The 2026 Care Act Changes: What They Mean for Your Financial Assessment

The Care Act 2014 and the Care and Support (Charging and Assessment of Resources) Regulations 2014 (SI 2014/2672) govern how local authorities in England carry out financial assessments for adult social care. Despite repeated government promises to reform the system and introduce a cap on care costs, the capital thresholds remain unchanged for 2025/26. If you or a family member are facing a care fees dispute, understanding exactly how the financial assessment works is the first step to challenging it.

The capital limits for 2025/26

Under the current means test, the capital thresholds that determine eligibility for local authority funding are as follows. The upper capital limit remains at £23,250. Anyone whose capital exceeds this figure is a "self-funder" and must pay the full cost of their care, whether residential or domiciliary. The lower capital limit remains at £14,250. Anyone with capital below this figure will not be required to contribute towards the cost of their care from their capital at all (though they may still be assessed on their income).

These thresholds have not been uprated since 2010, despite the significant rise in the cost of living and care home fees. The government's planned increase of the upper limit to £100,000 and the lower limit to £20,000, originally part of the social care charging reforms announced in 2021, has been postponed indefinitely. For the time being, the existing limits remain in force under regulation 12 of the Charging Regulations.

Tariff income: how capital between the limits is treated

If a person's capital falls between £14,250 and £23,250, the local authority must apply a "tariff income" calculation. Under regulation 15 of the Charging Regulations, the authority assumes that for every £250 of capital (or part thereof) above the lower limit, the person receives an additional £1 per week in income. This notional income is then added to the person's actual income to calculate their assessed weekly contribution towards care costs.

For example, if a person has capital of £18,250, the amount above the lower limit is £4,000. Dividing £4,000 by £250 gives a tariff income of £16 per week. This £16 is added to their actual weekly income (such as state pension, private pension, and any benefits) when calculating what they must pay towards care.

This calculation is frequently misapplied. We have seen cases where authorities apply the tariff income to the full capital amount rather than only the amount above £14,250, or where they use incorrect weekly income figures. Any error in the tariff income calculation directly inflates the assessed contribution.

Property disregards

One of the most significant and commonly misunderstood areas is when the value of a person's home must be disregarded in the financial assessment. Schedule 2 of the Charging Regulations sets out mandatory property disregards. The value of the person's main or only home must be disregarded in the capital assessment if any of the following people still live there: the person's spouse or civil partner; a former partner who is a lone parent and the person's estranged or divorced partner; a relative who is aged 60 or over; a relative who is incapacitated (within the meaning of the Regulations); or a child of the person who is under 18.

In practice, we regularly see local authorities including the value of the home in the assessment when one of these disregards clearly applies. This single error alone can turn someone from an eligible person into a self-funder. If you are told that your property is being included in the assessment, the first step is to check whether any of the mandatory disregards should apply to your circumstances.

For the first 12 weeks of a permanent move into residential care, the value of the person's home is automatically disregarded regardless of who lives there. This is the "12-week property disregard" under regulation 15 of Schedule 2, and is intended to give the person time to decide what to do with the property without being treated as a self-funder from day one.

Other mandatory capital disregards

The Charging Regulations set out a long list of capital that must be excluded from the financial assessment. The most frequently relevant include: the surrender value of any life insurance policy; personal injury compensation held in trust or administered by the court; payments from the Windrush Compensation Scheme, the Vaccine Damage Payment Scheme, and certain ex-gratia government schemes; and the value of any business assets where the person is a sole trader or partner and the business is their main source of income.

Councils often overlook these disregards, particularly in relation to compensation payments. If you have received a personal injury award or settlement that is held in a personal injury trust, it must be completely excluded from the capital assessment. We have advised clients who were wrongly assessed as self-funders solely because their council had included trust funds that should have been disregarded.

Deprivation of assets

Under section 70 of the Care Act 2014, if a local authority believes that a person has deliberately deprived themselves of capital or income in order to reduce or avoid their liability to pay care fees, the authority can treat them as though they still possess those assets. This is known as "notional capital."

However, the statutory guidance (Chapter 8, Annex E of the Care and Support Statutory Guidance) is clear that the local authority bears the burden of establishing that a significant purpose of the disposal was to avoid or reduce care charges. It is not enough to show that the disposal had the effect of reducing capital below the threshold. The authority must demonstrate that avoiding care fees was a significant motivation at the time of the disposal. The timing of the disposal relative to the person's need for care is an important factor, but it is not conclusive on its own.

If you are facing a deprivation of assets allegation, ask the council for its written reasoning. They should be able to identify the specific evidence on which they rely and explain why they concluded that avoiding care fees was a significant purpose. General assertions or assumptions are not sufficient.

How to challenge a financial assessment

If you believe that a financial assessment has been carried out incorrectly, there are several steps you should take. First, request a written copy of the assessment and the calculations used. You are entitled to this under section 17(10) of the Care Act 2014 and regulation 6 of the Charging Regulations. Second, identify the specific errors: an incorrect capital figure, a failure to apply a mandatory disregard, a miscalculation of tariff income, or an unjustified deprivation of assets finding.

Once you have identified the errors, write to the local authority setting out your grounds of challenge with reference to the relevant statutory provisions and regulations. If the authority does not amend the assessment, you can escalate the matter to the Local Government and Social Care Ombudsman, who has the power to recommend that the council recalculate the assessment and refund any overpayments.

The role of legal advice

Care funding disputes are technical, and the consequences of an incorrect assessment can run to tens of thousands of pounds over the course of a care placement. A person wrongly classified as a self-funder at £1,000 per week in care home fees will accumulate over £50,000 in charges in a single year that they should not have been required to pay. Getting specialist legal advice early in the process can make a significant difference to the outcome. At Fullbrook Law, we regularly advise clients on challenging financial assessments, deprivation of assets allegations, and disputes about the level of contributions required.

If you are dealing with a care fees dispute, we can help you understand your position and take the right steps to protect your interests.