payment agreement, if you qualify, lets you postpone paying until the home is sold or until after your death.
Not automatically. Age UK's factsheet says councils must not use blanket policies that treat particular spending, such as a funeral plan, as deliberate deprivation, so each case turns on your reasons and on whether you could foresee needing care at the time.
In England it is £23,250 for 2026/27, with a lower limit of £14,250, and nidirect currently gives the same figures for Northern Ireland. Wales uses a single limit of £50,000 for residential care, and Scotland's limits from 6 April 2026 are £36,750 and £22,750.
This article is for general information only and does not constitute legal advice. Individual circumstances vary. If you are dealing with an estate, consider taking advice from a solicitor who specialises in probate. For other guidance specific to your circumstances, speak to a funeral director, Citizens Advice, or a regulated financial adviser.